What are holding companies? Understanding Parent and Subsidiary corporate relationship

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 source: http://philippines.starbucks.com

Have you ever thought who owns the Starbucks franchise in the Philippines?

Rustan Coffee which is a subsidiary of Rustan Group owns Starbucks Philippines(need clarification here) which  is the franchisee of Starbucks in the Philippines.

If you look at the relationship between these companies one can clearly see which stands as the parent and which stands as the subsidiary. By definition a subsidiary is a corporation which is controlled by another company while a parent company is a corporation who has control over another company. 

The important term to remember is "control". What is control then?

Basically control is defined as having an influence over another. So in a corporate setting control is achieved if one company owns a majority share in a company thus giving such company the power to make decisions due to the majority voting rights.

The Philippine Stock Exchange have an index named Holding Firms. This index primarily have all the conglomerate that has shareholdings in businesses of various industry. 

To name a few the likes of JGS(JG Summit) of the Gokingwei's, AC(Ayala Corp.) of the Ayala's, SM(SM Investments) of the Sy's, LPZ(Lopez Group) of the Lopez's, and MPI(Metro Pacific Investments) of Manny V. Pangilinan of First Pacific are the known holding firms in the Philippines.

It is possible that a Parent/Holding Company is also a subsidiary of another company. In this case such company will be called the ultimate  parent company.  An ultimate parent company may be a domestic corporation or a foreign corporation. 

In that case the Parent corporation prepares its Financial report with two presentation that is as the corporation by itself and as consolidated report.(This topic will be discuss in another post).

Now why does one need to know such?

This is important because it gives an idea how a stock will be performing. So basically since the earnings of a parent company comes from its subsidiary one can gauge the value of a holding company through its subsidiary. 

An example is AC(Ayala Corp) with the good performance of BPI(Bank of the Philippine  Island) one might think that it is good to buy AC(which is good because AC is considered as a fundamentally sound corporation) but looking at its telecom business GLO(Globe Inc.) which has suffered set back in its operations due to the sluggish telecom industry one might concentrate more on BPI rather than investing its bulk of funds in AC.

At the same time it is also noteworthy to know that though such is interconnected it seems that the subsidiary and the parent are independent from one another.

So one still has to understand the nature of the company and the industry they are in. And it would be of great help knowing the diversified business a company ventures into.

 

Listed Company Profile: Alliance Global Inc.

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source: http://allianceglobalinc.com

Have you ever thought who is the maker of Emperador brandy, owner of Megaworld, master franchisor of McDonald's in the Philippines, and Travellers International Hotel Group, Inc.?

These are Alliance Global Inc.(AGI) core businesses.  Led by Andrew Tan, one of the Philippines leading tycoons, AGI group has grown and is continually making its presence in the Philippine market. 

Below is a excerpt from www.reuters.com/finance

Alliance Global Group, Inc. (AGI) is a holding company presently engaged in the food and beverage business (manufacturing and trading of consumer products), real estate (investment in and development of real estate, lease of properties, hotel operations and tourism-oriented businesses), and quick service restaurant (McDonald’s). 

The Company’s operating businesses are categorized into three segments: Food and Beverage (F&B); Real Estate (RE) and Quick Service Restaurant (QSR). Its subsidiaries include First Oceanic Property Management, Inc, Citylink Coach Services, Inc., Emperador Distillers, Inc., Anglo Watsons Glass, Inc., Golden Arches Development Corporation, Golden Arches Realty Corporation, Alliance Global Brands, Inc. and Emperador International Ltd.

AGI has been performing well from share price of Php 4.00 at the beginning of the year to Php 12.00 at present. Its performance can be seen in this one year candlestick chart

Below is an excerpt from AGI's 17Q report filed with the Philippine SEC

Key Performance Indicators

Presented below are the top five (5) key performance indicators of the Company and subsidiaries as of and for the nine months ended September 30: 2010 2009

o Revenues growth – measures the percentage change in revenues 

   over a designated period of time. Performance is measured both in

   terms of amount and volume, where applicable.
o Net income growth – measures the percentage change in net 

   income over a designated period of time
o Net income rate– computed as percentage of net income to

  revenues-measures the operating efficiency and success of 

  maintaining satisfactory control of costs
o Return on investment [or capital employed] – the ratio of net 

   income to total assets - measures the degree of efficiency in the 

   use of resources to generate net income
o Current ratio – computed as current assets divided by current 

   liabilities – measures the ability of the business to meet its current 

   obligations. To measure immediate liquidity, quick assets [cash, 

   marketable securities, accounts receivables] is divided by current 

   liabilities.

source: http://www.pse.com.ph/html/ListedCompanies/pdf/2010/AGI_17Q_Sep2010.pdf

Stock market news: IP CONVERGE DATA CENTER, INC.IPO

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I got this message  again from my COL account 

Offer Price: P4.20/ share

Minimum Subscription: 1000 shares and thereafter, in multiples of 1000 shares

Offer Period: November 25 to November 30, 2010 - 12:00 Noon

 

COL End of Offer and Payment: November 30, 2010 

12:00 Noon

Tentative Listing Date: December 9, 2010 

Payment Terms: 100% due upon subscription not later

than November 30, 2010 12:00 Noon

INITIAL PUBLIC OFFERING FOR IP CONVERGE DATA 

CENTER, INC.

Please be informed that the Board of Directors of The Philippine Stock Exchange, Inc. approved on October 20, 2010, the application of IP CONVERGE DATA CENTER, INC. (CLOUD or the Company) for the initial listing of 181,866,669 common shares, with a par value of P1.00 per share under the Second Board of the Exchange consisting of the following:

a.136,400,002 common shares, representing the issued and outstanding shares of the Company prior to the Initial Public Offering (IPO) of the Companys shares; and
b.45,466,667 common shares, representing the common shares to be offered to the public on a primary basis.

THE OFFER

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Minimum   : 1000 shares, and thereafter in multiples of 

                     1000 shares

COL Offer Period : November 25 to November 30, 2010 

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COL End of Offer and Payment   : November 30, 2010 

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Tentative Listing Date  : December 9, 2010

Payment Terms  : Full payment on or before November

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For interested subscribers, please subscribe online by 

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Corporate News: Jollibee CFO: My job is to prepare the company for all kinds of shocks

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source: www.inquirer

                                        

I got this news article from Philippine Daily Inquirer and it gives me a better perspective of JFC and its coming success for the next 2 -5 years. Equally important position in the company is the CFO which handles the financial capabilities of the company. The CFO must be able to foresee the needs of the company and be able to make actions to put the company on track to its goals.

Source: http://business.inquirer.net/money/topstories

Jollibee CFO: My job is to prepare the company for all kinds of shocks

By Doris Dumlao
Philippine Daily Inquirer
First Posted 17:29:00 11/20/2010

MANILA, Philippines—The son of an auto mechanic from a small town in Quezon who worked his way up to become chief finance officer of globally expanding Filipino fast-food giant Jollibee Foods Corp. has been named as the “CFO of the Year” for 2010.
 

Ysmael Baysa reminisces about his humble beginnings during the media briefing announcing him as this year’s recipient of the prestigious annual award jointly given by ING Bank Manila (ING) and the Financial Executives Institute of the Philippines. He shares the honor with his hometown of Sariaya and alma mater Luzonian University of Lucena City in Quezon province.

While most CFOs of top-tier companies are usually bred and schooled in Metro Manila or even abroad, Baysa takes pride in having been raised and educated in his province. “It’s because of this humble beginning that this award has meant so much more,” he says.

To read more about this news article click here.

 

Investing word of the day: Leverage

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 source: http://www.etftrends.com

Hi it's been quite awhile since I posted some investing words to think about.

So lets start with LEVERAGE.

Investopedia.com defines leverage as :

1. The use of various financial instruments or borrowed capital, such

    as margin, to increase the potential return of an investment.

2. The amount of debt used to finance a firm's assets. A firm with

    significantly more debt than equity is considered to be highly 

    leveraged.

Leverage is most commonly used in real estate transactions through the use of mortgages to purchase a home. 

So basically what does this word mean to us? 

Well leverage is taking advantage of available means to increase profit. To make it simple let's use OPM(Other People's Money). 

For example since Christmas season is around let say you wanted to sell those beautiful parols but right now you don't have enough capital to buy such. So you decided to find the manufacturer to make sure you get it at the cheapest price. So you went to Pampanga and was able to find the manufacturer. 

But even though its cheap at the manufacturer you still don't have enough capital of your own so you ask your brothers and sisters to lend you money. And so you got the money and got the parols. Displayed the parols in your house which is along the busiest road in your subdivision and by week's end you sold all the parols.

So where is leverage there? That is where OPM(Other People's Money) come. Well you were able to make profit even without you shelling out cash to finance your purchase.

By that you were able to increase you earnings by 100% if you fully financed it with borrowed money.


The same principle is used in Larry Gamboa's book Think Rich Pinoy(an adaptation to Robert Kiyosaki's principles in the Philippine setting).

                            source:http://thinkrichpinoy.com

source: http://fireballbooks.com/ThinkRichPinoy/

Larry and his partners scout banks for foreclosed properties that are auctioned at insanely low price. With a required deposit of only Php 25,000.00( this is the minimum I think) they were able to join the auction of foreclosed properties and the bank will even let you pay the property at installment basis.

So Larry Gamboa and company are able to leverage on their buy and sell project because it seems that they didn't even empty their pockets to fund the project because they borrowed the fund they need to the same bank who  sold the property. 

That is what we call leverage or in our Pinoy lingo OPM ;)   or better yet DOING MORE WITH LESS

source: http://www.healthy-holistic-living.com

Ways to be debt free: What now?

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                                                       source: http://7million7years.com

Its been awhile since I wrote something about this topic. If you haven't read the first part click here.

In my last post we talked about accepting that you are in fact buried in debt. It may sound crazy or something but as any other form of addiction acknowledging your situation is the very first step. Now the next thing one should do is to make an inventory of whatever one has. 

When I say "whatever one has" that includes your assets and your liabilities.

Do you have a car? Do you have a house or a laptop? These things are your assets. Assets are things of value that you own. 

Do you have a credit card loan, a bank loan, a mortgage, or a "utang sa 5/6" ? These things are liabilities. Liabilities are things that you owe.

List these things separately. You could have a notebook with the pages equally divided of which the first half would be your ASSETS and the second your LIABILITIES. Make it a four column page. The first would be your description or name of the asset or liability, the second is the amount related to it, the third is your plan for it, ans the last is where you can either put a tick mark to indicate if the plan for it is done or a date of which you want to achieve such. See  sample below:

Now just like the above examples you have to decide which assets of yours can go away and which one are necessity. I know this would be gory but hey remember you are buried in debt and if you don't get out of it fast the more you will be buried in the pit. Oh these is one of the secrets ... you must get out of debt fast.

On your liability section determined which one are onerous or burdensome.

Lets define onerous, courtesy of wiktionary.org

Etymology

From Latin onerosus (“burdensome”), from onus (“load”).
Pronunciation

    * (UK) IPA: /ˈəʊn.ɜː(ɹ).ʌs/ SAMPA: /"@Un.3:(r).Vs/

Adjective

onerous (comparative more onerous, superlative most onerous)

   1. burdensome; difficult; wearing; tiring

Antonyms

    * gratuitous

Related terms

    * exonerate
    * exoneration
    * onus

Why list liability in the order of burdensomeness? 

As I have said awhile ago the faster you pay your debt the better. So the faster you pay debts or loans with hefty interest the better because you save money paying the interest attached to it. So looking back at the above I guess the Php 650,000.00 bank loan at 15% per annum should be settled or paid first to avoid paying interest.

Now looking at your assets, list them down in the order of greater fair value. Sorry I never told you. Maybe your laptop cost 25,000.00 when you bought it 3 months ago but if you are to sell it  now probably you will only get 10,000.00 to 15,000.00. One has to consider an asset's fair value. 

Wikipedia has this to say about fair value:

A rational and unbiased estimate of the potential market price of a good, service, or asset, taking into account such objective factors as:

    * acquisition/production/distribution costs, replacement
      costs, or costs of close substitutes
    * actual utility at a given level of development of social
      productive capability
    * supply vs. demand

and subjective factors such as

    * risk characteristics
    * cost of and return on capital
    * individually perceived utility

What does this mean? Your assets may have a lower or higher value depending on how much is the accepted fair value at the time of sale. So what can you do to be able to sell your stuff to pay off your debts? I guess these are my only advice in regards to this matter ; first make sure people who are interested to buy see value in your asset and second make sure such are in good shape.

Looking at the two sides you might notice that you have a difference of negative Php 197,500.00

This is what we call Net Worth. To read about my post regarding Net Worth click here.

Having a negative net worth signifies that you are really buried in debt while having a break even or a positive net worth means you are able to leverage your assets and liability to the full potential. 

So what is one of the things that you should do to be debt free? 

You have to list your asset in the order of greater fair value and liabilities in the order of onerousness. Pay first your onerous debts and make sure your assets has greater value so that you can get as much from it.

Stock market news: NAC(Nickel Asia Corp.) IPO

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Got this message from my COL account regarding the anticipated IPO of Nickel Asia Corp.

NICKEL ASIA CORPORATION IPO

Offer Price: P15.00 / share

Minimum Subscription: 1000 shares and thereafter, in multiples of 100 shares

Offer Period: November 8 to November 11, 2010 12:00 Noon

COL End of Offer and Payment: November 11, 2010 12:00 Noon

Tentative Listing Date: November 22, 2010 

Payment Terms: 100% due upon subscription not later than November 11, 2010 12:00 Noon

INITIAL PUBLIC OFFERING FOR NICKEL ASIA CORPORATION

Please be informed that the Board of Directors of The Philippine Stock Exchange, Inc. approved on October 20, 2010, the application of NICKEL ASIA CORPORATION (NIKL or the Company) for the initial listing of up to 1,339,831,828 common shares, with a par value of P0.50 per share, under the First Board of the Exchange consisting of the following:

a.989,656,828 common shares, representing the total 

number of issued and outstanding shares of the 

Company prior to the Initial Public Offering (IPO) of the 

Companys shares;


b.Up to 304,500,000 common shares, representing the 

total number of shares, inclusive of 132,991,828 

common shares held in treasury, to be offered to the 

public on a primary basis; and 


c.Up to 45,675,000 common shares, representing the 

Over-Allotment Option in connection with the

companys IPO.

THE OFFER

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COL Offer Period    : November 8 to November 11, 2010

                                 12:00 Noon
 
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Who is Henry Sy Sr.

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                                     source: http://images.forbes.com

Henry Sy(born October 25, 1924) is a Chinese Filipino businessman and the founder of SM Group and chairman of SM Prime Holdings, the largest retailer and shopping mall operator in the Philippines.

He earned his Associate of Arts degree in Commercial Studies at Far Eastern University in 1950. 

Acknowledged as the country’s "Retail King," he has come a long way from the modest shoe store he set up in Quiapo in 1946, to become Asia's biggest shopping mall operator with over 30 malls throughout the Philippines.

He had 1.4 billion dollars in 2008, one of the richest men in the Philippines, next to Lucio Tan. As of 2010 Mr.Sy's net worth was estimated at $4.2 billion by Forbes Asia topping the Philippines rich list. On July 27, 2010, Sy confirmed that half of his industry would be shared with lifelong friends, the Wee family. 

Sy is considered a Tai-Pan or tycoon of Asia. The Sy group is the operator of Banco de Oro Universal Bank and owner of China Banking Corporation. In 2006, he bought the remaining 66% of Equitable PCI Bank, the Philippines 3rd largest lender, in which he already had a 34% stake, and merged it with Banco de Oro Universal Bank in 2007. The merger created the Philippine's second largest financial institution in 2008 and taking the top spot in 2009 with resources of close to $20 billion dollars.

Mr. Sy has recently sold his 11% stake in San Miguel Corporation, Southeast Asia's largest food and beverage conglomerate for $680 million.

Henry Sy, Sr., was named "Management Man of the Year" by the Makati Business Club and was conferred an Honorary Doctorate in Business Management by De La Salle University-Manila in January 1999.He organized the SM Foundation Inc., which helps underprivileged but promising young Filipinos.

Sy's retail chain is SM Prime Holdings, known as "Shoe Mart" or simply "SM". Several of his children now hold senior management positions in his companies, although he has groomed daughter Teresita Sy-Coson as his successor.

Sy's holding company, SM Investments Corp., has consistently been cited as one of the Philippines best-managed companies.On May 20, 2006, The SM Mall of Asia, built in the reclamation area of Pasay City, was opened to the public.It is the fourth-largest mall in the world.

                                     source: http://www.hotelsbycity.net

Sources: Wikipedia.org and Forbes.com

Citiseconline Platform 2: Off-hour ordering

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source: http://www.ibf.org.uk/2009/08/about-online-trading/

I have decided to show the Off-hour ordering since the usual ordering is the same as this one only that this order is placed during off hours before the pre-opening and after the run-off time as per PSE time trading hours.

Off-hour ordering allows investors who are in a different time zone to place their order in advance. Such order are queued and will be automatically placed in the system at the opening of the trading at PSE.

For our example below I have use JFC(Jollibee Food Corp.) for our Off-hour ordering:

Log in to your account and click the TRADE/PORTFOLIO tab and click OFF-HOUR ORDER

Enter the the stock you are buying or selling in the field STOCK CODE

Enter the number of shares you wanted to buy and the price you wanted to purchased the said stock. If you look at the other two boxes in the side you will noticed that quotes for the same stock is shown. On the BID ASK box you will notice that there is a size and price column. These columns indicate the number of shares being ordered or being sold with the corresponding price these investors are willing to trade.

At the same time be mindful that the bid or ask price is not limited to the listed prices in the first box. With the new trading system there could be more than three fluctuation as long as it is within the two threshold set by PSE as per the implementing rules and regulation. To know more about the Static and Dynamic threshold you can read my post here. 

You can refer to the other box for other information you need to determine at what price and quantity you can order or sell. But again such decisions entails other factors which will be discussed on other topics.

After entering desired price and quantity you can preview your order details. In the preview below you can see the details of charges and total purchased cost or proceed before continuing your order. Be sure to check the total purchased or proceed before confirming your order. Sometimes you may not have enough funds to support the purchased or your proceeds might be below your cost thus leading you to loss. 

Type in your password and click PLACE BUY ORDER(or SELL if selling) to confirm your order or CANCEL ORDER to cancel which will bring you back to the order section and make revision.

After approving your order the window below will pop out as a confirmation of your order.

To view your orders and still make changes you can go to the OFF-HOURS VIEW/CANCEL(for regular ordering you can go to the VIEW/MODIFY ORDER)

How well do you know your stock?

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                                                source:http://www.bocawebsites.com

Way back I posted a blog topic regarding stock index. These indexes represent the segments of the stock market and also use as an overall indicator of the Philippine economy. If you haven't read that please click here.

As you have already noticed I got this Photobucket slideshow showing some of the listed companies logo or photo. In a way a logo will remind you of the stocks they represent. But aside from the logo or photo and what it represent it is also important that one knows the company inside out. 

The Philippine Stock Exchange website has a link for corporate information(to read my post on PSE navigation to corporate information click here) . Such information can help a potential investor to decide in making that buy or sell.

The SEC requires a quarterly report fro listed companies called 17-Q. This report outlines the company's operation and standing for a quarter of the period. It includes comparative Balance Sheet, Profit & Loss, Statement of Changes in Equity,   Statement of Cashflows, Notes to Financial statements, Management discussion, Key operating highlights, and other pertinent reports and disclosures.(See ABS sample cover page below)

     source: http://www.pse.com.ph/html/ListedCompanies/pdf/2010/ABS_17Q_Aug2010.pdf 

 

Some of the information in this document are use in the computations of some fundamental analysis like liquidity ratios, growth ratios, and other common size ratios. Also one can see comparison from last year. This comparison enable investors to discern whether the company is a good buy or not. An increase in asset with a corresponding increase in net income indicates good performance of the company(there are many more other computations to gauge the value of a stock).

This report might be nosebleed but it pays to read it because it gives a possible investor an insight about the company in the eyes of the management of the company as represented in their report. Such documents also have to comply with the accounting and reporting standards and SEC's reportorial requirements thus we have some level of assurance that such report is not a misrepresentation of the company's true state.