Philippine Stock Market Trading Advisory

Philippine Stock Market Trading Advisory as of April 16, 2010

Of our 40 stocks coverage, the three stocks with the lowest prices in terms of their earnings and book value are so cheap that their prices just match their most liquid assets.  Investing into them at current prices means one does not even have to count on the stocks’ future growth to justify their purchase.  These stocks’ profitability and financial condition range from fair to strong and are safer investments than popular stocks whose share prices have gone sky-high.

Third Cheapest is ATS – ATS’ market cap as of Friday of PHP2.8 bn is just equivalent to its cash and half of its current receivables.  ATS has a fair financial condition with current ratio at 0.9x and debt to equity ratio at 1.1x.  Its profitability is at the mercy of petroleum prices making historical growth and margins erratic.  However, management has been successful reigning costs and expenses and is developing the logistics business as its direction towards stable growth and margins.  Our blended multiplier ceiling is 20.8x.  ATS is currently trading at only 6.4x.

Second Cheapest is RCB – RCB’s market cap as of Friday of PHP17.5 bn is just equivalent to its cash and bulk of due from the BSP.  RCB has favorable spreads and margins.  More importantly, of the seven major banks we cover, it has the second strongest financial condition after SECB.  Our blended multiplier ceiling is 20.8x.  RCB is currently trading at only 3.6x.

Cheapest is VLL – VLL’s market cap as of Friday of PHP17.4 bn is just equivalent to its cash, short term investments, receivables and 16% of its current real estate inventory.  Having gone to high-end vertical development, VLL’s profitability slumped slightly in 2009 from the global financial crisis.  The company benefits from OFW remittances to fuel its sales in affordable residential projects.  Our blended multiplier ceiling is 20.8x.  VLL is currently trading at only 3.4x.

Pymwymi Fund Performance

The Pymwymi Fund is up 15.1%, while the PSEi is up 8.7% from the start of 2010.