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LTG yields 10.58%

LT Group (LTG) has been recently severely battered by net foreign selling. One year net foreign selling amounted to 3.97 Billion. The heavy foreign selling dropped LTG to a 52-week low of 8.50.

As a result, LTG’s valuation dropped below its book value. LTG is currently trading at 0.5982 to book value.

LTG is a solid consumer company with solid earnings coming from tobacco, beverages, and real estate. Recently, LTG upped its dividend by declaring a 0.60 dividend. This will bring LTG’s total dividend for the year to 1.08. At 10.20, LTG yields 10.58%. The dividend declaration is a statement from LTG that it is a solid company.

LTG may have been dragged down by its banking subsidiary, PNB. PNB made a genius accounting maneuver. It recognized in its income statement massive gains from valuation gains of its prime real estate properties (a la DD) it is disposing to shareholders as dividends. The 33.6 Billion gain inflated its capital base. After recognizing the gain from the increased property valuation it then made a provision for loan loss of 16.9 Billion. The massive valuation gain cushioned the impact of the provisioning and inflated its capital.

The accounting brilliance may have tainted the financials of PNB which may have resulted in the decline in the market’s confidence in PNB. This may have been carried over to LTG.

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