Friday, 17 September 2010

Tampakan to contribute $2.7b yearly to the economy

Elaine R. Alanguilan
Manila Standard

The $5.2-billion gold and copper project of Xstrata Plc and Indophil Resources Plc will contribute
$2.7 billion to the local economy annually, said Mark Williams, general manager of joint venture Sagittarius Mines Inc.

The government is projected to receive $5.8 billion in taxes during the life of the Tampakan mine, Williams said. The open-pit mine ban imposed by the South Cotabato province government remains “a major concern,” he said in a speech in Manila.

The Tampakan mine, which holds the largest untapped gold and copper deposit in Southeast Asia, is expected to contribute about 1 percent to the country’s economic output if it becomes operational in 2015.

Williams said Tampakan would contribute $40 billion in revenue over the life of the mine.

“The project, which has the potential to become the largest mine in the country and the fifth-largest copper mine in the world, could increase the country’s gross domestic product by an average of 1 percent per year for 25 years,” said Williams in his presentation at the mining conference Thursday.

Wednesday, 15 September 2010

OF Remittances Continue to Grow in July; First Seven Months Level Reaches US$10.7 Billion

Bangko Sentral
Media Releases

Remittances from overseas Filipinos (OFs) coursed through banks rose to US$ 1.6 billion in July 2010, posting a year-on-year growth of 8.2 percent, BSP Governor Amando M. Tetangco, Jr. announced today. This favorable development brought cumulative remittances for the first seven months of the year to US$10.7 billion, higher by 7.1 percent from the year-ago level, with remittances from sea-based and land-based workers expanding by 9.4 percent and 6.5 percent, respectively.

Given sustained remittance flows at the onset of the second half of the year amidst the uneven pace of global economic recovery, a steady level of transfers from overseas Filipinos is anticipated for the remaining months of 2010. Underpinning mainly the resilience of remittances is the continued demand for Filipino manpower worldwide as global employment prospects remained favorable.

Preliminary data obtained from the Philippine Overseas Employment Administration (POEA) indicated that workers classified as new hires with processed contracts and are awaiting deployment rose by 15.1 percent to 251,748 for the period January-July 2010 from 218,627 in the same period last year. Moreover, for January-August 2010, approved job orders aggregated 447,936, of which 36.8 percent were comprised of processed job orders for service, professional, technical, as well as production and related workers.

The favorable outlook on remittance flows stemmed from reports from the Department of Labor and Employment (DOLE) of employment opportunities for overseas Filipino workers in Guam involving the construction of military facilities, particularly a naval hospital, as the first big project which will commence by the first quarter of 2011. The DOLE also pointed out that the military base expansion in Guam is projected until 2020 requiring about 7,000–10,000 construction workers every year. Also being considered for the US military relocation is the island of Tinian in the Commonwealth of Northern Marianas Islands (CNMI) which could offer jobs for Filipino overseas workers. Moreover, the Philippine Overseas Labor Office in Israel has reported that employment of foreign workers has been permitted for the construction of the Tel Aviv-Jerusalem Express Railway Line which is projected to be completed in 2015.

Meanwhile, the expected steady stream of remittances will also draw continuing support from the increasing global network of banks and non-bank remittance centers which have established more tie-ups with foreign financial institutions. Their aggressive marketing efforts to provide enhanced financial services to cater to the various needs of overseas Filipinos are expected to further shore up remittance flows through the banking system.

The main country sources of remittances were the U.S., Canada, Saudi Arabia, the U.K., Japan, Singapore, United Arab Emirates, and Italy. The combined flows from these countries represented 81.7 percent of the total remittances reported by the banks.

Tuesday, 14 September 2010

BPO sector poised to exceed $9-b revenue target

by Jeremiah F. de Guzman
Manila Standard

The country’s business process outsourcing industry will likely register foreign exchange revenues of close to $10 billion this year, exceeding the government’s target of $9 billion, the Commission on Information and Communications Technology said Monday.

CICT Chairman Ivan Uy said in an interview with reporters that revenues of the BPO industry would likely hit $9 billion this month or the next on the back of strong demand from foreign companies.

“This year it will be a big jump from the $7.3-billion revenues last year. Projection was about $9 billion, and by this month or next month, we might be already pushing that number,” Uy said.

He said the increased revenues would result the industry workforce hitting 600,000 by the end of 2010 from about half a million jobs so far this year.

“All are going up, including the animation industry, the health information management system, software industry and the traditional voice and non-voice that we already have strong presence in,” he said.

The CICT earlier projected a 26-percent growth in the BPO sector, with revenues and workforce expected to reach $9 billion and 600,000, respectively.

Uy said the country’s BPO industry could end the year with close to $10 billion in revenues.

The Philippines, according to a report of the Everest Research Institute in 2009, accounted for 15 percent of the offshore BPO market and had emerged as a key destination for English-based work, especially for North American companies.

The Philippines, whose offshore market has grown 46 percent annually since 2004, is poised to emerge as a leading destination for non-voice business process outsourcing work.

CebuPac hiring 300 more attendants


GOKONGWEI-LED Cebu Pacific will be hiring 300 flight attendants to augment the airline’s workforce in time for the arrival of four new Airbus A320 aircraft, an executive said.

Candice Iyog, Cebu Pacific's vice president for marketing and distribution, said in a statement the new batch of aircraft would be delivered from October this year until January next year.

“We are scheduled to add more flights to Kota Kinabalu, Taipei, Kuala Lumpur, Jakarta and Seoul in time with our Airbus A320 aircraft deliveries, and we need more cabin crew to handle our additional capacity,” she said.

The airline has scheduled a recruitment campaign in Cebu on Sept. 16 at the Cebu Midtown Hotel, and initial screenings on Sept. 20 and 27 at the CEB Training and Development Center on Domestic Airport Road in Parañaque and Oct. 6 at the Crowne Plaza Galleria Manila in Ortigas. -- A. M. P. Dagcutan

PSE 4,000 and then what?

Written by John Mangun
Outside the Box
Business Mirror

As of this writing, the Philippine Stock Exchange index (PSEi) needs another 100 points to make history.

The 4,000 mark has been the top of the mountain, the unreachable pinnacle for 15 years. Each time that it seemed like the flag would be planted on the top of this Mount Everest, something blocked in the way.

No one is predicting that this time there will be another failure. In fact, the general attitude is that 4,000 is just a road marker to much higher prices, not a final destination.

So what comes after 4,000?

The PSEi is not a stock. It is a composite of 30 issues, with Philippine Long Distance Telephone Co. (PLDT) weighting 16 percent of the index. Security Bank weighs 1 percent, so any movement of PLDT is 16 times as significant as Security Bank. GMA 7 has a weight of 0.59 percent, so each movement in PLDT is the same as 30 fluctuations of GMA 7.

While the PSE index reaches a new historical high, PLDT needs to go up by 30 percent, or nearly P800, to hit its historic high. And that is one important reason you hear comments about the PSE going to 5,000 and beyond. Or maybe not.

Prices are determined the same way prices of pork and chicken at the wet market are settled. Priced too high by the seller, no one buys and prices drop. Priced too low, and everyone buys pushing prices higher.

Now, the question is how do we figure out if a stock price is too high and we should sell, or too low and we should buy. What is a reasonable way to value the price of a stock?

You probably do not remember, but on October 23, 2002, you could have bought all the shares of PLDT you wanted for P210. An investment of P100,000 would now be worth P1.14 million. So why didn’t you? Because you thought that P210 was too high a price to pay for PLDT in 2002.

So if P210 was too high in 2002, then why is P2,400 too low a price for PLDT in 2010? And P2,400 must be too low if the market is going much higher than 4,000.

What is a fair price for PLDT?

If you were buying an existing company, you would look at the earnings and earnings growth. Assets are important, but not as important as profits as you would have to sell those assets to make any money. If you were to buy a company showing P1-million annual profit, you would have to pay the owner an amount equal to several years of profits. Do you pay for five, 10, 15 years of profits to own the company? In the stock market this is called the Price Earnings Ratio (PER).

PLDT has a current PER of 11.4 based on 2009 earnings of P210 per share and a price of P2,406. For 2010, earnings are expected to be at least P230, so if the PER stays the same, the price should be P2,635. Theoretically, we should see PLDT move up by about 10 percent. The question is, what is a reasonable PER in order to predict a future price?

The Tokyo stock market has seen an average PER as high as of 60. The PER for the Standard & Poor’s 500 was 139 in September 2009. The current New York Stock Exchange PER is 14.2. The average for the PSE is 12. There is no hard rule on a valid PER.

However, a company that sees EPS growth of a modest and reasonable 10 percent annually will double its profit in 7.2 years. Assuming that growth continues, in 15 years the buyer would own the company “free,” as earnings would more than equal the original buying price. Therefore, a conservative PER is 15.

Based on 2010 EPS and a PER of 15, PLDT should move to P3,450 and still be fairly valued. PLDT at P3,450 would see the price up 40 percent, and that should put the PSE index, if all the other components stay the same price as today, at 4,300.

There are other shares that have far to go also. If GMA 7 has a 15 PER with an expected EPS of P0.694, the stock trades at P10.41. For Megaworld, the price is P2.64. Other companies look even more interesting using this analysis: Filinvest Land, P2.58; First Gen Corp., P21.97; San Miguel, P133; First Philippine Holdings Corp., P200; and SM Development, P13.68.

Movements like these would definitely put the PSE index in the high 4,000s or even higher.

Some issues, like Jollibee, are trading at a much higher PER of 33. Is Jollibee overvalued and priced too high? Maybe, but Jollibee is a special company in that, if you want to trade the economic growth of the country, Jollibee may be the best indicator, as economic growth directly impacts Jollibee’s earnings. A 33 PER for Jollibee says investors believe the Philippines’ economic growth will continue to be very strong. This economic growth is allowing Jollibee to expand and grow at a very high rate, which drastically increases earnings.

There is a lot of talk right now about the PSE going too far, too fast. Will the break of 4,000 be a time of “irrational exuberance” that traps investors in a falling market? I do not believe so because: 1) Corporate earnings growth is very strong; 2) The PSE has been historically undervalued; 3) We are seeing the capital flight from the West to countries like the Philippines that I have been talking about for many months.

There were many negative comments yesterday about the government borrowing $1 billion from the international markets. Wrong. It is great because this borrowing is peso-denominated, further evidence of capital flight to the Philippines and more proof that the peso will appreciate.

Trade wisely. Take profits at resistance levels and reposition in quality companies with lower PERs. Expect a correction in the next weeks, so be ready for some great-buying opportunities.

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