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ISM Communications Corp.

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Outlier

INVESTORS loaded up on Dennis A. Uy-led ISM Communications Corp. last week after the consortium formed by China Telecommunications Corp. and Mr. Uy’s companies Udenna Corp. and Chelsea Logistics Holding Corp. was named as provisional winner in the government’s search for the country’s third major telecommunications service provider.

ISM was the most actively traded stock last week after it logged in P3.985 billion worth of 693.36 million shares on Nov. 5-9, based on data from the Philippine Stock Exchange (PSE).

Shares of ISM jumped to P6.80 apiece last Friday, up by 112.5% from its closing price on Oct. 31 of P3.20 apiece. The stock is also up 382.27% year to date.

“Traders jumped on board ISM after Chelsea Logistics Holdings Corp. (CLC) disclosed before market open on November 7, 2018 [Wednesday] that it and its parent, Udenna Corp., partnered with China Telecommunications Corp. to formally bid as a consortium for the New Major Player in the Philippines’ telecommunications market,” said Fiorenzo D. De Jesus, research analyst at RCBC Securities, Inc.

ISM had been the top traded stock in terms of value turnover since then, from Wednesday until Friday last week.

“What added more to the large trading volume of ISM is the disqualification of [Sear Telecommunications consortium] and PT&T (Philippine Telegraph and Telephone Corp.) as well as the last minute decision of Now Corp. and [Converge ICT Solutions, Inc.] to back out. These fueled the stock price of ISM to rocket from [the] P2.30s to P7.88,” Timson Securities, Inc. equity trader Jervin de Celis said.




Since last year, President Rodrigo R. Duterte pushed for the selection of a third telco player to break the duopoly of PLDT, Inc. and Globe Telecom, Inc.

The consortium of China Telecom, Udenna and CLC, under the name of franchise holder Mindanao Islamic Telephone Company, Inc. (Mislatel), emerged as the provisional winner for the third slot as a Philippine telco provider in the bidding last Wednesday.

Disqualified bidders — PT&T and the consortium of Sear, TierOne Communications International, Inc. and LCS Group of Companies — have filed motions for reconsideration with the National Telecommunications Commission.

In August, Mr. Uy acquired 888.73 million unissued common shares of ISM at P1.45 apiece, equivalent to 45.13% of the company’s outstanding total stock. The acquisition was valued at P1.28 billion.

ISM has also disclosed last month that its board has approved the change in the company’s name to Udenna Holdings Corp. as well as an increase in the capital stock to P75 billion from P2.8 billion, making it Mr. Uy’s holding company via backdoor listing.

Meanwhile, telco incumbents Globe and PLDT saw their respective share prices go down by 17.32% and 12.23% on a week-on-week basis.

“PLDT and Globe have dropped sharply since Nov. 7 as investors price in this negative news for the duo since there’s a new market player that will challenge their dominance,” Mr. de Celis said.

When asked about the outlook, analysts were cautious about ISM’s growth prospects.

“I think traders will try to speculate on the price action of ISM’s stock price as they wait for the finalization of the backdoor listing. ISM will also have to bare their plans to challenge the dominance of Globe and PLDT and that may fuel the stock price to swing in the short run,” Mr. de Celis said.

“For the long term, the company will have to shell out a big amount of money to service consumers… but since this venture is capital intensive, ISM might incur more expenses in the first 5 to 10 years before we see them earn a decent amount of revenue,” he added.

Mr. de Celis sees ISM playing P7 in the resistance level while support at P5.80-6.00 levels for this week.

ISM posted a net income attributable to the parent of P991,862 in the third quarter of 2018, after posting no attributable profit in the same period a year ago. Year-to-date, ISM’s net loss attributable to the parent was P13.05 million compared to nothing in last year’s comparable nine months.

In the nine months to September, its net loss after taxes stood at P26.7 million versus last year’s P54.37 million net loss. Gross revenues reached P180,000 so far this year. — Marissa Mae M. Ramos

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