Piki Lopez initiates Lopez Group reorganization to unlock value; long-term investors should lock-in to ABS, ROCK, and FGEN while they are still undervalued

Piki Lopez has commenced the reorganization of the Lopez group to unlock value. Piki Lopez is taking Lopez Holdings Corporation (LPZ) private through the acquisition via tender offer by First Philippine Holdings Corporation (FPH) of the 45.56% of LPZ which the Lopezes don’t own. The effect of the transaction would be eliminating one layer of holding company. At the end of the day, the Lopezes will end up having a direct controlling interest in FPH and FPH becoming the primary holding company of the Lopez group (ABS, ROCK, FGEN).

But that transaction alone will not unlock the value of the group.  Piki Lopez probably will not stop there. We think Piki Lopez will ultimately ditch the holding company/conglomerate model. The holding company/conglomerate model is not working anymore for them.  FPH has a market capitalization of 33.40 Billion Pesos but that would be less than half of the market capitalization of its 67.51% owned subsidiary FGEN. FGEN has a market capitalization of 104.34 Billion Pesos.

We think Piki Lopez will strive to eliminate the holding company and have their private holding company (Lopez, Inc.) own direct controlling interest in operating companies ABS, ROCK, and FGEN.  They will then nurture and grow each operating company into sizable respected players in their fields capable of raising their own capital.

Piki will probably consolidate real estate interest into ROCK in order to bulk-up the company. At ABS, Piki will probably hire more tech stars rather than show stars to remake it into a tech company from a broadcaster. At FGEN, everyone knows where Piki Lopez is taking it.

The reorganization will not happen overnight, but it is best to position a portion of the portfolio to ROCK, ABS and FGEN while they are still valued low.

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Disclaimer and Disclosure: This analysis is an independent viewpoint on publicly traded stocks in the Philippine market.  Accuretti Systems Inc. trades stocks in the Philippine market.

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