Cemex Holdings Philippines, Inc. (CHP) at 1.46 a share has a market capitalization of 19.69 Billion Pesos while Holcim Philippines, Inc. (HLCM) at 5.94 has a market capitalization of 38.33 Billion Pesos.
For 1H 2020 HLCM generated 11.4 Billion Pesos of sales while CHP generated just 9.6 Billion Pesos. HLCM was able to translate it sales to cash from operations of 2.4 Billion Pesos while CHP was able to generate cash from operations of a neglible 0.26 Billion Pesos.
CHP is saddled with long-term debt of 11.1 Billion Pesos while HLCM is free from long-term debt.
Aside from the debt burden, CHP’s balance sheet carries a 27.9 Billion Pesos goodwill which doesn’t count for much given the present COVID-19 pandemic and as evidence by its operating results over the years. The massive goodwill of CHP was created to justify the pricey acquisition of the 40% interest in Solid Cement and Apo Cement which that at that time it didn’t yet own. CHP argued that the massive goodwill is attributable to the existence of an assembled workforce and established dealer network. Yeah, who doesn’t have it.
HLCM and especially CHP at these times will not be able to distribute dividends nor will be able to initiate share buy backs despite their slumping share price to conserve resources.
In the long-run HLCM is better positioned to deliver shareholder value considering its better operating results and long-term debt-free but CHP is more likely to be an acquisition target considering that is market capitalization has been reduced to a bite size. CHP is almost half the value of HLCM.
CHP’s market value at the time of its initial public offering was around 56 Billion Pesos now it is just around 20 Billion Pesos. Its market value is now bit size to the biggest conglomerates in the country.
Disclaimer: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent perspective. Accuretti Systems Inc. does not hold any shares of Cemex Holdings Philippines, Inc. and Holcim Philippines, Inc..