Interpreting Data

This week was quite an eventful week for everyone following the local market. beginning with a nasty bloodbath in the first two days despite our economy growing at its fastest pace in more than 30 years. A nice rebound happened on Wednesday and the index ended flat on Thursday with advancers evening out decliners. We have one more day to go this week and already its been a pretty crazy week.

So how are we expected to react to mixed emotions of foreign traders despite the better than expected results of our economy? With reserved optimism. The numbers have repeatedly stated that our economy is moving at the right direction and corporate results will mirror that soon enough (especially when the 4q earnings are released). I have not changed my sentiments regarding the direction of our market simply because there is no reason to.

On to individual stocks:
SCC- I received a report today from a local trader. The report was made by Abacus and it stated that its 12-month target price for this company is 300/sh. Natural disasters in Australia have repeatedly driven the price of coal up. Despite Australia being the number 4 or 5 producer of coal, it is the world's number two exporter. As of 2009, it handles almost 25 percent of cross-country coal trading. The flooding and cyclones in Australia have driven prices so high that, according to the report, SCC has already been contracted to deliver coal at double the average price of 2010. After the Calaca power plant's recent rehab, SCC's power generating arm is expected to contribute even more to the company's earnings. Potential downside that may affect the price performance include; a prolonged rainy season, sharp decline in electricity prices, and a sudden/unexpected shut down of the Calaca plant.

UBP- With two foreign brokers downgrading the company from a buy to a hold, most investors would probably worry on its potential upside or lack of it. I, on the other hand, would not. UBP has recently announced a 2.5/sh cash dividend in a TBA date. A more than ten percent increase from its previous dividend payout, this is a company that is giving back to its investors 30 percent of income last year. It may not be as widely traded as other financial stocks dues to its lack of liquidity but in terms of a strong base and a low downside risk, this is still one bank I'm willing to bet money on. UBP has continued to outperform most other financial stocks in terms of earnings growth and it is expected to do so again this year.

EDC- It has come to my attention that EDC is a pretty well sought after stock to own by foreign brokers. A trend has emerged lately; responsible investing, namely green energy. EDC is the operator of the Philippine's largest geothermal power plants (a renewable source of energy). With only three countries in the world with the expertise and technology (Iceland, The Philippines, and USA), the fact that we are closest to the pacific rim gives EDC a significant advantage in exporting this technology. EDC has recently concluded a 300 million dollar bond offering, despite the fact that it has no debt to service and it has a healthy cash flow. This most likely indicates an upcoming project or joint venture. I had the great opportunity to meet the president of FAMI, Gus Cosio, and in our talks he mentioned that he shared the same sentiment on EDC; foreign brokers, due to its drive for socially responsible investing, will look into EDC more closely. It also helps that EDC is the least battered among the major power/utility companies trading in PSE, a sure sign there are buyers at a number of strong support levels.