Philex leads market lower

MANILA, Philippines–Most local stocks dipped Friday, weighed down by weak regional markets, profit-taking on blue chips and worries over the mine tailings leak from Philex Mining’s Padcal mine.

The main-share Philippine Stock Exchange index shed 7.49 points or 0.14 percent to close at 5,285.91, dragged lower by the mining/oil counter (-2.72 percent).

Philex, the country’s most valuable mining firm, slumped 7.59 percent to P19.96 a share on news that heavy rains had caused the accidental spill of its mine tailing.

AGI, Metrobank, EDC, SM Prime, BDO, PLDT, DMCI, SMIC and First Gen also contributed to the PSEi’s decline.

The market’s recent favorite, Tanduay, fell 5.06 percent to P10.88 a share as investors locked up huge gains made in the last few days after the announcement of its transformation into a holding firm for taipan Lucio Tan’s major businesses.

Philippine Equity Partners (PEP), in a research note, said the large businesses to be injected into Tanduay—Asia Brewery, PAL, Eton, Fortune Tobacco—implied a new holding company with a market capitalization of more than P100 billion ($2.4 billion) and easily bigger than GT Capital. It noted that Tanduay’s market capitalization had just ballooned to $1.1 billion from $470 million this week alone.

“However, investors are basing that on Tanduay’s present outstanding shares of four billion, Tanduay has yet to issue stocks to acquire these businesses,” PEP said. “What if they issue 16 billion shares at P5 a share to arrive at P100 billion. What then? Remember what happened to [Bloomberry]? If speculators believe that the stock price can rise to P15 a share post-stock issue and value the new conglomerate at P100 billion, then it appears they have already worked out that Tanduay will issue a mere 2.7 billion shares (just 40 percent extra) at P15 a share to get those assets. That’s quite a big call,” the research note said.

Meanwhile, gains by Ayala Land (+2.05 percent) and Jollibee (+3.43 percent) tempered the PSEi’s decline. Ayala and BPI also aided the index.

Among the day’s notable gainers were non-PSEi stocks like MJC (+49.8 percent) and Philippine Seven (+4.6 percent).