Tag: stock-market

From the Trading Desk. 

The Lopez Group faces a moment that calls for clear, steady action. TV5’s notice to end its content deal with ABS‑CBN—which ABS says it’s working to resolve—puts pressure on ABS’s cash flows and its relationships with partners. Letting that pressure linger risks bigger problems. 

The most straightforward fix is to bring ABS under First Philippine Holdings (FPH) through a share swap—and then use First Gen (FGEN) cash to help ABS regain its footing. Here’s why this path makes sense, quickly and simply:

1) Put ABS under the strongest umbrella

Inside the Lopez Group, ABS sits under Lopez Holdings, while FPH is the parent for major businesses like First Gen (power) and Rockwell Land (property). Moving ABS under FPH aligns responsibility and resources in one place and avoids messy intercompany band‑aids. It’s a clean, familiar step for listed companies in the Philippines.

2) Use the cash that already exists

In November 2025, First Gen closed a ₱50 billion deal with Prime Infrastructure, selling 60% of its Batangas gas plants and the LNG terminal while keeping 40% (Tokyo Gas holds 20% in the LNG hub). That transaction brought in real cash. A special dividend from FGEN to FPH immediately equips FPH with funds to settle partner obligations, stabilize operations, and give ABS breathing room after the share swap. 

There’s a bonus: in the Philippines, cash dividends between local companies aren’t taxed at the recipient company, making FGEN → FPH a fast, efficient way to move support where it’s needed. 

3) This doesn’t weaken Lopez control of FPH—if anything, it can increase it

Some might worry that issuing new FPH shares for a 100% ABS swap would dilute Lopez control. In practice, it won’t:

• Before the swap, Lopez Holdings (LPZ) owns about 55.6% of FPH (per FPH’s Public Ownership Report). 
• After a full ABS‑for‑FPH share swap (priced on recent trading averages), LPZ’s stake in FPH would likely tick up—roughly into the low‑to‑mid 60% range—because LPZ would receive the new FPH shares issued as consideration. In other words: more FPH shares end up with Lopez Holdings, so control does not fall; it can rise. (This is based on recent market data for ABS and FPH and simple share‑count math; inputs such as ABS’s outstanding shares and recent prices come from PSE EDGE.) 

And since FPH already has a healthy public float, that small increase in Lopez ownership does not threaten the exchange’s minimum public‑ownership rules. 

4) Doing nothing costs more

Waiting invites headlines, frays trust with partners, and makes a later fix more expensive. A share swap + FGEN special dividend is decisive, transparent, and fast. It shows banks, advertisers, and viewers that ABS’s finances are under firm stewardship—with the scale and discipline of FPH behind it.

Bottom line:
The likely move is ABS under FPH via share swap, funded by an FGEN special dividend—and Lopez control of FPH won’t be diluted by doing this. It’s the simplest way to restore confidence and give ABS the time it needs to get fully back on its feet.

Because the FGEN cash is already real, many investors will naturally front‑run the possibility of a special dividend flowing to FPH—and, by extension, to all FGEN shareholders. In that sense, the market may treat FGEN like a buy‑for‑dividend‑optionality story right now, pending board moves. (Again, this is sentiment—not a recommendation.) 

SUBSCRIBE TO SUPPORT FREE INDEPENDENT RESEARCH

By any reasonable yardstick, DITO is still far from break‑even. But the path is not unknowable—it’s arithmetic, capital discipline, and execution. The company’s 3Q25 filing lays out the challenge in stark numbers: nine‑month net loss of ₱24.93B, EBIT (operating loss) of ₱9.73B, and EBITDA of ₱1.565B—up 112% year‑on‑year, yet nowhere near enough to absorb heavy depreciation (₱11.47B), interest (₱12.82B) and FX losses (₱2.23B). On that math, DITO would need roughly ₱26–27B of EBITDA over nine months—or ~₱35–36B annualized—to hit net break‑even today. 

Scale the cash engine—fast, and with margin integrity.
No telco breaks even on hope; it breaks even on EBITDA. With nine‑month revenues at ₱14.9B and an EBITDA margin of ~10.5%, the cash engine is underpowered. The first lever is scale and margin: push data monetization (already 86% of service revenue) while rebuilding ARPU (mobile blended down to ₱100, FWA up modestly to ₱306). Even at a healthier 25–30% EBITDA margin—more typical for mature operators—the company would still need ₱90–120B in annual revenue to generate ₱22–36B of EBITDA, the minimum needed to neutralize fixed charges. That implies aggressive growth in consumer data, enterprise connectivity, and wholesale (carrier) lines, plus disciplined promo management to prevent volume from cannibalizing yield. 

Make finance costs smaller—or fewer.
The second lever is the price of money. Nine‑month interest expense of ₱12.82B—largely tied to US$3.241B and CNY2.561B drawn on project‑finance facilities—remains the single biggest drag after depreciation. Two paths help: (1) Refinance and repricing where possible (SOFR and LPR resets, margin negotiation) and (2) deleverage through primary equity and asset monetization. DITO has a Subscription Framework with Summit Telco to subscribe up to 9B primary shares; execution speed and terms will matter more than headlines. Parallel moves—tower sale‑leasebacks, partial fiber IRU monetization, and selective disposal of non‑core assets—can chip away at principal and lower interest, even if lease expense rises. The net objective is a multi‑billion‑peso annual reduction in interest payments to narrow the break‑even gap.

Tame the currency roller-coaster

DITO’s FX sensitivity is enormous: a ~9.7% move in USD/₱ shifts loss before tax by ±₱19.4B; a ~9.2% move in CNY/₱ shifts it by ±₱7.0B. FX losses already ran ₱2.23B in 9M25. That volatility is too significant to leave unmanaged. The company needs a formal, disclosed hedging policy—currency swaps or forwards aligned to semi‑annual interest and principal amortization calendars, plus natural hedges from USD/CNY-denominated costs and (where viable) revenues. Hedging won’t create profit, but it will stop FX from destroying operating gains. 

Keep capex lean; keep sites lit.
Post‑audit, capex dropped 76% YoY to ₱2.475B in 9M25. That restraint is welcome, but it cannot come at the cost of performance; the installed base still demands maintenance (₱2.70B) and utilities (₱2.15B) over nine months. The capex rule of thumb now is: spend only where it lifts EBITDA per site—densification that raises throughput in revenue‑rich pockets; enterprise builds with contracted returns; and upgrades that cut energy or maintenance per bit carried. That is how asset intensity turns into margin, not just footprint. 

Work the P&L: opex trim without starving growth.
GS&A rose 18% to ₱12.03B. Some lines must keep rising (network ops), but several can be bent: advertising was prudently down 35%; outside services were flat; yet taxes & licenses (+42%) and parts of repairs (+29%) warrant a deeper review—contract re‑cuts, shared services, automation in field ops, and energy optimization programs (smart cooling, solar hybrids) at base stations. Every ₱1B trimmed from opex is ₱1B closer to EBITDA levels that make break‑even plausible. 

Fix the liquidity optics—then the substance.
The optics are brutal: current ratio ~0.06x (₱6.08B current assets vs ₱96.12B current liabilities), total liabilities ₱304.65B, and capital deficiency ₱95.31B. Management itself discloses material uncertainty on going‑concern, citing undrawn portions of project finance and shareholder support as mitigants. Break‑even will not arrive without first de‑risking liquidity—locking in the undrawn facilities, terming out near‑dated trade/lease payables, converting portions of accrued project costs to longer‑tenor instruments, and most critically, closing equity infusions to rebuild the cushion. Markets reward certainty; paperwork in progress doesn’t pay interest. 

Price, product, and partners: grow smarter.
Two commercial pivots can raise EBITDA productivity per subscriber:

• Price discipline—dial back deep free‑data promos, steer to tiered bundles with speed/latency guarantees for prosumers and SMEs; protect ARPU creep without choking gross adds.
• Partnerships—expand MVNOs, campus and enterprise programs (already lifting carrier/enterprise revenue), and bundle OTT/video‑gaming that drives high‑margin nighttime traffic. More enterprise SLAs and wholesale carriage contracts mean stickier, forecastable EBITDA. 

A reality check on timelines.
Even with momentum—revenues +25%, EBITDA +112%, capex normalized—DITO is not “near” break‑even on earnings or fully‑loaded cash. Operating cash inflow (₱3.81B) was offset by capex and finance/lease payments, leaving cash down ₱416M for 9M25 and ₱763M on hand at period end (with ~₱558M pledged as collateral). The journey to earnings break‑even will be measured not in quarters but in EBITDA multiples, interest reductions, and FX stability achieved. Investors should benchmark progress against three quarterly scorecards: (1) EBITDA run‑rate (targeting ₱8–10B annual within 12–18 months), (2) interest/FX drag (cut by at least ₱3–5B p.a. via refinancing, hedging, and deleveraging), and (3) liquidity coverage (current ratio >0.5x via executed equity and extended vendor terms). Anything less, and break‑even remains theoretical. 

The bottom line:
Break‑even is not a mystery. It is the sum of bigger, higher‑margin EBITDA, smaller, cheaper debt, and less currency noise—backed by hard, executed capital. DITO’s network quality and subscriber growth are real strengths; now the company must turn them into cash at a pace that outstrips depreciation, interest, and FX. In telco finance, gravity always wins; DITO’s task is to lighten the load and power the engine—quickly.

Subscribe to Support Free Independent Research

SMFB widens profitability; CNPF and MONDE see compression; URC nudged lower; RFM holds firm despite cash flow squeeze

The Philippines’ leading packaged food and beverage players posted mixed margin outcomes in their nine‑month 2025 results, highlighting how input-cost volatility, pricing discipline, and working‑capital choices are reshaping profitability across the sector. Sales growth was broadly positive, but margin trajectories diverged: San Miguel Food and Beverage (SMFB) expanded margins; Century Pacific Food (CNPF) and Monde Nissin (MONDE) saw compression; Universal Robina Corp. (URC) edged lower; and RFM Corp. preserved healthy margins while absorbing a hit to operating cash flows.

Sales: Mid‑single to high‑single digit growth, with branded segments leading

SMFB’s consolidated revenues rose 4% to ₱302.9 billion on resilient demand and brand execution across food, beer, and spirits—food up 7%, spirits up 7%, beer steady—supporting scale benefits into the third quarter. Management underscored supply chain productivity and capacity expansion as margin enablers alongside revenue momentum. 

URC delivered ~5% top‑line growth (TTM revenue ₱166.1 billion), propelled by snacks and ready‑to‑drink beverages domestically and stronger performance from Munchy’s in Malaysia and Indonesia. However, elevated coffee input costs—still roughly twice 2023 levels—tempered EBIT expansion, setting the stage for margin pressure despite volume gains.

CNPF’s sales grew 8% to ₱61.8 billion, with the branded portfolio up 12% and OEM exports recovering after a soft first half. Management flagged “all‑weather” staples demand, easing inflation (notably rice), and brand investments as the primary growth drivers into Q3, where quarterly revenue accelerated 15% year‑on‑year.

Monde Nissin posted 3.5% growth to ₱63.3 billion, anchored by APAC Branded Food & Beverage (BFB) up 4.4% year‑to‑date, while meat alternatives contracted 3.9% on a constant‑currency basis. The company cited biscuits and “others” categories as domestic volume pillars and guided to sequential BFB margin improvement heading into 4Q25–2Q26.

RFM recorded 1.8% sales growth to ₱15.23 billion, indicative of flat-to-steady demand in pasta, milk, flour, buns, and ice cream JV products. Despite modest revenue growth, management reiterated its confidence in a stronger fourth quarter driven by category momentum and historical seasonality.

---

Margins: SMFB expands; CNPF and MONDE compress; URC softens; RFM resilient

SMFB: Group profitability improved, with EBITDA up 13% to ₱58.4 billion and overall margins widening to 19%. Margin gains were attributed to cost and operational efficiencies across divisions, most notably in food and spirits, with disciplined pricing underpinning resilience against weather‑related disruptions.

URC: Gross margin around 26.1% on a trailing basis, below FY2024’s ~27.0% and the company’s five‑year average (~27.7%), reflecting persistent coffee cost inflation and normalization across commodities. Management acknowledged EBIT pressure in the Philippines, partially offset by overseas scale and cost programs, implying modest margin decline versus last year despite top‑line strength. 

CNPF: Gross margin compressed by 110 bps to 25.5% year‑to‑date, driven by normalizing input costs after a period of favorable commodity tailwinds. Notably, operating expenses fell 90 bps as a share of sales, cushioning the margin squeeze and allowing net income to grow 10% to ₱5.8 billion. 

Monde Nissin: Consolidated gross margin declined 160 bps to 33.3% for nine months, with edible oil inflation weighing on APAC BFB even as sequential margin recovery emerged on pricing actions and reformulation. Meat alternatives posted gross margin improvement and EBITDA positivity, but the segment’s revenue contraction offset group‑level gains, resulting in overall margin decline year‑to‑date.

RFM: Margins remained strong despite flat sales—EBITDA of ₱830 million, implying an EBITDA margin of ~15.2%—as lower selling and marketing expenses and lean G&A lifted operating margin to ~11.2%. While the company did not report year‑on‑year basis‑point changes, commentary and segment detail point to a stable-to‑improving margin mix led by consumer products.

---

Operating Cash Flow: Strength for MONDE and URC; strain at RFM; SMFB and CNPF steady

Monde Nissin reported ₱8.7 billion operating cash flow in the period, supported by lower operating costs in meat alternatives, foreign‑exchange tailwinds, and targeted pricing in APAC BFB, even as edible oils remained a drag on gross margins. URC likewise showed solid cash generation (TTM operating cash flow ₱12.86 billion), underpinned by working‑capital normalization across branded and commodities businesses.

RFM’s operating cash flow fell sharply to ₱141 million from ₱1.3 billion a year ago, largely due to inventory buildup (over ₱1 billion) and reduced payables, which tightened liquidity despite sound income statement margins. Management emphasized inventory normalization and cash discipline as fourth‑quarter priorities. 

SMFB highlighted a solid financial position—with sustained earnings power and prudent capital management—but did not disclose detailed nine‑month OCF figures. CNPF continued to invest in strategic growth (plant‑based and coconut operations) while maintaining low leverage and healthy liquidity metrics, reinforcing cash resilience despite gross margin compression. 

Balance Sheets: Liquidity cushions intact; leverage disciplined

SMFB’s disclosures show total consolidated debt of ₱ 187.2 billion as of September 30, 2025, balanced by robust earnings and margin expansion across key segments, providing flexibility for capacity investments and brand support. 

URC’s financials reflect a strong asset base and conservative leverage, with ongoing margin headwinds from coffee mitigated by international scale and cost controls; CNPF maintains a current ratio of ~2.0 and a debt‑to‑equity ratio of ~0.24, indicating prudent gearing. 

Monde Nissin maintains a net cash position (₱11.2 billion), a current ratio of 2.34, and minimal debt, reinforcing flexibility to sustain dividend payouts and fund margin‑restoration initiatives in APAC BFB. RFM also sits on net cash with current ratio ~1.36, though the nine‑month working‑capital swing is a near‑term watch‑item.

---

Bottom Line: Five companies, five margin paths

• SMFB stands out for margin expansion via cost discipline and pricing, despite weather and input‑cost noise. 
• URC delivers volume‑led growth but faces slightly lower gross margin amid elevated coffee costs. 
• CNPF sustains double‑digit profit growth even as gross margin compresses on commodity normalization.
• Monde Nissin shows sequential margin recovery but a year‑to‑date decline, with edible oils the main headwind and meat alternatives improving.
• RFM maintains strong margins but must rebuild operating cash flow after a working‑capital drawdown. 

Investor lens: Expect continued focus on pricing, mix, and cost programs to protect margins, with working‑capital discipline (especially inventories and payables) a differentiator into year‑end. Companies with net cash and low leverage (Monde, RFM, CNPF) retain optionality for dividends and capex, while scale players (SMFB, URC) leverage brand strength to buffer input volatility.

SUBSCRIBE TO SUPPORT FREE & INDEPENDENT RESEARCH

Shakey’s Pizza Asia Ventures Inc. (PSE: PIZZA) has long been a household name in the Philippines, and its latest quarterly filing shows why: systemwide sales surged 14% to ₱17.7 billion, and net revenue climbed 12% to ₱11.24 billion for the first nine months of 2025. On the surface, this looks like a victory lap for a brand celebrating its 50th year in the country.

But dig deeper into the numbers, and a more nuanced story emerges—one of growth bought at a price.

---

The Expansion Gamble

Shakey’s is in the middle of an aggressive rollout, adding new stores, renovating existing ones, and expanding its multi-brand portfolio, which includes Peri-Peri Charcoal Chicken and Potato Corner. This strategy is designed to cement its dominance in casual dining and kiosks, but it comes with short-term pain.

The company’s gross margin slipped to 22.6% from 24.3%, and operating margin fell to 8.9%, despite double-digit revenue growth. Why? Pre-opening costs and renovation expenses—the unavoidable toll of rapid expansion. Management admits as much in its SEC filing: improving input costs were overshadowed by network investments.

---

Debt and Interest: The Hidden Weight

Expansion isn’t cheap. Shakey’s poured ₱693 million into capital expenditures this year, and while operating cash flow remains strong at ₱1.03 billion, the company leaned on debt to keep the engine running. Interest expense jumped 18% to ₱348 million, fueled by a loan repricing to 6.3% and short-term borrowings swelling to ₱1.32 billion.

This financing burden shaved pretax margins and dragged EPS down to ₱0.34 from ₱0.40. Yet, in a move that will please shareholders but raise eyebrows among analysts, Shakey’s still declared a ₱ 0.20-per-share dividend—tightening internal funding at a time when liquidity is already under pressure.

---

Liquidity: A Thinner Cushion

Cash reserves fell to ₱821 million from ₱1.32 billion at year-end 2024. The current ratio eased to 1.3x, signaling a slimmer buffer against short-term obligations. While the company’s cash conversion cycle improved to 17 days—a testament to operational discipline—the reality is clear: expansion has narrowed financial flexibility.

---

The Bigger Picture

None of this means Shakey’s is in trouble. Its core EBITDA rose 14% to ₱1.8 billion, and its franchising model remains a powerful lever for long-term growth. But investors should recognize the trade-off: today’s margin squeeze and liquidity strain are the price of tomorrow’s market share.

The question is whether the payoff will justify the cost. If new stores ramp up quickly and financing costs stabilize, Shakey’s could emerge stronger than ever. If not, the company may find itself juggling debt, leases, and shareholder expectations in a tougher consumer environment.

---

Bottom line: Shakey’s is betting big—and for now, the bet is eating into margins and cash. For growth-focused investors, that may be acceptable. For those who prize near-term profitability, caution is warranted.

Subscribe to Support Free & Independent Research

Manila Water Company, Inc. (MWC) reported a robust financial performance for the nine months ended September 30, 2025, driven by tariff adjustments and operational efficiencies across its concessions.

Revenues climbed 9.1% year-on-year to ₱30.05 billion, supported by the third tranche of the approved Rate Rebasing tariff implemented in January. Despite a slight dip in billed volume in the East Zone, cost discipline helped sustain profitability.

Net income attributable to the parent surged 25.4% to ₱12.67 billion, while EBITDA rose 14% to over ₱21 billion, improving the EBITDA margin to approximately 73%. Core net income, excluding one-off gains, grew 15% to ₱11.6 billion.

The company also booked a ₱1.1 billion gain from the sale of its East Water investment in Thailand, boosting international contributions. Domestic operations outside Metro Manila delivered steady growth, with Visayas and Mindanao businesses benefiting from tariff adjustments and higher billed volumes.

As of September 30, total assets stood at ₱241.67 billion, while stockholders’ equity increased to ₱85.94 billion. Manila Water invested nearly ₱18 billion in capital expenditures, with 85% allocated to East Zone infrastructure projects.

Defensive Utility Play
Analysts note that Manila Water shares characteristics with Maynilad, its West Zone counterpart, as both operate under regulated concessions with predictable cash flows and tariff-based revenue structures. This makes them attractive defensive plays for investors seeking stability in uncertain economic conditions.

Dividend Yield Comparison
Despite its strong fundamentals, Manila Water’s trailing dividend yield of about 4.8% (based on a 2025 dividend of ₱1.841 per share and a recent price of ₱38.70) lags Maynilad’s, which typically offers a higher payout ratio and yield in the 6–7% range. The gap reflects Manila Water’s more conservative dividend policy and its heavy capital expenditure commitments, with nearly ₱18 billion invested year-to-date, primarily in East Zone infrastructure.

Outlook
Management expects continued margin resilience into the fourth quarter, supported by regulated tariff structures and efficiency programs. Strategic expansion plans, including a potential acquisition in Mexico, could further diversify earnings.

Subscribe to Support Free and Independent Research

Max’s Group, Inc. (PSE: MAXS), operator of iconic restaurant brands including Max’s Restaurant, Pancake House, and Yellow Cab, reported a 14% drop in net income to ₱160 million for the nine months ended September 30, 2025, compared to ₱186 million in the same period last year. The decline came as inflationary headwinds and higher financing costs weighed on profitability despite seasonal resilience and operational streamlining.

Revenues slipped 2.8% year-on-year to ₱8.58 billion, while system-wide sales fell 3.8% to ₱13.2 billion. The group cited softer consumer sentiment and a smaller store footprint—566 outlets versus 626 a year ago—following its ongoing network rationalization strategy. Still, same-store sales growth reached 1.4%, supported by targeted value offerings and improved average daily sales, which rose 9.9%.

Margins compressed as gross profit dropped 8.4% to ₱2.47 billion, with gross margin narrowing to 28.8% from 30.6% last year. EBITDA declined 9.1% to ₱983 million, while EBIT fell nearly 20% to ₱411 million. Finance costs edged up to ₱210 million, reflecting higher interest and lease expenses, further pressuring bottom-line results.

On the expense side, general and administrative costs eased 1.4% to ₱2.0 billion, while selling and marketing expenses plunged 40% to ₱184 million due to tighter promotional spending. Other income also softened to ₱128 million from ₱150 million.

The balance sheet showed total assets at ₱12.78 billion, down 5.2% from year-end 2024, with cash declining to ₱692 million from ₱1.06 billion. Debt-to-equity improved to 1.22x from 1.53x, signaling progress in deleveraging.

Management reaffirmed its focus on margin resilience, cost discipline, and footprint optimization, while noting that Q4—traditionally a peak season—will be critical for recovery. “We continue to prioritize operational efficiency and brand relevance to navigate macro volatility,” the company said in its filing.

Dividend Sustainability: Covered but Tight in Downside Scenarios

Max’s paid ₱145.95 million in cash dividends in May 2025 (₱0.141/share), representing roughly 67% of nine-month earnings. While operating cash flow of ₱489 million covered the payout comfortably, free cash flow after capex was thin at ₱34 million, highlighting limited buffer for reinvestment.

Forecast models suggest the current dividend is sustainable under base and bull recovery scenarios, with FY 2025 payout ratios ranging 54–68% and interest coverage near 2×. However, in a bear case—where wage hikes and power costs persist—the payout could exceed 85% of earnings and push interest coverage toward 1.7×, leaving little room for shocks.

For FY 2026, sustainability improves if inflation stays within BSP’s target and financing costs ease: payout ratios could fall to 30–51% in base/bull cases, with interest coverage rising above 2.3×. Conversely, under prolonged cost pressure, dividends may need to be cut or deferred to preserve liquidity and covenant compliance.