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‘Too many’ populist moves, former state economic planner warns

A FORMER state economic planner has cautioned against populist measures that could harm the country’s fiscal health.
“We have too many of those populist but economy- and business-unfriendly policies,” Ateneo de Manila University professor Cielito F. Habito said during the Ateneo Economic Briefing 2018 in Makati city on Thursday last week.
He cited Republic Act No. 10931, or the Universal Access to Quality Tertiary Education, as an example. The new law provides state funds to cover the tuition fees of those enrolled in state and local universities and colleges, as well as technical-vocation education and training programs under the Technical Education and Skills Development Authority.
“Case in point: the free tuition for all. Some friends in the UP (University of the Philippines) administration can’t seem to grapple with the fact that they are now giving free tuition in a campus where the biggest problem of students is the lack of parking space. That is exactly what the surveys in UP say,” Mr. Habito said, who served as former president Fidel V. Ramos’ socioeconomic planning chief from 1992 to 1998.
“Why do you have to give free tuition to everybody when we already have a good law in place that says give free scholarships to promising, needy students? But then again they wanted to have a popular-looking law that everyone gets free college education,” he added.
“That is a tremendous price tag that is impacting government finances.”
The law, which was authored by Senator Paolo Benigno A. Aquino IV, was initially opposed by the country’s economic managers who deemed it “unaffordable,” costing about P50 billion in the first year of implementation.
The fiscal deficit grew 36% to P279.4 billion as of July from P205 billion in 2017’s first seven months, equivalent to 53.35% of the P523.68-billion budget shortfall programmed for this year. The same comparative seven months saw expenditures grow 23% to P1.93 trillion from P1.58 trillion and revenues increase by 21% to P1.65 trillion from P1.37 trillion.
The government has also widened the programmed fiscal deficit to 3.2% of gross domestic product for 2019 from the current three percent, as it seeks to accelerate infrastructure and social spending.
“It’s so easy to come out with political and populist approaches. It looks good but it actually hurts the rest of the Filipino people,” said Mr. Habito.
Malacañang had yet to respond to a request for comment as of Sunday afternoon.
Mr. Habito also cited RA 10969, or the Free Irrigation Service Act, which exempts farmers with up to eight hectares from paying irrigation service fees.
The Development Budget Coordination Committee late last year also flagged fiscal risks posed by the increase in salaries of soldiers and policemen, as well as in Social Security System pension payouts by P1,000 across the board that has cut the fund’s actuarial life by 14-17 years.
To soften the fiscal impact of such policies, Mr. Habito proposed that the government reconsider the primacy of public-private partnerships (PPPs) in implementing projects.
“Our government must seriously consider relying more on PPP again because that’s the only way to relieve the fiscal pressures that are really building up,” said Mr. Habito.
“That’s the way to improve the promptness and efficiency of implementation.”
The current administration has opted to using state funds and official development assistance in a bid to speed up disbursements for priority projects while leaving the PPP for the operation and maintenance stage.
At the same time, state economic managers have said that the government will continue to entertain the PPP framework for unsolicited proposals that introduce new technologies and which that do not seek sovereign guarantees. — Elijah J. C. Tubayan

Subway builder eyes ferries

TO EASE traffic congestion in the country’s main financial center, there’s no way to go but underground and afloat, said businessman Antonio L. Tiu, who is leading a venture for one of two subway projects in the capital region.
IRC Properties, Inc., Mr. Tiu’s venture with Chinese and Hong Kong companies for a $3.7-billion underground system in Makati City, has also submitted an offer to run and upgrade the rickety Pasig River ferry service, he said in an interview on Aug. 25. The ferry system would help drain traffic from Makati City while the subway gets built, said Mr. Tiu, 43.
Metro Manila is struggling to loosen the gridlock that is costing the economy P3.5 billion ($65.5 million) a day because of insufficient infrastructure to serve 13 million people and three million vehicles.
Shares of IRC have more than doubled this year as it’s taken steps toward a prominent role in the upgrade effort, helping it morph from a property developer into an infrastructure company.
“To solve the traffic, the only way to go is down and above water,” Mr. Tiu said.
The subway can remove 270,000 cars from the roads daily and help transport 700,000 of Makati City’s daytime population of 5 million, most of them workers, Mr. Tiu said. The district is the main business center in Metro Manila and the entire country.
The venture plans to break ground on the 10-kilometer (6.2-mile) subway before year-end and complete it by 2024.
The government is also building a 30-kilometer underground railway cutting across several cities.
IRC’s Makati City consortium is set to include Greenland Holdings Corp. and China Harbour Engineering Co., Mr. Tiu said.
The composition of the consortium, which may include Makati City, will be finalized in three months.
Half of the funding needed is already secured and more investors are expected, Mr. Tiu said. IRC may also sell the equivalent of $500 million in preferred shares, he said.
Mr. Tiu has close ties with the family of Makati City Mayor Mar-len Abigail S. Binay-Campos, who has held the role since 2016. His businesses were sidelined by tax-evasion and money-laundering allegations during the previous administration, and both charges have since been dismissed by courts, he said.
Another of Mr. Tiu’s companies, AgriNurture Inc., has offered to supply 500,000 tons of rice quarterly to state-owned National Food Authority to ensure steady supply of the staple grain and help curb inflation, he said.
Mr. Tiu is also planning to list his company that makes fresh juices, The Big Chill Inc., on the stock exchange this year.
Shares of AgriNurture have risen 41% this year while IRC’s gain makes it one of the best-performing stocks in the Philippines in 2018. — Bloomberg

A true two-in-one product: soap that is good for the laundry and for your face

CONVENTION, common sense, and chemistry all tell us never to use the soap we use for our bodies on our faces. With this in mind, how would you feel about a thick lather of laundry soap on your face?

Perla soap has been around since 1949, passed around by the Philippine Manufacturing Corp., Procter & Gamble, and then sold to SCPG Asia-Pacific Inc. in this decade. In the almost-70 years since it has been in production, the soap, made of raw materials derived from coconuts, has not changed formulation, according to Perla Brand Specialist Quiel Estrella.

BusinessWorld met Mr. Estrella during a fashion show in SM The Block featuring regular women who happen to be users of Perla. The women were selected from a social media competition held by the brand, and one of the prizes included modeling all-white outfits on the runway and a chance to meet Perla celebrity endorser Toni Gonzaga.

“This is a celebration of Filipina beauty, Filipina simplicity,” Mr. Estrella said about how the coconut-derived soap symbolizes the Filipino consumer.

CHEMISTRY LESSON
And now a little chemistry: soap is made from fats and an alkaline solution, usually something caustic like lye or sodium or potassium hydroxide. Historically, soaps were made from plant ashes and animal or vegetable fats.

The fat used in Perla is pure coconut oil, which Mr. Estrella is proud to say is sourced from Filipino farmers, making the soap a purely Filipino product. “All of the magic that Perla can do, it’s because of the coconut oil,” he said.

While Perla has always been marketed as a laundry soap (and not a detergent, which is a different substance altogether), it has been a cult tool for skincare, as the households which have used it for ages described that the soap left the skin on the hands soft. Since people noticed how kind the soap was to the skin, they started using it on their faces as well.

“People will still tell you, you have acne breakouts: use Perla. You have skin allergies: use Perla,” said Mr. Estrella.

Perla has also found a niche among households with sensitive skin, because members of their families might get skin reactions from commercial detergents used for their laundry. With today’s growing concern for the environment, some families are switching to newer hypoallergenic detergents — but then, they cost much more than Perla’s price point of something below P20 a bar.

Mr. Estrella says, “It’s about all-natural, and it’s about caring for your skin. But what will you choose? A new product, or a brand built on decades of trust?”

Perhaps it’s a rebellion against the chemicals used in commercial soaps or modernity, but people have been running to age-old secrets like Castile soap or Marseille soap, which have been used for centuries. Mr. Estrella notes that some of the people they have talked to compared Perla to these products, which were developed centuries ago with olive oil and laurel oil.

Mr. Estrella spoke abut the benefits of using the soap for skincare: apparently, the glycerin is kept intact within the soap, so it has a moisturizing factor that won’t dry up your skin. The coconut oil within the soap, he says, penetrates the more easily to nourish the skin, while the lauric acid in the coconut oil attracts oil and dirt away from the skin — and well, your clothes too.

A little too good to be true, but Mr. Estrella says that they have had stringent tests done in third-party labs — “Just to make sure that what we’re saying is really true.”

“I cannot market it as a laundry soap and beauty soap at the same time. There will be confusion,” he said. “We just let our consumers talk about it.”

Laundry soap that leaves your clothes softer, and a beauty soap, all in one bar: is there anything Perla can’t do? It sounds too good to be true, but then decades of housewives saying otherwise is hard to refute. Plus, Mr. Estrella himself said that he uses Perla for his own skin (and a cursory look saw small pores and an overall great complexion on Mr. Estrella). Okay, so it’s all anecdotal, and it might all be incidental, and we know that it’s just too frightening a prospect to use the stuff you wash your clothes in on your very own skin. But Mr. Estrella assured us, “Everything that we say, it’s actually proven [in a lab] to be true.”— Joseph L. Garcia

Cal-Comp PHL in talks with SM to supply AI robots in malls

By Arra B. Francia, Reporter
THE local unit of Taiwan’s New Kinpo Group (NKG) is currently in talks with the largest operator of shopping malls in the country for the roll out of artificial intelligence (AI) robotic products that can assist customers.
Cal-Comp Technology (Philippines), Inc. Chief Executive Officer Simon Shen said the company is speaking with the SM Group as well as other operators of convenience stores for the supply of its New Era AI Robotics. These are smart humanoid robots which feature smart voice interactivity, facial biometrics identification, and POS systems, among others.
“Our robotics will be used in Philippine shopping malls and community stores very soon,” Mr. Shen told reporters after a tour of the company’s manufacturing facility in Batangas on Aug. 10.
“It’s going well, I think we will be implementing very soon,” he added when asked how negotiations with the Sy-led SM Group are going.
Should this deal push through, this will allow Cal-Comp Technology to introduce its products to 70 SM malls in the country.
“Most important is robotics can speak Tagalog, these were put up by Filipino engineers. So we try to put up Tagalog voice AI for their preference,” Mr. Shen said.
Representatives of the SM Group declined to make a comment on the deal.
Service robots are one of the several products under NKG’s portfolio. The company also manufactures calculators, hard disk drives, printers, consumer electronics, power management equipment, automotive, security, medical, and health care products, among others, for different international brands.
Aside from service robots, the company is also planning to launch more products under their own brands.
“We cannot compete with our customers in our current business. We are selling products only where we are not in competition with our current customer, like beauty products under the Hi Me name, the 3-D printer under the XYZ brand,” Mr. Shen said.
The introduction of more products comes alongside Cal-Comp Technology’s further expansion in the country. It plans to build two new manufacturing facilities here, in addition to its current manufacturing space covering 298,674 square meters in Lima Technology Center in Lipa, Batangas and First Philippine Industrial Park in Sto. Tomas, Batangas.
Cal-Comp Technology looks to finance this expansion through a P6.77-billion initial public offering (IPO) by the fourth quarter of this year, where it targets to sell up to 378.07 million shares.
The company will also acquire new assembly equipment and machinery, as well as more investments for research and development, through the IPO.

Federal Land to launch 5 projects in second half

FEDERAL LAND, INC. launched the Florida Sun Estates-Orlando in General Trias, Cavite earlier this year.

THE property unit of GT Capital Holdings, Inc. will be launching five more residential projects in the second half of 2018, after posting lower reservation sales in the first half due to fewer units left in its inventory.
Federal Land, Inc. had targeted to unveil nine to 11 projects this year, three of which have already been launched from the January to June period. This includes the Florida Sun Estates-Orlando in General Trias, Cavite, Mimosa Tower of Peninsula Garden Midtown Homes in Paco, Manila, and Baler Tower of Palm Beach West in Metro Park, Bay Area.
The property developer then launched the first tower of Quantum Residences along Taft Avenue in Pasay City earlier this month.
“We have five more projects in the second half. There’s Grand Hyatt 2 because Grand Hyatt 1 was fully sold out, two or three towers in the Bay Area. Aside from Grand Hyatt, another tower in Bonifacio, and another tower in Taft,” GT Capital President Carmelo Maria Luza Bautista told reporters after a media and analysts’ briefing in Taguig City on Aug. 15.
Federal Land has already sold out the 239 units in the first tower of the Grand Hyatt Manila Residences in Bonifacio Global City (BGC) in Taguig. The company will also launch the second tower of the Quantum Residences in Pasay, which will cater to students of schools such as De La Salle University, St. Scholastica’s College, and Arellano University located within the area.
The launch of more projects will support the company’s growth this year. In a presentation, Mr. Bautista noted that Federal Land’s inventory slipped by 17% to 1,364 units in the first half, following delays in securing permits and licenses for new projects. Reservation sales accordingly fell by six percent to P6.4 billion.
Federal Land’s net income also dropped by 35% to P503.6 million in the first semester, versus the P777.8 billion it generated in the same period a year ago, as revenues stood flat at P5.3 billion.
The company currently holds a land bank of 82.70 hectares across the country, located across Metro Manila and provinces such as Iloilo, Laguna, and Cavite. Its residential units for sale range from 18 to 400 square meters (sq.m.), priced from P20 to P101 million.
Aside from residential projects, the company said it will also redesign the podium for The Big Apple Mall at Grand Central Park in BGC, to accommodate the business district’s high-density residential communities. The redesign will bring 20,000 sq.m. of additional gross floor area to the company.
Federal Land is one of the property companies of tycoon George S.K. Ty, with the other being Property Company of Friends, Inc. (Pro-friends), which caters to the low-cost property sector. Pro-friends has so far developed 2,886 housing units, with a land bank of more than 1,700 hectares mostly in Cavite.
The two firms delivered consolidated revenues of P9.7 billion in the first half of 2018, 8.9% higher year on year, while net income attributable to the parent went down by 24.5% to P1.1 billion. — Arra B. Francia

Yes, bolo ties are actually a thing now

BOLOS, the official neckwear of Arizona, New Mexico, and Texas and the ne plus ultra for the Western cowboy for over 60 years, are having a moment on fashionable young necks. In Paris, Balmain featured $550 gold-toned bolo ties in their spring 2018 menswear show — and promptly sold out. On Instagram, the #BoloTie hashtag has 50,446 posts and counting from both guys and gals being equally ironic and serious (or, seriously ironic) in their style choice. On the internet, searches for “bolo tie amazon” have increased 120% over the past 12 months, according to Google Trends.

The word “bolo” is derived from boleadora, an Argentine lariat, or rope used to lasso, although the neckwear’s actual origin is a mystery. One fella, Victor Cedarstaff, claims he is the creator: Back in the late 1940s, his hat flew off while he was riding his horse; so as not to lose his hatband, he simply slung it around his neck, and an iconic accessory was born. And so it goes.

The neck lasso — or bolas, bootlace, or shoestring ties as they have also been called — made it into mainstream fashion in the 1980s, when it was coveted by Rockabilly and New Wave bands. It has continued to pop up on eccentric celebrities ever since, from Billy Murray to Johnny Depp, Ed Ruscha to Bruno Mars, and, of course, Macklemore. And like the resurgence in ugly sneakers and all things archival, that brings us to today.

“This summer, we definitely have seen a lot of grooms purchase these for their groomsmen and/or themselves for their big day,” says Hayley Faw, co-founder of the jewelry brand Apse Adorn. It’s been making bolos for about two years now. “We even designed seven custom bolos for one groom, who wanted each of his groomsmen to sport a different pendant style.”

As to their appeal, Faw thinks men in particular are getting more adventurous with their style. “Bolos are a really simple — and meaningful — way to test the ‘accessory waters’ without going into full blown jewelry,” she tells Bloomberg.

Designer Gogo Ferguson, who cast an alligator-claw tie bolo has seen this trend before. “Bolos seem to come and go like the tide,” she says, “but I have held that they are a unique twist to an otherwise-boring tuxedo!”

Evan Ratner, an investment analyst, and Vinnie Buehler, an associate at a law firm, launched CalinY this summer. The brand uses interchangeable pieces so guys can match their bolo with their outfit. They call it the “Urbolo.” And yes, booze was involved.

“I am in my early 30s, and don’t feel I can pull off the Southwest look on a daily basis, so we created a bolo with an urban edge,” says Buehler. He recounts how the idea came together last summer over drinks at Manhattan’s Union Square, when he was listening to his friend, (now business partner) vent his frustration on the lack of neckwear options for men.

“We’ve noticed that people enjoy wearing them around their neck for more formal occasions,” adds Ratner, “but friends also have enjoyed loosening them up and wearing them with a tee.” Breaking the chains of the necktie monopoly, one bolo at a time — Cator Sparks, Bloomberg

Disney, SM reap fruits of partnership

By Cathy Rose A. Garcia, Associate Editor
NEARLY 5,000 Disney-branded products are sold every hour in SM shopping malls throughout the country, according to officials of The Walt Disney Company (Philippines), Inc. and SM Lifestyle and Entertainment, Inc.
In the last three years, Disney and SM have worked together, leveraging on the strengths of their brands to drive business growth for both companies.
“The main reason (for the partnership) was we wanted to establish SM as a key destination for Disney properties. We like to work with global brands like Disney, they’re the best licensor in the world. For us being the largest mall operator, the largest retailer in the Philippines, we also want to work with the best,” Myra Eugenia I. Moñozca, vice president for licensing and partnerships at SM Lifestyle Entertainment, told BusinessWorld in an Aug. 17 interview.
Disney-SM’s multiyear partnership covers theatrical promotions, retail and special activities. The two companies brought Disney, Marvel, Pixar, and Star Wars movies to life through retail and entertainment experiences at SM shopping malls throughout the Philippines.
Veronica Espinosa-Cabalinan, general manager of The Walt Disney Company (Philippines), noted the Disney brand has become stronger in the Philippines as a result of the partnership with SM.
“The partnership helped drive business growth for us. The data showed close to 5,000 Disney products are sold per hour in SM malls. Year on year, since the partnership, we have had double-digit growth in our Disney character business with SM Retail,” she told BusinessWorld at the Disney office in Taguig on Aug. 17.
“Two out of three Filipinos are Disney fans. With that fact and the quality products we have available in retail, it helps us build the connection with Filipino fans and audience,” she added.
Ms. Moñozca noted Disney now contributes approximately half of overall sales of character brands in SM. Also, Disney licensees in key categories such as apparel, accessories, footwear and toys have been able to generate 80% of their sales from SM stores.
DISNEY EXPERIENCE AT SM
SM malls have become a showcase for Disney films, as well as its well-loved characters. Last December, all 55 SM malls throughout the country featured Disney-themed Christmas displays under the “We Love Disney” campaign.
“The malls pride themselves in providing the best possible family experience for our customers every Christmastime. We know the nature of our Filipino customers. You can basically do everything at the mall now, go to mass, shop, eat, watch a movie… Having that thematic experience like We Love Disney campaign added to that excitement during Christmastime,” Ms. Moñozca said.
Ms. Cabalinan noted these displays, which featured Mickey and Friends, Disney Princesses and other popular characters, helped bring the Disney experience to more Filipinos.
“As you know, especially in the provinces, one of the aspirations of some Filipino families is to be able to go to Disneyland. Now this type of installation brings them close to that type of experience, one where they can also experience in Disneyland,” Ms. Cabalinan said.
More than a third of screen share for Disney films in the Philippines are accounted to SM cinemas, allowing the movies to reach audiences in Visayas and Mindanao wherever there are SM malls.
“Aside from driving business growth, it provided us increased engagement with fans, connecting to fans not just in Metro Manila. We have to build our strengths in the Tier 2 and Tier 3 cities, and that’s what the partnership is about also, reaching areas with fans that we are unable to connect with,” Ms. Cabalinan said.
With a slew of new movies coming out in the next few months, Disney and SM expect to continue bringing unique, “money can’t buy” experiences for fans at the malls.
“What’s exciting is Disney churns out new properties and movies every year, just based on theatrical slate for next year, there’s so much more we can do with theatrical promotions with Disney… We will support it on ground with activations, retail campaigns as well. With new movies comes greater opportunities to do something different year on year,” Ms. Moñozca said.

Orly launches nail care innovations

KEEPING ONE’S nails always manicured usually comes with the worry that the nails will get brittle and yellow — and growing out one’s nails to correct these problems would usually take a few months. But developments in nail care technology now address these concerns.

International nail care brand Orly has reintroduced its Orly Breathable Treatment + Color nail polish collection and launched the Orly GelFX Builder in a Bottle as part of its “Strength in Color” campaign.

The Orly Breathable Treatment + Color nail polish was first launched in 2017 to the professional market. It has been relaunched this year to the general public.

“We wanted to educate the general public on the innovative healthy benefits of Orly Breathable as we are promoting Orly as a safe option for the market as it is vegan, free of harmful chemicals, and an all-in-one healthy product (treatment and color in one),” wrote Frances Abayari, brand manager of Sprint Asia Logistics Inc., which is Orly’s official distributor, in an e-mail to BusinessWorld. 

The Orly Breathable Treatment + Color nail polish is made with a permeable formula which hydrates and promotes nail growth. It is also claimed to prevent chipping and peeling. It is Infused with argan oil, pro-vitamin B5, and vitamin C. No base coat and topcoat are necessary as it functions as an all-in-one product.

Its ingredients are also Halal Certified by the Islamic Society of Washington Area (ISWA).

The brand also introduced the Orly GelFX Builder in a Bottle, “a soak-off sculpting gel for nail extensions” as one of the latest innovations in the nail care industry.

Ms. Abayari described that it “applies like a soft gel, wears like a hard gel, and soaks-off when ready to remove.”

It instantly extends short nails and can be used to apply nail art. The Orly GelFX Builder in a Bottle is set for release in the Philippines by the fourth quarter.

Activities for the professional market and the public will also be held in line with the campaign.

“We have road shows nationwide promoting all product categories having all Orly services available in most salons. We have regular retail promotions to reach end consumers as well,” Ms. Abayari added.

Orly Products are available at Pure Beauty branches, ZALORA, Watsons, Landmark, Robinsons, Cash & Carry, ICM, PCX, Lazada, and BeautyMNL. — Michelle Anne P. Soliman

Absolut Distillers sets P1.3-B expansion plan

By Victor V. Saulon, Sub-editor
ABSOLUT Distillers, Inc. (ADI) announced a P1.3-billion expansion plan for the next two to three years covering investments in at least 10 megawatts (MW) of renewable energy and a capacity increase for bioethanol production.
Gerardo T. Tee, ADI chief operating officer and head of distillery operations, said he would like the projects to be completed by 2021 or as soon as possible.
“I’d like to rush it by 2020 kung sabay-sabay namin gagawin (if we will do them all at the same time),” he told reporters during a tour of the company’s facility in Lian, Batangas on Friday.
“This is about Bong’s intention to further improve our renewable energy capacity,” he said, referring to Lucio “Bong” K. Tan, Jr., president and chief operating officer of Tanduay Distillers, Inc., the parent firm of ADI.
The renewable energy projects are broken down into a 3.5-MW biomass plant, a 3.5-MW waste-to-energy facility, and 3-MW of solar power projects to add to its existing 2-MW solar farm.
“Our priority is a P700-million investment in a mill that would include a 3.5-MW biomass plant,” Mr. Tee said.
Mr. Tee was referring to a sugarcane mill that will produce molasses, the raw material for bioethanol production. Its by-product, bagasse, can be used to generate energy. The mill will create another market for sugarcane farmers who supply to a lone mill in the area.
ADI is investing around P100 million for its bioethanol expansion that will increase production capacity to 150,000 liters from 115,000 liters per day.
The solar energy expansion — a combination of solar rooftop and ground-mounted solar panels — may be ramped up to as high as 5 MW, although 3 MW is ADI’s “threshold” as it approximates the facility’s energy consumption of around 3.5 MW, he said.
Mr. Tee placed the cost of the solar expansion at $1.3 million to $1.4 million per MW, or up to P350 million for 5 MW.
ADI’s existing bioethanol facility has a digester, an equipment that produces methane gas which is fed to its wastewater to metabolize bacteria and reduce pollution. The resulting organic waste has a potential for biogas that can be used to produce energy. A biogas waste-to-energy system is part of the expansion plan, Mr. Tee said.
“That’s another $3 million,” he said, converting the cost at P150 million in the local currency.
The ADI chief said the cane mill and the biomass facility should be completed by 2019, while the solar and waste-to-energy projects by 2020, at the earliest.
Mr. Tee expects financing for the projects to be sourced 70% from banks and 30% from internally generated funds.
“We have been acquiring land within our area of operations as we prepare to expand our investment in renewal energy,” he said.
The existing bioethanol facility stands on a 16-hectare property, while the expansion projects will be built on newly acquired land of around 24 hectares. ADI is negotiating to acquire more land in the area.

Product review: Orly Breathable Treatment + Color

AS A nail polish formulated as a one-step system, Orly Breathable Treatment + Color saves one the hassle of having to apply several coats of different polishes as it can be used as both base and top coat.

During the product launch in Pasig City on Aug. 8, BusinessWorld was given six colors — a variety of light to dark shades of pink and purple.

For a week, this writer tried Nail Superfood, a bright watermelon hue (which appeared orange under yellow lighting). To test its longevity, I applied two coats of the polish as is (with no base and top coat) on my left hand, while on my right, I applied a separate base and top coat along with two coats of the polish.

The color dried after 10 minutes.

I was impressed that the color did not smudge or get any lines after the first evening I had it on, unlike other brands I have used regardless of color.

By the middle of the week, I noticed that the polish on the tips of my left index and middle fingers began to chip off while the polish on my right hand remained sturdy. I did not perform any tedious task with my hands that would affect the polish longevity, except probably washing my socks daily after arriving home.

At the end of the week, I played a bit of classical guitar, alternating my left and right hand to strum on the strings. After 15 minutes, I checked my nails, but saw no changes.

When I finally removed the polish, the fingers on both hands did not look pale and it was not obvious that I just had nail polish on.

Overall, I have to say that it did not quite live up to my expectation of not needing to apply base and top coat, as I hoped that the polish would stay unchipped for two weeks.

For those who wish to try it for themselves, I would suggest applying three coats of polish and wear it for more than a week to see how long it can last without peeling or chipping off. — Michelle Anne P. Soliman

T-bill, T-bond rates seen sideways

RATES of Treasury bills and bonds will likely move sideways. — KARL ANGELO N. VIDAL

YIELDS ON government securities on offer this week will likely move sideways as demand is expected to pick up amid excess liquidity in the market as inflation expectations start to “taper off.”
The Bureau of the Treasury (BTr) is offering P15 billion worth of Treasury bills (T-bill) tomorrow. Broken down, the Treasury plans to raise P4 billion and P5 billion through the three-and six-month papers, respectively, and another P6 billion in one-year T-bills.
The government will also raise P15 billion via reissued three-year Treasury bonds (T-bond) with a remaining life of two years and five months on Wednesday.
Bond traders interviewed last week said rates on the T-bills on offer on Tuesday will likely move sideways from the previous auction.
The Treasury fully awarded the T-bills it auctioned off last week, borrowing P15 billion as planned versus total tenders totalling P43.1 billion.
At that auction, rates of the three-month, six-month and one-year papers declined to 3.203%, 4.064% and 4.869%, respectively.
On Friday, at the secondary market, yields on the 91-day, 182-day and 364-day papers ended at 3.65%, 4.0414% and 4.8301% respectively.
The trader added that the three-year bond auction on Wednesday could fetch a higher rate from the previous auction.
“For the T-bonds, the rate would be around 5.05% to 5.15%,” the trader said.
In May, the BTr made a full award of reissued three-year T-bonds, borrowing P10 billion out of the P19.424 billion tendered by investors.
The three-year papers fetched an average rate of 4.703%, up from the 4.632% fetched when the papers were sold in April.
“Our forecast is 4.9-5.1% as we see inflation expectations in the next few months is starting to taper off (lower),” another bond trader said in a text message.
At the secondary market on Friday, the three-year debt papers were quoted at 5.2946%.
The Bangko Sentral ng Pilipinas (BSP) said inflation will likely peak in August or September before eventually slowing down to the 2-4% target band by next year.
“Latest baseline forecasts have shifted higher over the policy horizon, suggesting that inflation will remain elevated in 2018 with the peak occurring sometime in the third quarter, and will revert to the inflation target of 2-4% in 2019,” BSP Governor Nestor A. Espenilla, Jr. said in a speech in Makati City on Aug. 14.
Last month, headline inflation accelerated to a multiyear high of 5.7%, averaging 4.5% as of end-July. Both prints are well above the higher end of the government’s target.
In response, the monetary authority fired off its strongest response in a decade, raising benchmark rates by 50 basis points earlier this month.
The trader added that the market is “still very liquid” due to the maturities the Treasury paid off recently.
The Treasury unleashed P91 billion into the financial system last week as it paid maturing debts.
The first trader noted that strong demand continues to be seen in the short end as rate hike expectations from the BSP as well as the US Federal Reserve were already priced in.
The US central bank’s Federal Open Market Committee opted to leave policy rates unchanged during its August meeting. However, the central bank is widely expected to tighten its benchmark rates next month.
In the minutes of the meeting, the participants generally expected further gradual hikes as many officials said it would likely “soon” be appropriate to raise benchmark rates.
The Treasury is raising P300 billion from the domestic market this quarter through auctions of securities, offering P195 billion in T-bills and another P105 billion in T-bonds.
The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — Karl Angelo N. Vidal

Coca-Cola FEMSA’s sale of PHL operations ‘credit positive’ — Moody’s

COCA-COLA FEMSA S.A.B. de C.V.’s decision to sell its stake in bottling operations in the Philippines has been deemed a credit positive by Moody’s Investors Service, as the proceeds are expected to be used to reduce the company’s debt.
Earlier this month, Coca-Cola FEMSA said it is selling its controlling stake in its Philippine unit, Coca-Cola FEMSA Philippines, to the Coca-Cola Co., which will take over operations via Bottling Investments Group (BIG).
Coca-Cola FEMSA estimated the transaction to yield an enterprise value of $700 million, in line with the $688.5 million it paid for the stake in 2013.
“Considering that the company will use at least part of the proceeds to reduce debt, the sale is credit positive for (Coca-Cola FEMSA) because it further supports its plan to de-lever. If (Coca-Cola FEMSA) fully uses the proceeds to reduce debt, the company’s adjusted total debt/ EBITDA would decline on a pro forma basis to 2.0x from 2.5x as of the end of June 2018,” Moody’s Investors Service said in an August 23 Credit Outlook report.
Last year, Coca-Cola FEMSA issued 10 billion Mexican pesos ($520 million) in local notes to pre-fund the $445 million maturity of a Yankee note slated mature in November 2018. Additional debt payments include $500 million due in February 2020 and $900 million due in November 2023, both of which relate to the Yankee bond.
“If (Coca-Cola FEMSA) does not use the proceeds to reduce leverage, at least partially, Moody’s-adjusted leverage will remain close to 2.4 times at year-end 2018 because of additional debt incurred to fund acquisitions in Guatemala and Uruguay,” Moody’s said.
“Also affecting (Coca-Cola FEMSA) credit metrics will be the sale of the Philippines operation and sharp depreciations of Brazil’s and Argentina’s currencies. Although leverage would be higher than our expectation, (Coca-Cola FEMSA’s) already-strong liquidity would be enhanced,” it added.
As of end-June 2018, the company’s cash on hand stood at 23.5 billion Mexican pesos ($1.2 billion) which covers two times its short-term debt.
Coca-Cola FEMSA’s exit from the Philippines is attributed to the excise tax on sweetened beverages implemented at the beginning of the year. The country imposed a P6 per liter tax on beverages with sugar or noncaloric sweeteners and a P12 per liter tax on drinks containing high fructose corn syrup.
“The Philippines’ strong economic growth, which has averaged 6% annually over the past 10 years, has allowed the demand for products subject to excise duties to be somewhat inelastic. However, the materiality of the change, coupled with the low purchasing power of the population (less than $3,000 GDP per capita), has severely affected (Coca-Cola’s) volumes and profitability,” Moody’s said.
The debt watcher noted Coca-Cola FEMSA’s output in the Philippines during the first six months of the year dropped 5.8% from a year ago while its operating income declined 44% year on year. The Philippines accounted for some 13% of its consolidated revenue and 7.5% of its earnings before interest, taxes and amortization (EBITA).
“Therefore, we estimate that on a pro forma basis, (Coca-Cola FEMSA’s) EBITA margins will improve to close to 15.2% from 13.8% for the last 12 months that ended in June 2018,” Moody’s said.
The debt watcher also flagged a “more adverse” business climate for the soft drinks companies, as more countries are imposing taxes on sugar-sweetened beverages. After the Philippines, the United Kingdom, Peru and Ecuador are also slapping taxes on soft drinks.
“This means that innovation and product diversity will remain key factors when assessing credit risk in this industry,” Moody’s said.
“Despite (Coca-Cola FEMSA’s) exit from the Philippines, management made clear that it will continue to pursue expansion opportunities, including in Asia, and we expect the company to do so prudently,” it added. — Janina C. Lim

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