The Waves of Philippine Business P. 2

Prelude

Hello regular readers, apologies for taking such a long time to update my entry. I was looking at the share price of Megaworld and I guess it took me some days to recover.

I saw the high of this stock last year when it peaked at around 4.00 or higher. Lo and behold, it's now below 0.95 thereabouts. This is near the lows of its share price during the height of the Asian Financial Crisis.

Now, let me ask you, is Megaworld on the brink of Armageddon? Probably not. Do I see value? Well, on paper there seems to be. I haven't checked their FS; but, based from my experience companies here aren't as transparent as say, US companies anyway. On a topline view though I think they are still booking new sales albeit at a much slower pace than before. But to see its price fall below 1.00? That's just too much.

Back to the Waves

I mentioned during my last post that I'd be discussing the waves of Philippine businesses. Let's proceed to that.

To discuss the waves, you need to have a slew of indicators. These indicators are much like what economists use to gauge where the Philippine economy is headed. These are also indicators that the Bangko Sentral (BSP) (Central Bank) uses to determine if they should do expansionary or restrictive economic measures like adjusting the interest rates. For our purposes though, we will use other forms of factors.

Remember the theme of this blog, it's guerilla investing. Therefore we (or I) don't use the usual indicators used by most economists. We (I) have to approach a problem guerilla style. And that's what we (I) are (am) doing. I hope this third person / first person perspective isn't putting you off. I mean I'm just one writer, but I also have to take into account that the reader here is also interested in the guerilla approach to finances, hence "we".

I haven't battle-tested these indicators, so at this stage of my investing philosophy, they are a work-in-progress suggestion. What does this mean? This means that at this point in time, I cannot safely state that these indicators are good indicators. But as you read along, I am sure that these indicators will make sense to you. Some are the usual indicators, some are not. Some are accessible to the public , some are not.

The Guerilla Indicators

If there is one important indicator, it's this - OFW Remittances. But beyond the number of zeroes you see attached to the $ sign, it's important to dig down the figures. Dig what? For gold? No. Dig the data, where does the money go to? OFW remittances fuel our consumer driven economy, as John Gokongwei puts it, "We are a nation that produces nothing and consumes everything." (Well except for babies, which we produce in great quantities. Haha).

As far as I know, there's only a few studies as to where the OFW remittances go. I'll try to search for them soon.

What other indicators are important?

Media - what's the headlines now? I've realized that a huge chunk of the perception people have here are based on what they see or hear from the news. What are the themes in most magazines now? Magazines are also a good source of information and trends. Who'd think that magazines dealing with gadgets and home decors and condos would fly?

Now, look at the malls, don't you see gajillion outlets selling techie stuff? There're Apple stores now, laptops have become cheaper, Motorola/Ericsson/Nokia boutique shops. Which came first? The magazines or the products? It's hard to tell, but certainly, magazines and media are an indicator for you.

Car sales. It's one of the figures that are hard to fake. This is a subject (cars) that I will tackle in detail in a future post. Check the top 5 brands/models that are being sold. Check the growth rate if it's published in the news. Chances are, if there is growth, then the economy isn't doing as bad as the stock market is telling you.

Number of students in private schools. I am not sure if this is easily accessible, but this is an important indicator for you. We all know how expensive education is locally, so if there are still scores of students enrolling at exclusive schools, then you know that there is something wrong with the low GDP numbers.

We'll talk more on my subsequent post. Thanks for dropping by and being patient. Hope you enjoyed the read!