Investing Word Of The Day: Buyout

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With the recent talks of SMC buying a 40% shareholding at PAL you might think what the word "BUYOUT" means.

source: http://www.nytimes.com

IPO News: SMC Global Power Holdings Corporation

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source: http://www.sanmiguel.com.ph/businesses/

As we already know, Ramon Ang of San Miguel Corporation has been aggressively diversifying to the power sector and the latest is the listing of SMC Global Power Holdings Corporation.

Below is an excerpt of SMC Global Power Holdings Corporation approved listing: 

 source: Manila Bulletin

SEC Approves SMC Global IPO

By JAMES A. LOYOLA

October 1, 2011, 12:34am

MANILA, Philippines — The Securities

and Exchange Commission has approved the registration of the shares of SMC Global Power Holdings Corporation, paving the way for its P36.9-billion initial public offering – the biggest in the country’s history.

SEC documents show, the IPO will help SMC Global to raise fresh funds to finance the expansion of its power generation assets including the investment of P90 million in the next 5 years to build new power plants.

SMC Global Power plans to raise between P12.76 billion and P27.34 billion from a base offer of 290 million to 385 million primary and secondary shares at a maximum price of P71 per share.

Up to 288.75 million will be primary shares and 96.25 million will be secondary shares held by parent firm San Miguel Corporation (SMC).

million to 77 million primary and secondary shares, which will be sold to domestic investors, as well as an over allotment option of 43.50 million to 57.75 million secondary shares.(to read the entire article click here)

At the beginning most analyst are skeptical about SMC. The main reason for this is SMC under Ramon Ang's leadership has become unpredictable with various acquisitions and sell of its  assets and subsidiaries. 

With the above news analyst will probably take another look at how RSA has been transforming SMC from the company known for San Miguel Beer to a new company that is venturing to energy generation through the Initial Public Offering of SMC Global Power Holdings Corporation.

To date SMC Global Power Holdings Corporation has 4 power plants in Luzon under IPPA contract: Sual Power Plant(Pangasinan), Ilijan Power Plant(Batangas),San Roque Power Plant(Pangasinan), and Limay Power Plant(Bataan).

The planned IPO said to be the biggest for the Philippines to date is to expand SMC Global's network of energy generation and other corporate expenditures. 

San Miguel will be well positioned in the energy generation sector with SMC Global's IPO that will help finance expansion projects, with its shareholdings in Meralco for power distribution, and coal mines in the Southern part of the Philippines. These key industries to which San Miguel has been focusing will be the driver for SMC to once more be one of the most sought after corporation in the Philippines.

Listed company profile: San Miguel Corporation

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 source: http://nickledimepenny.blogspot.com/2009/02/san-miguel-corporation.html

San Miguel Corp.(SMC) has been in the country since the Spanish times with their brewery business. As the years went by SMC has added other areas of business in the food and beverage area. 

But as of today with Ramon S. Ang (a.k.a. RSA) diversification program for SMC the company has been entering new industries. One of this is power generation with its stake at Meralco(MER) and other is their bid on Philippine Airlines(PAL) of  Lucio Tan.

Below is the Corporate structure of SMC 

(source: http://www.sanmiguel.com.ph)

As per SMC's financial statements as of Sept, 2010 current ratio is at 1.7  but with a 1.87 Debt to Equity ratio.

For some time SMC's stock has been stagnant but the recent news and moves regarding RSA's diversification has caught the attention of investors. Some say it is more of a playing of the stocks by the few people and some say it is the doing of the very people that are already there.

Nonetheless it is worth looking back and checking SMC and be considered specially now that they have been aggressively diversifying into new areas.

Listed Company Profile: Meralco

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source: http://www.meralco.com.ph/

We have been waiting for this giant to rise up and be one of the leading stocks in the PSE.

About 2 months ago I was checking this stock and I knew there is something with this company. Being one of MPI's gem in their list of stocks and as well as the recent move by SMC the price of MER suddenly rose rapidly at year end it posted a 237.00 and nearly surpass its all time high of 292.00 in the first weeks of 2011 when it posted a 287.00 per share market price.

Originally a Lopez company, the entry of Manny Pangilinan's First Pacific Holdings through Metro Pacific Investments have given boost to MER's planned entry to the power generation sector a move from power retailer to power producer. And the latest is the entry of Ramon Ang of SMC .

Looking at its price it seems to hit another high after the uneasy start of 2011. 

I have seen a rise in its price back in Nov 2010 thus bought some until it went down due to year end jitters. After cost averaging till the end of 2010 I was looking at a 225 target price with a 15% gain but it went far beyond my expectation. Right now it sits at 280.00.

source: www.bloomberg.com

In fundamental aspects Meralco is in good shape having a good current ratio at 1.10 and a PE% of 35 (MRQ source www.reuters.com). Outlook on 2011 is positive and if MER's plans to get into self-generation of electricity it might have a better market price as what was seen with SCC.