A fellow kabayan asked where I got the terms of the JV of the
PHES. Also, at a P/E ratio of 10 it would only take 4
years to sell all the Valenzuela property,thus using P/E ratio
of 10 is wrong.
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| http://www.flickr.com/photos/54028939@N00/1226982752 |
First, I would like thank you Renzie for your comments and
inquiries. It helps a lot to learn from others also. Life’s like that. You give
something and you’ll receive something too. It’s a law. A natural law. At the
end of the day, we are all here to profit, share our experiences and hopefully have
done our part in making our world a better place to live in.
A while ago my colleague and I were discussing our own personal
situations and investments ideas. I told him that I was ‘lucky’ in stock market
because I was able to profit in some stocks. He said,” Yeah, you have said the
correct word lucky”. This connotation implies that in stock market, you either pick
the right stocks or wrong stocks. The stock you think will go up ends up moving
flat or downwards, in other times, it abruptly go up leaving you wondering what
kind of drugs the market is taking.
If you read the news before the start of October, some analysts
are saying that the Index might move downwards. True to its nature of unpredictability,
the Index hit an intraday high a couple of days ago. Just when the Index moves
up and hit the intraday high, some analysts expected the Index to be positive
but it moves in the opposite direction.
Stock market is not an absolute science. If
you check the numbers, forecasts, and assumptions of the analysts, you will see
different numbers. Their forecasts never matched. Nevertheless, most of them
use the same metrics in valuing a company. The value of the company depends on
the perspective of the market. For example ALI is being valued with P/E ratio
of more than 30 times, while the rest of the real estate companies are being
valued less than that.
I’m a fan of Peter Lynch, the former fund
manager of Fidelity Magellan. I read in one of his books that once a turnaround
company, or a speculative company turns into a profitable company, it has to be
gauged using the metrics being used for other profitable companies. In this
case IF PHES JV with ALI is signed; it needs to be gauged with profitable real
estate companies.
We just bought a pre- selling condo last
year. We will pay the down payment for three years and once the property is
turnover, we need to pay the balance. In effect, the real estate developer is
getting the full selling price of the condo upon turnover, and that is in three
years time.
There also other real estate developers who
allows in-house financing. The buyer will not resort to the bank to pay the
balance upon turnover but it will be the real estate developer who will
shoulder the financing side of the purchase. If PHES and JV scheme will be like
this, then the profit from this venture will be extended on the terms of the
in-house financing which is normally ten to twenty years.
There is no disclosure yet on the terms of
JV. All the numbers that you can see around are all assumptions (mine included)
in valuing the company. Once the numbers are out through disclosure, we can
have a fair assessment on the profit of PHES from the JV and how long it will
take.
This is only my opinion and my basis for
valuing may be wrong and other investors may have a different view of this
company which I fully respect.
