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Earnings, revised growth targets lift Converge shares

CONVERGE ICT Solutions, Inc.’s shares rose last week as it revised growth forecasts following the release of its second-quarter earnings data.

Converge was the 11th most actively traded stock last week, with a total of 65.21 million shares worth P854.92 million changing hands from August 12 to 16, data from the Philippine Stock Exchange showed.

Shares closed at P14.28 apiece last Friday, up by 19% from P12 apiece the previous week.

Year to date, the stock has jumped 70.4% from its P8.38 close on the last trading day of 2023.

Analysts attributed the week-on-week increase to strong earnings data released by the telecommunications company early last week.

“Solid second-quarter results reflected positively on the stock last week, driving investor sentiment upward. The earnings beat most analysts’ expectations, which likely contributed to a bullish momentum, resulting in increased trading volumes and upward price movements earlier last week,” Arielle Anne D. Santos, equity analyst at Regina Capital Development Corp., said in an e-mail.

The attributable net income of the company surged by 29.8% in the second quarter to P2.74 billion from P2.11 billion in the same period a year ago, bringing its total to P5.29 billion for the first half of the year.

Likewise, Converge’s second-quarter revenue reached P9.98 billion, climbing 14.4% from last year’s P8.72 billion.

With strong earnings for the second quarter and first half, the telecommunications company upgraded its 2024 revenue growth targets to 12-14% from 7-8%, further pushing shares upward.

“This upward revision signaled stronger-than-anticipated demand, particularly in the residential and enterprise segments. The market generally responded positively to this guidance upgrade, as it indicated management’s confidence in capturing more market share and sustaining growth. This news likely contributed to a further boost in stock price, reflecting heightened investor optimism,” Ms. Santos said.

The company’s household coverage for the second quarter reached 63.7%, higher than the 62.3% in the same period last year.

Enterprise clients likewise increased year on year to 55,906, up 30.6% from 42,797.

“The increase in enterprise clients and household coverage is a significant development for the company as it highlights the broadening market reach of Converge despite the stiff competition in the telco landscape,” Jervin De Celis, equity trader at Timson Securities, said in an e-mail.

Ms. Santos expects Converge’s full-year revenue to come at the higher end of its 12-14% forecast if recent trends continue.

Mr. De Celis sees Globe’s third-quarter revenue reaching P10.7 billion, while full-year revenue may reach P41.37 billion.

“I expect the stock to pull back early this week as investors might take this rally to take some profits. The stock may find support between P12 and P12.50, while resistance will probably range between P15 and P15.50,” he said.

Ms. Santos placed her support at P12.30 and immediate resistance at P14.70. — Karis Kasarinlan Paolo D. Mendoza

High hopes in Israel for cocoa that survived Gaza frontline conditions

REUTERS

ESHKOL COUNCIL, Israel — Farming can develop in mysterious ways. Israeli researchers learned about that when the war in Gaza seemed to have all but wrecked their work on a more resilient strain of the cocoa plant that could help alleviate a global shortage of the beans.

Just days after Israel’s agriculture research center, the Volcani Institute, sent 140 seedlings to a facility in southern Israel to study how this tropical plant could be grown in dry conditions, the area came under attack by the Palestinian Islamist group Hamas.

The Oct. 7 assault that sparked the war in Gaza, paralyzed southern Israel and left the facility shut down for months without electricity or irrigation.

“When we came back in January, we saw everything around us, all the experiments that died,” said Talli Ilani, a researcher at the R&D Darom site. Everything except for 18 cocoa seedlings.

While the team had not planned on testing the selected cocoa strains specifically for drought resistance, they may have found just that. “It’s a very unusual result, to find a strain that can withstand 3-1/2 months of drought as new fresh seedlings and also severe cold front,” said Ellen Graber, a senior principal scientist at the Volcani Institute.

“It means that we may be able to develop strains that can expand the growing regions for cocoa.”

Bad weather and disease have hurt cocoa production and sent global cocoa prices soaring. Ms. Graber now plans to clone the surviving plants — which she refers to as “super heroes” — and test them for other qualities such as resistance to pests, and identify the genes responsible for their resilience.

The Volcani Institute has developed resilient plant strains in the past, including drought-resistant wheat that ripens earlier and with a higher nutrient content, as well as a chill-resistant basil that yields all year round. — Reuters

Overseas Filipinos’ Cash Remittances

CASH REMITTANCES from overseas Filipino workers (OFWs) rose to a six-month high in June, the Bangko Sentral ng Pilipinas (BSP) said late on Thursday. Read the full story.

Overseas Filipinos’ Cash Remittances

How PSEi member stocks performed — August 16, 2024

Here’s a quick glance at how PSEi stocks fared on Friday, August 16, 2024.


Shares may rally further as BSP starts easing cycle

REUTERS

PHILIPPINE SHARES may continue to climb this week after the Bangko Sentral ng Pilipinas (BSP) on Thursday cut benchmark interest rates for the first time in nearly four years.

On Friday, the Philippine Stock Exchange index (PSEi) rose by 2.3% or 154.46 points to end at 6,847.37, while the broader all shares index went up by 1.74% or 63.27 points to finish at 3,691.42.

Week on week, the PSEi climbed by 3% or 199.57 points from its 6,647.80 close on Aug. 9, marking its second consecutive weekly gain.

“Local equities surged, boosted by the Bangko Sentral ng Pilipinas’ 25-basis-point (bp) rate cut, the first in almost four years,” online brokerage firm 2TradeAsia.com said in a market note.

“The local market had a good run last week, with value turnover going above the year-to-date average. In the process, the market was able to get past its 6,700-6,800 resistance range,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

The Monetary Board on Thursday reduced its target reverse repurchase rate by 25 bps to 6.25%.

This was the first time the BSP reduced rates since November 2020, when it delivered a 25-bp cut amid the coronavirus pandemic.

Prior to the cut, the BSP kept its policy rate at an over 17-year high of 6.5% for six straight meetings following cumulative hikes worth 450 bps between May 2022 and October 2023 to combat inflation.

“With inflation on a target-consistent path, the current macroeconomic outlook supports a calibrated shift to a less restrictive monetary policy stance,” BSP Governor Eli M. Remolona, Jr. said at a briefing.

Mr. Remolona said they could cut rates by another 25 bps this year. The Monetary Board’s remaining policy-setting meetings are scheduled for Oct. 17 and Dec. 19.

For this week, the market will continue to react to the BSP’s rate decision, Mr. Tantiangco said.

“With the BSP already going for one 25-bp rate cut, together with the prospect of more monetary policy easing moving forward, we may see the market climb further this week,” he said. “Easing recession worries in the United States are also expected to help the local bourse.”

Mr. Tantiangco said if the PSEi can remain at the 6,700-6,800 range, this would be its new support, while its next resistance is at 7,000.

“There is clear upward bias to market movements as rate cuts, locally and abroad, have turned in favor of risk assets. The dying out of the ‘higher-for-longer’ view on global interest rates may be the impetus the PSEi needs to approach 7,000 in the medium term,” 2TradeAsia.com said.

The online brokerage placed the market’s immediate support at 6,600 and resistance at 7,000.

Philippine financial markets will be closed on Friday (Aug. 23) for a special nonworking holiday in observance of Ninoy Aquino Day, which was moved from the original Aug. 21 date. — R.M.D. Ochave

Philippines accuses China of violating 2002 pact

"BRP TERESA MAGBANUA”, the largest patrol vessel (97 meters) for the Philippine Coast Guard (PCG)

THE PHILIPPINE Coast Guard (PCG) on Sunday said China is the only country in the region that continues to violate a 2002 declaration that sought to promote peaceful coexistence in the South China Sea.

This, after China urged its neighbor to withdraw a PCG vessel from Sabina Shoal, a Philippine feature to which Beijing has deployed naval assets in recent weeks.

“China should stop citing the 2002 Declaration on the Conduct of Parties in the South China Sea, as they have not honored or followed a single provision of that declaration,” PCG spokesman Jay Tristan Tarriela said in an X post.

“As far as the region is concerned, it is only Beijing that constantly violates this declaration,” he added, citing China’s deployment of large coast guard and maritime militia vessels there.

The Chinese Embassy in Manila did not immediately reply to a Viber message seeking comment.

Mr. Tarriela said China had sent naval assets to Sabina Shoal, which is part of the Spratly Islands and falls within the Philippines’ exclusive economic zone. It is 123.6 nautical miles from Palawan Island, which is facing the South China Sea.

“These actions undermine stability in these waters and contribute to escalating tensions.”

China last week filed a diplomatic protest against the “illegal anchoring” of Philippine Coast Guard vessel BRP Teresa Magbanua at the shoal, saying it “seriously infringes on China’s sovereignty.”

“China has protested to the Philippines through diplomatic channels and asked the Philippines to stop its infringement activities and withdraw the vessel at once,” Chinese foreign ministry spokesperson Lin Jian told a news briefing in Beijing last week.

He said BRP Teresa Magbanua had entered the lagoon of Sabina “without permission and has been there for a very long time.”

It was a violation of the Declaration on the Conduct of Parties in the South China Sea, she added, noting that Beijing was “closely monitoring the developments” and would undertake “resolute measures.”

China and the Association of Southeast Asian Nations (ASEAN) have yet to finalize a code of conduct in the disputed waterway decades after signing the nonbinding 2002 declaration, which calls on parties to “exercise self-restraint in the conduct of activities that would complicate or escalate disputes and affect peace and stability” at sea.

The 2002 document urges parties to refrain “from action of inhabiting on the presently uninhabited islands, reefs, shoals, cays and other features and to handle their differences in a constructive manner.”

On Thursday, Singaporean President Tharman Shanmugaratnam said in a joint statement with his Philippine counterpart delivered at the presidential palace in Manila that his country, which is a non-claimant state, upholds “the rights of all states to freedom of navigation and overflight.”

Singapore “strongly supported the peaceful resolution of disputes in accordance with international law including the 1982 United Nations Convention of the Law of the Sea (UNCLOS),” he said.

“That’s fundamental UNCLOS has to be the legal framework within which all the activities in the oceans and seas are carried out.”

The 97-meter multi-response vessel Teresa Magbanua was sent to the shoal after reports of small-scale Chinese reclamation activities there.

Mr. Tarriela said the ship was deployed there not to provoke or escalate tensions, but to “protect and safeguard our sovereign rights over these waters.” He added that it’s also monitoring “illegal poachers” who damage the marine environment.

The 97-meter Teresa Magbanua, a multirole response vessel, has been stationed at the shoal since mid-April.

The PCG on Aug. 13 said China had deployed a 135-meter coast guard vessel with hull number 5303 to the shoal to replace its largest coast guard ship known as “The Monster,” which was first spotted by the Philippine Navy in the area on July 3.

It said the vessel, which was registered by the Chinese government under the Western and Central Pacific Fisheries Commission, did not inspect Chinese maritime militia vessels that gathered within the shoal for compliance with fishery laws.

“Instead of conducting inspections, they interacted with the crew of the Chinese maritime militia as if they were familiar acquaintances, sharing meals together,” it said.

“It is evident that no formal boarding procedures were carried out by the China Coast Guard to question the Chinese maritime militia’s intentions, despite their prolonged presence without any signs of fishing,” it added.

Mr. Tarriela said this showed that the Chinese maritime militia is recognized by the Chinese Coast Guard (CCG) as an integral part of its maritime operations, “aiding in encroaching upon the exclusive economic zones of other countries throughout the South China Sea.”

“These state-subsidized maritime militia support the CCG and the People’s Liberation Army Navy in intimidating neighboring maritime states such as Vietnam, Malaysia, Indonesia and the Philippines,” he added.

The shoal has been used by the Philippine Navy as a staging area for the resupply missions to its outpost at Second Thomas Shoal, which is also within the country’s EEZ.

The US-based Asia Maritime Transparency Initiative (AMTI) in February said about 195 Chinese militia ships were present near disputed areas of the South China Sea including Philippine features on any given day last year, a 35% increase from a year earlier.

These were composed of professional militia that operate purpose-built vessels out of Hainan province, and the “Spratly Backbone Fleet,” which consists of commercial vessels subsidized to operate in disputed waters to support Chinese sovereignty claims, AMTI said.

Earlier this month, the Philippine Navy said Chinese research vessel Ke Xue San Hao, which is equipped with advanced technology designed for marine environment observation, was still near Sabina over a week after it left a major Chinese military outpost in the South China Sea.

Its zig-zag movement “indicates something else,” which is no longer an innocent passage, it said.

The Navy said it had spotted Ke Xue San Hao, 12 Chinese maritime militia vessels and one China Coast Guard ship at the shoal from July 30 to Aug. 4. — Kyle Aristophere T. Atienza

Analysts cite Manila focus shift to energy

CASEY HORNER-UNSPLASH

By Kyle Aristophere T. Atienza, Reporter

THE APPOINTMENT of a former Energy official to the National Maritime Council signals a renewed focus on harnessing areas of the South China Sea within the Philippines’ exclusive economic zone (EEZ), according to a security analyst.

Chester B. Cabalza, founding president of International Development and Security Cooperation (IDSC), said energy security could become the focus of the government in the coming months.

“That is one of the gray areas in our cause in the West Philippine Sea,” he said in an e-mail, referring to areas of the disputed sea within the country’s exclusive economic zone (EEZ). “It could be possible that exploration of energy at sea would be the thrust of this administration which is important in a blue economy.”

The presidential palace on Friday said former Energy Undersecretary Alexander Lopez had been appointed spokesman of the National Maritime Council (NMC), which was created earlier this year to boost the country’s maritime security and domain awareness amid worsening tensions with China.

The council was a predecessor of the 10-member National Coast Watch Council.

The palace said Mr. Lopez, a retired military official, “will speak on behalf of the NMC when it comes to issues surrounding the West Philippine Sea.”

Don Mclain Gill, an international relations lecturer at De La Salle university, said Mr. Lopez’s appointment “may add more nuance” to the country’s efforts to explore and exploit gas and oil within its EEZ.

“The energy resources of the West Philippine Sea have always been a focus of Manila,” he said in a Facebook Messenger chat. “However, the challenge toward attaining proper operational planning is hindered by Chinese expansionism.”

There’s been an increasing call for the Philippines to start drilling for oil and gas at Reed Bank, which is believed to hold as many as 5.4 billion barrels of oil and 55.1 trillion cubic feet of natural gas, amid the expected depletion of the country’s sole indigenous gas field by 2027.

President Ferdinand R. Marcos, Jr. in December cited the need to resolve issues in the South China Sea so the Philippines could start joint exploration for gas and oil in the waterway before the Malampaya gas field gets depleted.

Very little progress had been made since the country started negotiating with China for joint oil and gas exploration, he told Japanese media during his visit to Tokyo.

Mr. Gill said despite efforts by the Philippines to focus on the economic aspects of its sea claim, “energy will remain a securitized issue especially for Beijing.”

“That is because China is expansionist,” he said. “It feels that it owns everything and therefore, everything we do will be perceived as a security issue.”

“Even the energy exploration negotiations under the Duterte administration failed because China wanted terms that were against our Constitution,” he said.  “You can only cooperate functionally with countries that know how to forge trust-based relations.”

Mr. Cabalza urged the NMC to work with stakeholders in implementing a proposed law that will create archipelagic sea lanes and prescribe the obligations of foreign ships and aircraft passing through them.

The measure passed by the Senate on final reading last week defines the “right of innocent passage” as the “continuous and expeditious passage of foreign vessels through the territorial sea that is not prejudicial to the peace, good order or security of the Philippines.”

A Philippine task force handling the country’s dispute with China last week said the bill would bring attention to the “proper scope” of the Philippine maritime domain and the “need for strategic investments in maritime security, maritime domain awareness, maritime law enforcement, sustainability of marine resources and protection of the marine environment.”

The late Benigno S.C. Aquino III in 2014 appointed Mr. Lopez head of the military’s Western Command, which oversees many parts of the country’s western front, including the Philippine EEZ in the South China Sea.

The NMC replaced the National Coast Watch Council, which Mr. Aquino created a year before a standoff with China over the Scarborough Shoal.

The council, which has been convened twice since its creation, is the “central body in charge of formulating policies and strategies to ensure a unified, coordinated and effective governance framework for the country’s maritime security and domain awareness.”

Mr. Marcos increased the number of agencies supporting the council to 13 from nine, including the space agency and the University of the Philippines Institute for Maritime Affairs and the Law of the Sea.

Mr. Lopez served as Energy undersecretary from 2018 to 2022 and was a consultant of the agency from 2017 to 2018.

Lawmakers buck proposal to legalize e-sabong, cite effects on poor people

By Kenneth Christiane L. Basilio and John Victor D. Ordoñez, Reporters

LAWMAKERS have rejected a proposal to legalize online cockfighting or e-sabong to replace lost revenue from Philippine Offshore Gaming Operations (POGO), saying it would only spawn more crimes and worsen poverty.

“The pernicious effects of e-sabong affects poor people,” Cagayan de Oro Rep. Rufus B. Rodriguez told BusinessWorld in an interview last week. “It will deepen poverty. The problem with e-sabong is that even young people could gamble too through the internet.”

Some congressmen have sought to legalize online cockfighting operations to boost state revenue after a presidential ban on Philippine Offshore Gaming Operators (POGOs). They said the practice continues despite a two-year presidential ban started by ex-President Rodrigo R. Duterte.

The Philippine Amusement and Gaming Corp. (PAGCOR) earlier said it would lose as much as P7.5 billion in yearly revenue due to the closure of POGOs.

It generated about P6.2 billion from license fees on legal online cockfighting operators from 2021 to 2022, PAGCOR Chairman Alejandro H. Tengco said.

The House of Representatives committee on games and amusements last week approved a bill that seeks to criminalize e-sabong.

“I’m just following what President Rodrigo Duterte ordered banning it and continue President Marcos’ order to [stop e-sabong],” Mr. Rodriguez, who authored the measure, said.

Mr. Marcos issued an order in 2022 that kept the ban on online cockfighting operations.

Under the House bill, operators of online cockfighting face a jail term of up to 20 years and fines of as much as P5 million, Mr. Rodriguez said. “This will now empower our government to have a law… giving them the necessary tools to combat illegal e-sabong.”

The House ways and means committee has received proposals from PAGCOR and the Cagayan Economic Zone Authority to boost government revenue in the gaming sector, Albay Rep. Jose Ma. Clemente S. Salceda said. He did not elaborate.

“The gaming sector, particularly in the online space, is already expanding,” he told BusinessWorld in a Viber message.

“Some industry analysts expect 12-15% annual revenue growth for some stocks in the Philippine Stock Exchange that are engaged in the gaming sector,” he said. “So, the first question to us would be: Are current players being taxed at sufficient levels?”

The government should consider whether it wants to keep e-sabong in a “controlled, regulated and taxed policy enclosure” or keep it illegal, allowing it to operate unfettered.

“The legalization of e-sabong will introduce the same social costs as POGOs,” Leonardo A. Lanzona, an economics professor at the Ateneo De Manila University, said in a Facebook Messenger chat. “The government has to move away from these seemingly easy solutions with significant social costs.”

Policymakers should not merely look at regulating gambling activities for the sake of collecting state revenues, Filomeno S. Sta Ana III, coordinator of think tank Action for Economic Reforms, said via Viber.

“With respect to gambling regulation, other factors beyond getting revenues have weightier considerations,” he said.

He said the state should conduct a cost-benefit analysis to consider the effects of gambling on society, government capacity to regulate the industry and the risk of money laundering.

Senator Emmanuel Joel J. Villanueva said e-sabong would only spawn more crimes.

“We have just defeated an enemy with the POGO ban, and now some are considering resurrecting e-sabong, which is far worse because it directly targets our countrymen from all walks of life,” he said in a statement. “We want our revenues coming from legitimate, legal and sustainable sources.”

Mr. Marcos in his third address to Congress in July ordered a total ban on POGOs, citing their links to crimes such as money laundering, prostitution and human trafficking.

He ordered PAGCOR to close all POGO facilities by yearend.

Mr. Villanueva said these gambling operations would only plunge Filipinos in debt and are unlikely to generate substantial state revenue.

Mr. Duterte in May 2022 banned internet-based cockfighting after dozens of gamblers who got hooked went missing.

About 30 gamblers went missing between 2021 and 2022, prompting a congressional probe. The cases remain unsolved.

“No matter how you look at it, the social costs of gambling overshadow the intended benefits,” Mr. Villanueva said. “We cannot simply turn a blind eye to the suffering of our people who have become victims of the pitfalls of gambling.”

Senator told to face music on drugs

PHILIPPINE STAR/MICHAEL VARCAS

PHILIPPINE Senator Ronald M. dela Rosa should stop trying to skirt responsibility for ex-President Rodrigo R. Duterte’s deadly drug war, a congressman said on Sunday.

“He should really get his facts straight and not just go out screaming conspiracy theories,” Party-list Rep. France L. Castro said in a statement.

Mr. Dela Rosa, who was Mr. Duterte’s national police chief who enforced the war on drugs, on Friday accused the government of President Ferdinand R. Marcos, Jr. of working with “leftists” and “yellows” to pin his predecessor for the deaths of thousands of drug suspects.

“First, he played nonchalant on the issue… When he felt the International Criminal Court heat was increasing, he begged Marcos, Jr. to protect him from the ICC,” she added. “Now he is saying that there is a conspiracy to nail him and former President Rodrigo Duterte and his ilk.”

Mr. Dela Rosa did not immediately reply to a Viber message seeking comment.

The Philippine government won’t stop the ICC from conducting their investigation of Mr. Duterte’s anti-drug campaign, Solicitor-General Menardo I. Guevarra said in July. — Kenneth Christiane L. Basilio

Labor protection pushed

PHILIPPINE STAR/ WALTER BOLLOZOS

A LABOR leader on Sunday urged the Labor department to increase spending on protecting workers’ rights and strengthening trade unions, after the Department of Budget and Management (DBM) said the agency has one of the lowest budget use rates.

“There is a need for more funding in certain areas to better support trade unions and the labor sector,” Federation of Free Workers President Jose Sonny G. Matula told BusinessWorld in a Viber message.

“We request more funding for labor education, particularly to support trade unions and federations in educating workers about their rights and responsibilities,” he added.

The DBM last week said the Labor department is one of the 10 agencies with the lowest spending. — Chloe Mari A. Hufana

La Union eyes higher rice output

NEDA

BAGUIO CITY — La Union expects to boost rice production after the provincial government and National Food Authority (NFA) signed a deal to increase the output of farmers in the province.

La Union Governor Raphaelle Veronica Ortega-David and NFA Administrator Larry Lacson signed a deed of usufruct on Aug. 7 at the Provincial Capitol in San Fernando City, greenlighting the construction of a P200-million rice processing center by the NFA on a two-hectare property owned by the province in Damortis, Santo Tomas town.

La Union is keen to leverage its rice self-sufficiency status as it tries to become the center of agri-tourism in Northern Luzon by 2025 with the construction of the facility, Ms. David said.

The integrated rice processing center will feature state-of-the-art technology such as a modern rice mill, mechanical dryer, 100,000-bag capacity warehouse, generator sets, a three-phase power supply, electronic truck scale and a staff house.

The bidding for the project will start this year, and the construction target is by July 2025. Once completed, the project will be the first NFA-owned rice processing center in the Ilocos region.

Mr. Lacson praised La Union’s rice sufficiency with 152,000 metric tons of rice produced in a year. With a production rate of 4.5 metric tons per hectare, the province also surpasses the national production average of four metric tons per hectare. — Artemio A. Dumlao

Shabu peddler busted in Kidapawan

PHILSTAR FILE PHOTO

COTABATO CITY — Police seized P800,000 worth of crystal meth (shabu) from a suspected trafficker who was entrapped on Friday night in Kidapawan City in Cotabato province.

Brigadier General James E. Gulmatico, director of the Police Regional Office-12, told reporters on Sunday that the 46-year-old suspect, who lives in Digos City, Davao del Sur, had been detained and was awaiting prosecution for drug trafficking.

The suspect was arrested after turning over 115 grams of the illegal drugs to nonuniformed personnel of the Police Regional Drug Enforcement Unit in a clandestine operation in in Kidapawan City. — John Felix M. Unson