Philippine Stock Market Trading Advisory

Philippine Stock Market Trading Advisory as of May 17, 2010

ABS or GMA7?  These two stocks benefited from political ad revenues.  These two stocks claim they are Number One in nationwide viewership based on surveys made by independent parties.  These two stocks claim they have the best and brightest stars.  However, which one should we include in our investment portfolio?

ABS is the bigger company with PHP34.8 bn in total assets in 2009 compared to GMA7’s PHP13.8 bn.  ABS’ 2009 revenues and five-year average earnings growth likewise overshadows GMA7.  However, based on the scorecard below, GMA7 has the better financial performance.  GMA7 is more liquid and financially prudent, while ABS is mainly funded by debt with interest expenses eroding its pre-tax income margins.

Ironically, GMA7 is cheaper with a blended multiplier of 25.01x compared to ABS’ 49.68x.  With a solid financial performance detailed above, it should be the other way around.  Fortunately, investors have the opportunity to purchase GMA7 while its share price is at lower price levels.

Speaking of stocks with prices at lower levels, MWC has left our roster of undervalued stocks.  MWC rallied to PHP16 and hit a high of PHP16.25 this week.  It was at PHP15 when it was on our list for a couple of weeks.  MWC is now valued at a blended multiplier of 24.92x, slightly above our 22.36x limit and next to GMA7’s 25.01x.

Another stock poised to leave our roster of undervalued stocks is SECB.  As we’ve mentioned before, SECB has the strongest financial condition among the bank stocks we cover based on an adjusted debt to equity ratio suitable for banks.  From PHP57 on May 7, 2010, SECB has appreciated to PHP66.50 last Friday (May 14, 2010).  It is still a suitable BUY with a blended multiplier of 18.79x.

Pymwymi Fund Performance

The Pymwymi Fund is up 19.6%, while the PSEi is up 10.8% from the start of 2010.  The Pymwymi Fund was created at the start of 2010.  Stocks recommended for creating a Pymwymi Fund as of this time are AC, AGI, SECB, CHIB and UBP.

Note:  Philippine Stock Market Trading Advisory Disclaimer Below