Investors unload Cemex Philippines stocks over potential stock rights offering

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Cemex Philippines is expanding its Solid Cement plant in Antipolo, Rizal. -- WWW.CEMEXHOLDINGSPHILIPPINES.COM
Cemex Philippines is expanding its Solid Cement plant in Antipolo, Rizal. -- WWW.CEMEXHOLDINGSPHILIPPINES.COM

By Lourdes O. Pilar

NEWS of Cemex Holdings Philippines, Inc.’s plans to more than triple its authorized capital stock as part of efforts to raise funds through a potential stock rights offering (SRO) made the Cemex stock one of the most actively traded last week.

Data from the Philippine Stock Exchange showed the cement manufacturer trading P721.26 million worth of 329.21 million shares from April 1-5.

Shares closed at P2.02 apiece on Friday, unchanged from the previous day but down 22.9% week on week from the P2.62 finish on March 29. For the year, the stock gained 3.6%.

“Cemex Holdings became one of the most actively traded stock [last] week after it disclosed its plan to increase its authorized capital to enable itself to raise funds via SROs or other fund-raising options,” said trader Jervin S. de Celis of Timson Securities, Inc. in an e-mail interview.

“Market participants were probably surprised about this and raced to liquidate their shares because the amount of $250 million to be raised has a massive dilutive effect on the company’s earnings,” Mr. De Celis explained, adding that since the disclosure did not contain further details, it urged investors to sell on the assumption that the offer might be lower than the market price.

In a disclosure to the stock exchange last Wednesday, the listed cement manufacturer said its board of directors has approved the increase of its authorized capital stock to P18,310,395,454, consisting of 18,310,395,454 common shares with a par value of P1 per share.

The amendment, the company explained in the statement, will enable them to raise equity capital “including, but not limited to” a rights offering subject to approval of the board of directors. Its authorized capital stock currently stands at about P5.195 billion divided into around 5.195 billion common shares at P1 each.

Unicapital Securities, Inc. Research Head Wendy Estacio noted the Cemex stock was actively traded in the past weeks due to its bullish chart patterns as investors hoped for a first-quarter earnings recovery, but this was reversed on news of the planned SRO.

From last Tuesday’s P2.66 closing price, Cemex shares reached an intraday low of P2.19 per share on Wednesday before closing at P2.26 per share when the news of the SRO was disclosed. On that day, 118,225,000 of the company’s shares were traded versus the 13,678,000 shares having exchanged hands the day prior.

Net selling continued on Thursday, bringing the stock’s closing price further down to P2.02 per share. The closing price was unchanged on Friday.

Cemex is looking to raise up to $250 million to improve its capital structure, provide flexibility in its balance sheet, and fully fund the company’s expansion of its Solid Cement plant in Antipolo, Rizal.

Worth about $235 million, the expansion will add 1.5 million metric tons (MT) a year to Solid Cement’s current capacity of 1.9 million MT, increasing Cemex’s overall capacity by 26%.

“It seems like they cannot fully fund the project despite being delayed from 2019 to 2020. However, to be fair, this will improve its financial position given its huge exposure to debt securities,” Unicapital’s Ms. Estacio said.

Cemex booked a consolidated net loss of P930 million in 2018, compared to a net income of P659 million in 2017. The net loss came amid a seven percent increase in net sales to P23.42 billion, driven by residential construction due to the high demand from overseas Filipino workers, foreign investors, and outsourcing and offshoring companies.

“After the government’s move to protect local players from cement imports, the rising prices of cement may help Cemex to recover this year. Net profit may settle between P800 million to P1.2 billion,” Timson Securities’ Mr. De Celis said.

“Cemex Holdings is trying to find support between P1.94 to P1.96 and since the sentiment for this stock is expected to remain negative, it may struggle to breach its resistance level of P2.20 at least in the short run,” he said.

For Unicapital’s Ms. Estacio: “I projected Cemex Holdings losses to be trimmed to P744.6 million from P930.1 million in 2018 with the expectation that the average selling prices of cement will slightly improve, but still pricing in the impact of higher interest expenses and foreign exchange losses.”

She placed the company’s support level at P1.90 per share and resistance level at P2.40 per share in the short term. “Possible recovery could be observed by 2020 provided that the Solid Cement plant starts commissioning,” she said.

Cemex Holdings is the local unit of Mexican cement and construction materials company Cemex S.A.B. de C.V. Its cement products are sold under three brands, namely Island and Rizal for Luzon, and APO for the Visayas and Mindanao.