JGS group invests elsewhere, signals refusal to throw all money into the pit called CEB

JG Summit Holdings (JGS) announced that it has taken part in the US$100 Million investment in Tyme. Tyme is considered as one of the leading digital banking networks for emerging markets. The capital raised by Tyme will be deployed to grow TymeBank in South Africa. JGS Summit is looking to bring Tyme’s digital experience and innovation to the Philippines to support the initiatives of the Bangko Sentral ng Pilipinas (BSP) in bringing inclusive financial services further into its population.

CEB capital call

The investment in Tyme is made amidst the capital call at Cebu Pacific (CEB). CEB has been burning cash on its operations due to travel restrictions imposed to mitigate the rage of the ongoing pandemic. Through a stock rights offering CEB is calling shareholders to infused 12.5 Billion Pesos of capital into CEB. JGS is planning to subscribe to its entitlements and to take on any entitlements that is not taken. JGS controls around 66.77% of CEB.

The capital raised at the stock rights offering might just be gobbled up by the near-term funding requirements of CEB. As of its latest financial report, CEB is burning cash on operations and scale of operation has not improved significantly. CEB might need more capital for a turn around.

JGS on a downtrend

JGS recently has been on a downtrend. It is down around 13% from three-months ago. The downtrend could be attributed to the capital requirements of keeping CEB flying.

The recent press release of the JGS Group signals that it might not go all in for CEB. The investment in Tyme shows that JGS is also investing in other areas and not all financial resources will be thrown-in to keep CEB flying. It could be that group risk management dictates that there will be a cap on the capital that could be thrown-in to CEB to keep it flying.

JGS group signals no all in for CEB

It is not just the parent JGS displaying a body language not to go all in for CEB, subsidiary Universal Robina Corporation (URC) and affiliate Robinson Retail Holdings (RRHI) also signal that they are retaining capital to grow themselves by taking advantage of opportunities that the pandemic presents instead of repatriating capital for a CEB rescue. Recently, URC bought Roxas Holdings’ sugar mill, ethanol plant and other investment properties in La Carlota City, Negros Occidental for 4.3 Billion Pesos. RRHI is using its cash pile to further boost its cash making capabilities.  It is chipping away around 4.5 Billion from its cash pile to acquire the 300-store Rose Pharmacy. 

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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