On September 15, 2020 TEL shares traded on a volume of 278,935, well above its 65-day average volume of 172,186. Usual brokers of foreign investors in the likes of UBS, CLSA, and Credit Suisse took the lead in selling TEL that day.
At the height of the March sell-down, TEL traded to a low of 805 a share. Since then, TEL has been steadily rising in the belief that TEL has been a beneficiary of the COVID-19 pandemic as people are forced to stay home. It was seen that TEL will post a stellar performance during the year as it benefits from the COVID-19 pandemic measures.
After PLDT (TEL) announced in Business World that its profit is up nearly 16%, TEL soared to 52-week high of 1,487 a share on September 1, 2020.
As the stock soared, the public began to scrutinize its prospect. It appears that TEL is facing a “triple threat position” – elevated capital expenditure requirements, elevated debt level, and of sustaining cash dividends.
Cash generated from operations could all get burn for capital expenditures as TEL spends 70 Billion Pesos for network improvements and expansion. Then it has to pare down debts and distribute cash dividends. If TEL cut capital expenditures so it can allocate cash from operations to dividend distribution then there comes competition from third telco DITO, and the emerging Coverge ICT and Now Corporation and the need to pare down debt. If it borrows more money to pay borrowed money and distribute dividends until when can that be sustainable. Thus, the “triple threat position” it is facing.
TEL was quick to address the triple threat position by liquidating assets to raise funds. On September 7, 2020 TEL announced the sale of its Smart Towers, an office building in Makati City.
Fast forward to September 15, 2020 – TEL shares traded on a volume of 278,935, well above its 65-day average volume of 172,186. Usual brokers of foreign investors in the likes of UBS, CLSA, and Credit Suisse took the lead in selling TEL that day.
Time to follow the lead and take profit. TEL is a magnificent company with a very deep talented management team. It pays to buy TEL at a good risk reward ratio.
Disclaimer and Disclosure: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent view point. Accuretti Systems Inc. in the course of day to day trading may have own, or is considering buying or disposing, the shares of the companies mentioned in this commentary.