August 21, 2011- A Little Common Cents Corner #1 – In Depth Analysis of Alliance Global (AGI)

“A Little Common Cents Corner” – This category is my personal attempt to be “Sherlock Holmes” on technical tape readings and my fervent attempt to be a fundamental analyst at times. We’re surrounded by important cues and clues that might help us to solve our everyday problems and looming challenges.  Understanding the big picture means examining the hundreds and thousands of smaller pieces first.  It takes a keen eye to take in such subtle messages in a hectic world.  I try to flush the noise, and find the important pieces in the puzzle.  I think most analysts call this the mosaic theory.  The business world is all about cracking the codes.  Truths are couched politely and rarely spoken directly.  For purposes of local expertise, this corner will be devoted primarily to Philippine equities, but macro indicators such as index futures, currencies, gold and other barometers will be taken into consideration.  For purposes of trading edges, it is understood that whatever is written here is tainted with personal biases and opinions.  I may be talking my book and caveats are always necessary.  

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I will bet on your mother’s grave that there are a handful of traders who have been trading for more than 2 decades who haven’t read a single annual report in their lives, but are making boat loads of millions in the current markets.  Of course, there are also a handful of traders who are making their own millions specifically by reading reports.

Out of the 22,000 clients of CitisecOnline in its latest 2Q11 report and the 30,000 clients (I plucked this from thin air) perhaps of other brokers ranging from Macquarie, UBS, Credit Suisse, ATR-KE, DBP Daiwa, BPI, RCBC, First Metro, Abacus, Tower, Wealth, Phil Equity etc,  (let’s assume there are 50,000 clients total in the Philippine markets) with about 5000 trading actively (I figured the 4000+ Social facebook friends in the Market Mirror forum) will most likely be swing traders, else they wouldn’t be checking the markets minute by minute, giving status updates every so often.  I’m writing this report for those 5000 people who happen to be swing traders.  Yes, I’m talking to you.

Why I wished to talk about AGI, is just a personal reason.  We can talk about other stocks in my next posts on A Little Common Cents Corner.  For now, I’d like to showcase a company I’m eyeing upon (not because it’s the stock with the best technical setup) but because my Sherlock Holmes sniff-snuff is feeling a little bit itchy to know what’s cooking.

Some Simple Fundamental Eye Candy:

I may be disillusioning myself when I check a company’s corporate website, I know.  I even made a simple collage of Mr. Andrew Tan’s famous brands under AGI, I didn’t even get to add his Eastwood Mall, and his other businesses such as the recently acquired Global Resorts or formerly Fil Estate land which is 10% of the entire Boracay island.

Traders trade blocks of AGI, and only a few really know what they’re buying and selling exactly, so I thought I’d educate the 4000-5000 swing traders who normally just buy and sell XYZ.  AGI, my dear tsupitero friends owns McDonalds, Resorts World, The Bar, Generoso, McKinley Hills etc.  Just so you know, every time you spend a dime buying these goods, you’re in effect paying tribute to AGI.

From the Corporate Quarterly Resorts found in PSE website:

For the first quarter of AGI, the company earned 6.19 Billion pesos, up 179% with a non-recurring gain of 3.35 Bil pesos for (acquisition of GERI).  Excluding the gain, the company is up 28% y/y or 2.85 Bil pesos from 17 Bil worth of revenues which was up 62% from last year.

Diverse Asset Portfolio

1.) Real Estate Businesses – 33% Contribution of MegaWorld to AGI (Strong sales of Manhattan Garden City, New Port, McKinley Hill, and higher lease income from BPO projects)

2.) Emperador Distillery , McDonalds, Resorts World & Marriott Hotel and GERI (Boracay) – 67% Contribution

Cash Rich Position –  The combined cash position of AGI’s other business units, including Travellers, reached P64.8 billion, a result of higher operating efficiency.

*Personal Faceless Trader Comment-   At 11.14 pesos, Andrew Tan’s Cash War Chest can buy more than 50% of the company’s market value which runs at 114 Bil pesos today. There are 9.2 Bil shares outstanding in the market.  If the price goes anywhere below 10 pesos, his cash alone for all his businesses can buy (64.8 Bil Div by 10 pesos = 6.48 B/9.2 B ) , roughly 70% of the entire market’s outstanding shares.

Comparing with the other Philippine Conglomerate Tycoons:

Market Caps and Earnings Results:

According to my personal analysis, with AGI being on track and even outperforming consensus 2011 net profit forecasts, even at the the price of 11.20, AGI is trading well below its peers.  I took the current market capitalization of Ayala Corporation, Aboitize Equity Ventures, First Philippine Holdings, SM and San Miguel and AGI is one of the cheapest conglomerates around the Philippines despite strong earnings growth momentum.  Seems like the market’s either presenting a good opportunity here, or I’m missing some risk factors?

Technical Tape Readings:

Largest Buyers/ Believers in AGI’s ability to earn money and its unwarranted discount in today’s market are: 

Historical Broker Transaction Time Period: July 23, 2010 to August 19, 2011

Biggest Accumulators:

1.) CitisecOnline (Broker 203) has a combined 1.5 Bil pesos accumulation at the average price of 10.93

2.) DBP Daiwa (Broker 142) has an accumulated 1.2 Bil pesos worth of stock at avg price of 11.56

3.) ATR KE (Broker 220) , BDO (279) , Credit Suisse (311), Deutsche (209)  and RCBC (217) Securities – accumulated AGI at prices between 10.50-11.40

Biggest Profit Takers:

1.) UBS(333) has sold 1.5 Bil pesos worth of AGI stock, profitable with an average cost of 10 , and sold at 10.50.

2.) Macquarie(121), Abacus(102), Philequity (338) and Aurora ( 167) sold 285 Mil to 550 Mil worth of shares of AGI all at profits this year.

Check the historical broker transactions net buy below for full information:

I considered checking the recent historical broker transactions as well from August 9 to August 19, 2011 to check whether the recent bargain prices of AGI have been attracting longterm holders to the stock:  Here are the results:

Recent AGI Section shows CitisecOnline(203) clients selling 167 mil worth of their shares, which is being gobbled up by Deutsche Regis (209), Credit Suisse (311), DBP Daiwa ( 142) , CLSA ( 323), A&A (101), Papa (219) and Abacus (102).

– The Faceless Trader

 

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2 Responses to August 21, 2011- A Little Common Cents Corner #1 – In Depth Analysis of Alliance Global (AGI)

  1. spyfrat says:

    wow very nice. it was a classic cayman vs cayman way back when agi was at mid 11 to low 12 😀

    Like

  2. Pingback: August 26, 2011- A Little Common Cents Corner – Updated Analysis on AGI | Faceless Trader

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