I attended the recent CAF of Absolute Traders last June 24 at the trading floor of the Philippine Stock Exchange. The number of audience participants was modest, compared to previous CAFs, where the venue would always be filled to the brim. One reason for such a modest turnout is the state of the Philippine stock market, which has bled uncontrollably since the start of the year.
This CAF was notably different than previous CAFs in that there was a fundamental analysis presentation. The fundamental analysis portion was presented by Sandy Gilles, a CFA. The key take away from his presentation is that the current stock market is at a fair PE ratio. This means that the stock prices are not expensive relative to the earnings growth for PSE-listed companies. It is expected that companies will have income growth of about 11%.
Stock buyers beware though. This does not mean that the market has bottomed out. There are issues like inflation, weather (due to its correlation with rice production), gas prices, and further government monitoring of the utility sector.
Absolute Traders Chairman, Mr. Fitz Aclan also presented his view of the market. Based on charts, there are still downside risks to the PSE with a worst case scenario of the index falling to 2,000 or 2,200. The worst case scenario will be made possible in a situation wherein crude oil exceeds $150, local inflation rate goes beyond 12%, and downgrades by foreign financial institutions and ratings agencies.
One interesting slide that he presented was a slide on the worst stock performers (index linked stocks) since the start of the subprime crisis in the US. FPH ranked the first with a -77% paper loss (or actual loss, if you realized it by selling). The resilient stocks were only three -
ICT (+1.72%)
MWC (+42%)
PX (+79%)
Who says you can't make money in a bear market? You just have to have an eye for the right stock.
Nurturing the Agriculture sector
Despite the gloom and doom that fell upon the audience, one shining light was the upcoming IPO of an agriculture-based company, Agrinurture Inc. Not only is it an initial public offering, it is also an interesting public offering. The company presentation was represented by no other than their CEO, Tony Tiu.
I always enjoy business presentations from reputable and upcoming businesses. This is one of them.
Prior to the presentation though, I had my doubts about the company. Who is Agrinurture? If my broker inquired if I wanted to get the IPO, should I bother? After the presentation, all my doubts were laid to rest.
Mr. Tiu's presentation was both about the company and a reminder of how our country has gone down the wrong road in terms of the agricultural sector. If you take a look at this list, I ask you, is agriculture a bad sector to invest in? Look at the countries and tell me, aren't ALL of them considered part of the developed world? Doesn't this give us a hint that agriculture is actually a good sector to invest in?
For one, our country's people would rather work in offices than plow the fields largely because the salary of these two are in opposite extremes. Yet, it's not like our country has no natural resources. Compare ourselves to Singapore. Singapore imports most of its agricultural needs because their country has little to no arable lands. What about ours? Are chip manufacturing, BPOs and ship-building the only sectors that our country has to offer?
According to Mr. Tiu, Siliman University used to have 900 agriculture undergraduates. It's fallen to just 50. Sometimes we have to wonder where did we all go wrong? Is it because people are practical so they want to take up better courses to work in offices with good pay? Is it because there are no opportunities in the agricultural sector? Which is the chicken, and which is the egg? By the way, if there were no poultry farms, we won't even have chicken nor eggs.
New Stock on the Block
I like their company initial, ANI. It's very positive and also relates well to the industry where the company operates in. Kudos to the person who thought about that.
I won't divulge much of their business operations as that will be made possible by the prospectus that will come out once the IPO plans have been finalized. Apart from that, what I share is already second hand information. I would rather the company do their presentation via their own representative.
What I can share though is my impression and what I like about their company. They are big exporters of canned coconut juice and other fruits. They are a major supplier to the biggest supermarket chain in the country. They have acquired a popular juice retailer brand that is a natural extension of their business, i.e. fruits. They are also looking into the agricultural estate business, which to me is very promising.
One of their key growth drivers is the food crisis. Don't you just wish you were in a business that could say that? As Mr. Tiu rightly puts it, "In good times we eat, in bad times, we eat more." Apart from that, it's been historically proven that in high inflation environments, prices of basic commodities go higher, driven by demand from people doing panic buying. During bad times, you'd obviously put your money in essentials, and do away with those that are not.
I hope the investing public would be interested in this stock. Do note, this is going to be the only stock that is directly involved in the agricultural sector. Moreover, they will likely prosper in this volatile stock market times.
P.S. I found this appalling set of data from a press release by the PSE. Imagine, if you add another 1% to the number of people who trade the stock market, or even people who would just buy and hold, stock prices would definitely increase due to the increased demand. Go figure.
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