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Mythical guitar-maker Gibson fighting for survival

San Francisco — World-famous guitar maker Gibson, whose instruments have been played by the likes of John Lennon and Elvis Presley, is facing serious financial problems that threaten its very existence.

The mythical company — in Nashville, Tennessee since 1894 — on Monday brought in a new financial director, Benson Woo, to try to rescue the ailing group.

Gibson Brands, which also sells audio systems for both professionals and the general public, is working with an investment bank to set up a debt refinancing plan, the company said in a statement.

The group has a $375 million debt payment due in early August, the Nashville Post reported.

“While the musical instrument and pro audio segments have been profitable and growing, they are still below the level of success we saw several years ago,” CEO Henry Juszkiewicz said in the statement.

He said the company, as part of a broad review of its business strategy, was continuing to streamline its Philips brand consumer audio business while eliminating some underperforming products.

He said Gibson expects this strategy will lead “to the best financial results the company has seen in its history within the next year,” with full repayment of company debt “within several years.”

Gibson produces one of the most prestigious guitar models in the world, the Les Paul.

Among the stars who have played Gibson instruments are the bluesman B.B. King, the Rolling Stone Keith Richards and Jimmy Page of Led Zeppelin. — AFP

Asian stocks fall; dollar rises with bond yields

Most Asian equity benchmarks declined with US futures and the dollar rose as Treasury yields climbed back toward recent four-year highs.

Japan’s Topix index dropped after staging its second-best performance this year, while shares in Australia and South Korea also fell, taking their cue from European markets as US equities and Treasuries took a break for the Presidents’ Day holiday. The MSCI Asia Pacific Index declined. Hong Kong shares bucked the trend, climbing after traders returned to their desks after a holiday.

Investor focus now turns to the US Treasury, which opens its auction floodgates this week, beginning with $151 billion of short-term bills on Tuesday. With little in the way of significant economic data on the schedule, the sales will provide the clearest gauge yet of how steeply bond yields may rise in the world’s largest economy. Traders will also be parsing minutes from the Federal Reserve’s latest meeting.

Bank of Japan Governor Haruhiko Kuroda did not discuss monetary policy during an appearance in parliament. Speculation has been swirling about the possibility the BOJ is scaling back its stimulus since the central bank reduced its purchases of government bonds in January.

Elsewhere, oil climbed above $62 a barrel for the first time in more than a week as an alliance of some of the world’s largest oil producers signaled further cooperation to tighten supplies through the end of the year. Bitcoin broke above $11,000.

Here are some key events scheduled for this week:

The Federal Reserve will release minutes on Wednesday of its Jan. 30-31 meeting, Janet Yellen’s last as chair, where officials kept the rate unchanged. Fed policy makers speaking this week include New York Fed President William Dudley and Atlanta Fed President Raphael Bostic. Cleveland Fed President Loretta Mester is among speakers at the U.S. Monetary Policy Forum in New York City. Companies announcing earnings this week include: Walmart, Home Depot, HSBC, BHP Billiton, Glencore, Barclays. Chinese markets reopen on Thursday.

These are the main moves in markets:

Stocks
The Topix fell 1% as of 12:13 p.m. in Tokyo. Japan’s Nikkei 225 Stock Average declined 1.2%. Australia’s S&P/ASX 200 Index fell 0.1%. South Korea’s Kospi index was down 0.7%. The Hang Seng Index in Hong Kong rose 0.6%. Futures on the S&P 500 lost 0.1%. The MSCI Asia Pacific Index fell 0.5%.

Currencies
The Bloomberg Dollar Spot Index was up 0.2%. The euro declined 0.2% to $1.2388. The yen fell 0.1% to 106.74 per dollar.

Bonds
The yield on 10-year U.S. Treasuries climbed two basis points to 2.90%. Australia’s 10-year yield rose two basis points to 2.91%.

Commodities
West Texas Intermediate crude rose 1% to $62.29 a barrel. Gold fell 0.3% to $1,341.99 an ounce. — Bloomberg

Asia debt binge to dampen growth but not derail It, Oxford says

Asia’s soaring levels of debt will weigh on growth over the next decade — especially in China, Malaysia, Thailand and India — but it won’t be enough to derail the region’s economy.

That’s because of mitigating factors such as high domestic savings and resilient supply side dynamics, according to Priyanka Kishore, lead Asia economist at Oxford Economics Ltd. in Singapore.

“These should act as substantial buffers,” Kishore wrote in a note. “Even with growth slowing to 3.5% by 2030 (from around 5% currently), we expect Asia to remain the largest contributor to global growth in the long run.”

Oxford forecasts that in the long run, the debt of households and non-financial companies will remain above 100% of gross domestic product in most Asian economies, excluding Japan.

Noting that conventional analysis indicates this should weigh on growth, Kishore said country specific factors such as the distribution of private sector leverage by assets/income level found that China, Malaysia and Thailand, and India to a lesser extent, stand out as vulnerable to debt-induced spending cutbacks.

But Asia will still remain the world’s growth engine, Kishore wrote. — Bloomberg

Draft terms for 3rd telco player out

THE GOVERNMENT’s bid to improve telecommunications services in the country has taken a step forward with the Department of Information and Communications Technology’s (DICT) release on Monday of draft criteria for selecting the third major service provider.

The draft joint memorandum circular — to be issued by the Department of Finance (DoF), DICT, National Security Council and the National Telecommunications Commission (NTC) — that was posted on the DICT’s Web site provided that the prospective third player:

• should have a net worth of at least P10 billion;

• should prove, in the case of a consortium, that it has the capacity to raise equity from potential consortium members to enable it to have a net worth of at least P10 billion;

• by itself, “or at least one of the members of the consortium,” should have “proven technical capability” to provide telecommunications services;

• has a congressional franchise — or if a consortium, Filipinos must have at least 60% in the group with at least one of the members holding such a franchise;

• is not related to any telecom group with mobile and broadband wireless market share of at least 40% — in reference to PLDT, Inc. and Globe Telecom, Inc.; and

• should not have any “bidder’s liabilities,” defined as “uncontested obligations” to the NTC as of Jan. 31, including supervision and regulation fees, spectrum user fees, penalties, surcharges and interest.

Once chosen, the third major telecommunications player should also have a 70:30 maximum debt-to-equity ratio; will have to post a performance bond equivalent to one-half of one percent, or 0.005%, of investment committed for the first five years of operation; and will have to deposit at least 30% of the committed investment for the first year with a government financial institution specified by the Finance department within 30 days of the award, among others.

The new player should also submit its rollout plan within 15 days from date of award, start commercial operations by the 12th month from such date and cover at least 80% of provincial capital cities and towns and 80% of chartered cities within five years.

The DICT will present the draft to stakeholders in a Feb. 27 consultation at Novotel Manila, Araneta Center in Quezon City. The department said it expects “at least 300 participants” in that event “to provide inputs on the draft MC before it will be finalized and take effect…” Another consultation will be held on March 6 at the NTC Building along BIR Road in Diliman, Quezon City.

DICT Officer-in-Charge-Secretary Eliseo M. Rio, Jr. said last week that the department aims to issue the final joint memorandum circular on March 21 with April 5 as effectivity date, hold the auction on May 18 and announce the winner that same month.

With this tentative timetable, the DICT hopes to give interested parties more time to prepare, despite President Rodrigo R. Duterte’s order to have the third player selected by next month.

Interested companies include NOW Corp., Philippine Telegraph and Telephone Corp. and Converge ICT Solutions, Inc., among others. Mr. Rio said by phone yesterday that over 30 companies have congressional franchises.

“The third player will have to shell out big to be able to compete with Globe and PLDT,” Jervin S. de Celis, equities trader at Timson Securities, Inc., said in a mobile phone message. “It will be capital-intensive, so raising cash through issuance of debt or additional shares in the open market may help the potential player raise additional funds.”

For Luis A. Limlingan, managing director at Regina Capital Development Corp., interested parties also face time constraints. “The drafts will definitely narrow the third player if ever to a few suspects, if you look at some of the terms such as the 60:40 ownership rule, no bidders liabilities, a net worth of at least P10 billion, must have a congressional franchise, etc…,” Mr. Limlingan said in separate text. “My main concern is the timing issue because proposals need to be sent in a few months. Perhaps some potential players may find this a huge obstacle as they could be seeking a foreign partner.” — Patrizia Paola C. Marcelo

Jan. external payment balance back in deficit

THE COUNTRY’s balance of payments (BoP) position reverted to a deficit in January amid bigger outflows due to debt payments and as the central bank smoothed out foreign currency swings.

The Philippines posted a $531-million BoP deficit last month, a reversal from December’s $917-million surplus and widening from the $9-million deficit logged in January 2017, the Bangko Sentral ng Pilipinas (BSP) reported late on Monday.

“Outflows in January 2018 stemmed mainly from foreign exchange operations of the BSP and payments made by the national government for its maturing foreign exchange obligations,” the central bank said in a statement.

The BoP measures the country’s transactions with the rest of the world at a given time. A deficit means more funds left the economy than what went in, while a surplus shows that more money entered the Philippines.

Outbound funds were partially offset by foreign currency deposits of the national government, as well as a steady stream of income from the central bank’s offshore investments.

These were also the reasons cited by the central bank in explaining the decline in gross international reserves in January to $81.2 billion from $81.57 billion the month before.

Economists have pointed out that the widening current account deficit, which makes up the bulk of the country’s BoP position, has been affecting market sentiment towards the Philippines.

BSP officials, however, said that the current account deficit is unavoidable due to increased public spending and investments led by the government, with the goal of boosting economic growth to as fast as 7-8% from last year’s 6.7%, 2016’s 6.9% and the 6.2% average in 2010-2015.

In 2017, the BoP settled at an $863-million deficit, better than the $1.4-billion gap expected by the central bank but wider than the $400 million shortfall posted a year prior.

The BSP expects a $1-billion BoP deficit this year, with improved foreign investment flows expected to offset the impact of higher importations as domestic economic activity remains upbeat. — Melissa Luz T. Lopez

Monetary policy ‘too loose’ after cut in bank reserves

By Melissa Luz T. Lopez
Senior Reporter

A CUT in bank reserves introduced by the central bank last week needs to be followed by higher interest rates, an analyst said, as keeping an “ultra-loose” monetary policy would leave the peso too weak and the economy closer to overheating.

Peter Lundgreen, founding chief executive officer at Lundgreen’s Capital, said the decision of the Bangko Sentral ng Pilipinas (BSP) to cut reserve levels bolsters the case for a rate hike as soon as possible.

“The risk is that the central bank is running a too loose monetary policy — it’s the biggest threat to the economy,” Mr. Lundgreen said in an interview in Makati City yesterday.

“As bullish as I have been (towards the economy), there is an extreme risk for overheating and I view that the central bank is way behind the curve in hiking rates.”

[WATCH: HOW LONG CAN THE BSP PUT OFF A RATE HIKE?]

The BSP on Thursday announced a one percentage point cut in the 20% reserve requirement ratio (RRR) imposed on universal and commercial banks, even as monetary authorities described the move as just an “operational” adjustment in support of a government agenda to deepen the local debt market.

The change allows the central bank to focus on “auction-based” instruments in influencing market rates rather than relying on bank reserve levels, as banks have abundant money supply.

By March 2, big banks need to hold on to 19% of total deposits as reserves from 20% previously.

The RRR cut is estimated to unlock about P90 billion of idle funds, which the central bank expects to shore up through its weekly term deposit auctions and via placements in its overnight deposit facility.

BSP Managing Director Francisco G. Dakila, Jr. noted that the central bank can now rely better on the weekly term deposit auctions to influence market rates and can deploy other macroprudential and risk management measures to contain the bank reserve requirement cut’s potential impact on inflation and credit growth.

“This has been communicated already and the central bank made fine work in the guidance of the market on this… But it is actually making monetary policy even loose. It calls for even more rate hikes as a counter measure,” Mr. Lundgreen said of the RRR.

Domestic liquidity expanded by 11.9% in December to P10.6 trillion while bank lending surged by 19%, according to latest available central bank data.

Mr. Lundgreen said the BSP is behind the curve by at least two rate increases, which he believes should have been introduced in 2017.

The monetary authority last hiked benchmark borrowing rates in September 2014. In June 2016, it introduced operational cuts to policy rates in making the shift towards an interest rate corridor, leaving rates within the 2.5-3.5% range.

Mr. Lundgreen likewise warned that the additional liquidity raises concern as to whether this will be used productively.

“It frees up lending capacity among banks. It is extremely critical if this lending capacity ends up financing government infrastructure investments,” the Denmark-based investment advisor said.

Loose monetary policy would likewise drive the further depreciation of the peso, which yesterday plunged to P52.34 versus the dollar, its weakest in nearly 12 years.

‘CONFUSING THE MARKET’
In a separate report, Credit Suisse analyst Michael Wan pointed out that the BSP’s reserve cut “risks confusing the market,” as it came at a time of robust credit growth, a wider current account deficit and a spike in commodity prices.

“Ultimately, we think real interest rates could be too low for an economy growing at 9-10% in nominal terms,” Mr. Wan said in a commentary released yesterday.

“With the BSP remaining dovish in its statements so far with no decisive shift to raising rates yet, we see space for the currency to continue underperforming the region.”

Central bank officials have said that they will remain data-dependent in their policy moves, but assured that they stand ready to tweak rates to respond to emerging risks particularly as inflation is expected to remain elevated in the coming months.

US, Japan, India, Australia in talks to establish alternative to China’s Belt and Road Initiative

SYDNEY — Australia, the United States, India and Japan are talking about establishing a joint regional infrastructure scheme as an alternative to China’s multibillion-dollar Belt and Road Initiative in an attempt to counter Beijing’s spreading influence, the Australian Financial Review reported on Monday, citing a senior US official.

The unnamed official was quoted as saying the plan involving the four regional partners was still “nascent” and “won’t be ripe enough to be announced’ during Australian Prime Minister Turnbull’s visit to the United States later this week.

The official said, however, that the project was on the agenda for Mr. Turnbull’s talks with US President Donald Trump during that trip and was being seriously discussed.

The source added that the preferred terminology was to call the plan an “alternative” to China’s Belt and Road Initiative, rather than a “rival.”

“No one is saying China should not build infrastructure,” the official was quoted as saying.

“China might build a port which, on its own is not economically viable. We could make it economically viable by building a road or rail line linking that port.”

Representatives for Mr. Turnbull, Foreign Minister Julie Bishop and Trade Minister Steven Ciobo did not immediately respond to requests for comment.

Japanese Chief Cabinet Secretary Yoshihide Suga, asked at a news conference about the report of four-way cooperation, said Japan, the United States, Australia, and Japan, Australia and India regularly exchanged views on issues of common interest.

“It is not the case that this is to counter China’s Belt and Road,” he said.

Japan, meanwhile, plans to use its official development assistance (ODA) to promote a broader “Free and Open Indo-Pacific Strategy” including “high-quality infrastructure”, according to a summary draft of its 2017 white paper on ODA.

The Indo-Pacific strategy has been endorsed by Washington and is also seen as a counter to the Belt and Road Initiative.

First mentioned during a speech by Chinese President Xi Jinping’s to university students in Kazakhstan in 2013, China’s Belt and Road plan is a vehicle for the Asian country to take a greater role on the international stage by funding and building global transport and trade links in more than 60 countries.

Mr. Xi has heavily promoted the initiative, inviting world leaders to Beijing in May last year for an inaugural summit at which he pledged $124 billion in funding for the plan, and enshrining it into the ruling Communist Party’s constitution in October.

Local Chinese governments as well as state and private firms have rushed to offer support by investing overseas and making loans.

In January, Beijing outlined its ambitions to extend the initiative to the Arctic by developing shipping lanes opened up by global warming, forming a “Polar Silk Road”.

The United States, Japan, India and Australia have recently revived four-way talks to deepen security cooperation and coordinate alternatives for regional infrastructure financing to that offered by China.

The so-called Quad to discuss and cooperate on security first met as an initiative a decade ago — much to the annoyance of China, which saw it as an attempt by regional democracies to contain its advances. The quartet held talks in Manila on the sidelines of the November Association of Southeast Asian Nations and East Asia Summits. — Reuters

Duterte: Chinese bases on disputed sea were built as shield from possible US attack

By Arjay L. Balinbin

BEIJING’S military bases in the disputed South China Sea were built to defend China against any attack by the United States, President Rodrigo R. Duterte said.

“The Chinese bases are not intended for us. The contending ideological powers of the world or the geopolitics has greatly changed. [The bases] are really intended against those who the Chinese think would destroy them, and that is America,” Mr. Duterte said during his speech at the 20th Founding Anniversary Celebration of the Chinese Filipino-Business Club on Monday evening, Feb. 19.

According to the President, the Philippines is not part of the conflict between China and the US.

”Then why would I go there with my navy, soldiers, police and everything? We will be slaughtered,” he said. “I will not commit the lives of the Filipinos only to die unnecessarily. I will not go into a battle which I can never win.”

Despite that, the President said his administration will still assert the Philippines’ claims in the disputed sea.

“In front of Ambassador Zhao Jianhua, I tell you, we will insist. But what would be the components of our demands and our insistence? Well, we can only be diplomatic. We can only be talking on friendly and civilized terms. We cannot go there…and start waving our rifles. We cannot do that today. It is unrealistic. It cannot be true,” he said.

Responding to his critics who claim that his administration is “not doing enough” to address China’s growing militarization in the disputed waters, Mr. Duterte said: “What were they doing during their time? Why did they not start building things there… structures that China is building now?”

“Now, I admit that China is building structures and military bases. But are those intended for us? You must be joking.”

The President likewise mentioned that there is an ongoing discussion between the two countries on a possible joint exploration in the South China Sea.

“When I can talk to them, why should I fight? China is willing to talk. As a matter of fact, there are ongoing negotiations for a joint exploration. Can you beat that?”

Mr. Duterte also clarified that the Philippines is still on good terms with the US in spite of the fact that the Filipino nation “is now veering towards China.”

“Let us be very clear on this. We are on good terms with America, special terms… We maintain good relations with the US. We have this RP-US defense deal, [and] we honor it.”

With the existing US-Philippines defense alliance, Mr. Duterte noted that the Philippines cannot even “enter into another military alliance with any other country.”

“And if you look at it very closely, it would appear that there’s really a divide… The war now is on trade, not territory. That’s why I said geopolitics is always changing,” he said further.

PCC nullifies Uy-led Udenna’s takeover of 2GO shareholder

By Krista A.M. Montealegre,
National Correspondent

THE Philippine Competition Commission (PCC) nullified Udenna Corp.’s takeover of a Dutch company that owns a majority stake in Negros Navigation Co., Inc. (Nenaco), the parent company of 2GO Group, Inc., for failure to notify the antitrust body of the $120-million deal.

In an en banc decision released on Monday, the commission found Udenna’s acquisition of KGL Investment Cooperatief U.A. (KGLI) shares in KGL Investment B.V. (KGLI-BV) satisfied the P1-billion threshold, ruling that the parties should have informed the PCC of the transaction.

The deal between holding firm of businessman Dennis A. Uy and KGLI is the first to be voided by the country’s anti-trust body for non-notification. Both companies were also slapped with a penalty of P19.6 million, equivalent to 1% of the value of the merger transaction.

“The law is clear: an agreement consummated in violation of the competition law’s compulsory notification requirement shall be fined and is considered void,” the PCC said.

Under the Philippine Competition Act (PCA), parties to the merger and acquisition deals above P1 billion are prohibited from consummating their agreement until 30 days after providing notification to the commission.

The PCC launched a review of the transaction after receiving a letter complaint from Negros Holdings & Management Corp. (NHMC) in December 2016.

NHMC is owned by the Tagud family, who was locked in a court dispute with the group of Mr. Uy over the ownership of 2GO. The entry of Udenna and Sy-led SM Investments Corp. into the logistics firm prompted Sulficio Tagud, Jr. to retire both from the management and the board of 2GO last year.

At the time of the transaction, KGLI-BV owned 39.71% of KGLI-NM Holdings, Inc. (KGLI-NM), a key shareholder of Nenaco, which in turn owns 88.31% of 2GO, according to the latest regulatory filing of the listed firm.

The Udenna-KGLI deal will only be valid if the proper notification is filed with and cleared by the regulator, PCC Spokesperson Attorney Mercedes B. Torrijos said in a phone interview.

In its investigation, the PCC’s Mergers and Acquisitions Office (MAO) found that Udenna bought the entire shareholdings of KGLI-BV through a share purchase agreement dated July 28, 2016, and the deal consummated as reflected in a deed of transfer dated Aug. 19, 2016.

Udenna and KGLI initially sought to be excused from notification, claiming that the buyout satisfies the “size of person test,” but not the “size of transaction test” required under the PCA and its implementing rules and regulations (IRR).

MAO’s investigation, however, found that the transaction met the threshold based on both tests.

The PCC argued that the aggregate annual gross revenues in, into or from the Philippines, or the value of the assets in the Philippines of Udenna exceeded P1 billion at the time of the transaction. The parties also admitted that the acquisition involved the entire shareholdings or 100% of KGLI-BV.

“It’s one thing for transactions to be found as anti-competitive during the review. It’s another thing when businesses evade the legal requirement of notification in the first place,” PCC said.

“This is a reminder for companies to comply with the Philippine Competition Act, including filing a sufficient notification prior to consummation of a merger that meets the thresholds,” PCC said.

The PCC order was signed by Chairman Arsenio M. Balisacan as well as Commissioners Johannes Benjamin R. Bernabe and Amabelle C. Asuncion. Commissioner Stella Luz A. Quimbo concurred with the imposition of the administrative fine, but disagreed with the decision to void the transaction.

Ms. Quimbo noted that under the PCC’s IRR, how the void penalty will be applied, implemented and monitored in the context of the Udenna-KGLI case is debatable and the current guidelines on the void penalty and the infrastructure to implement the same are insufficient.

“The suspension of the void penalty will not set a dangerous precedent because of the specificity of the factual milieu,” Ms. Quimbo said in her dissenting opinion.

“What is dangerous is for the Commission to impose a void penalty, merely because the law ‘plainly’ requires so, without regard to the Commission’s obligation to apply the law in consonance with its legislative intent, and without regard to the current state of rules on implementing the void penalty,” she added.

In a statement, Udenna Vice-President for Corporate Affairs Adel A. Tamano said the company has “sufficient basis” to challenge the PCC decision either by filing a motion for reconsideration with the PCC, or through a petition to the Court of Appeals.

Udenna cited the argument of Ms. Quimbo that imposing the void penalty is “arguably a surplusage” since “there is no continuing direct harm to the market by the subject transaction that the void penalty needs to prevent.”

Udenna is currently weighing its options, including submitting to the PCC decision and filing a notification to the government agency.

“Udenna believes that the decision to declare the transaction void and at the same time impose a penalty of P19.7 million was unduly harsh and uncalled for, particularly considering the interest of the Udenna Group’s many stakeholders and the decision’s effect on business,” Mr. Tamano was quoted in a statement as saying.

“Udenna is confident that its acquisition of the shipping holding company remains assured considering that it has paid the agreed consideration and its counter-party is still committed to the consummation of the transaction,” Mr. Tamano said.

SM Prime recurring profit up 16%

NEW MALLS and sales of residential properties continued to drive SM Prime Holdings, Inc.’s earnings higher in 2017.

In a statement issued Monday, SM Prime said recurring profit grew 16% to P27.6 billion, after a 14% increase in consolidated revenues to P90.9 billion. The company attributed the growth to higher rental revenues from malls opened in the last two years, alongside the solid sales take-up of residential units in 2017.

Overall operating income, meanwhile, went up 15% to P40.6 billion in 2017, against the P35.3 billion posted in the previous year.

“SM Prime continues to benefit from the sustained overall economic progress of the Philippines that resulted to higher spending power for most Filipino families. This translated to consistent growth of our key businesses that include higher rental revenues of our malls, increased residential units sales and growing contribution of our other business segments,” SM Prime President Jeffrey C. Lim said in a statement.

SM Prime operates in four business units, namely malls, residential, commercial, and hotels and convention centers.

Revenues from mall operations were up 9% to P53.2 billion, while rental income gained 11% to P45.3 billion. This was fueled by rising contributions from new malls, specifically SM City San Jose del Monte, SM City Trece Martires, SM City East Ortigas, SM CDO Downtown Premier, S-Maison at Conrad Manila, SM City Puerto Princesa, and SM Center Tuguegarao Downtown.

SM Prime said same-mall sales growth, or sales derived from malls that have been open for more than a year, was consistent at 7% across all mature malls.

By the end of 2017, SM Prime had a total of 67 malls covering a gross floor area (GFA) of 8 million square meters (sq.m.) in the Philippines, and seven malls in China with a GFA of 1.3 million sq.m. Operating margins from these malls stood at 53%.

On the other hand, the residential business under SM Development Corp. (SMDC) saw revenues climb by 18% to P30 billion for the year. Operating income also increased 24% to P8.9 billion for the period. This was attributed to construction accomplishments from projects launched from 2013 to 2016, including Shore Residences and Shore 2 Residences in Pasay City, Air Residences in Makati City, and Fame Residences in Mandaluyong City.

The same projects allowed SMDC to post a 4% increase in the number of units sold for the year, to 17,259 units from 16,670 in 2016.

Reservation sales further rose 21% to P57.8 billion for the period.

Meanwhile, revenues from commercial properties grew by 12% after SM Prime opened FiveE-Com Center. Hotels and convention centers’ top-line added 49% with the opening of Conrad Manila, pushing the two segments to a combined growth of 32% to P7.9 billion in terms of revenues. Operating income from commercial and hotels and convention centers also surged 35% to P3.6 billion.

SM Prime is expanding its office space inventory at the Mall of Asia Complex in Pasay City, adding a combined GFA of 320,000 sq.m. from the opening of ThreeE-Com and FourE-Com Centers in 2018 and 2020, respectively.

The hotels and convention centers arm, meanwhile, has six hotels with more than 1,500 rooms, four convention centers, and three trade halls under its portfolio.

Shares in SM Prime gained 15 centavos or 0.42% to close at P36.25 apiece at the stock exchange on Monday. — Arra B. Francia

Dominguez backs Landbank move to acquire controlling stake in PDS

By Melissa Luz T. Lopez,
Senior Reporter

FINANCE Secretary Carlos G. Dominguez III is backing the move of the Land Bank of the Philippines (Landbank) to acquire the majority stake in the country’s fixed-income exchange, saying that the local stock market operator has taken too much time for the buyout.

Mr. Dominguez said he is keen on getting Landbank to own a majority stake at Philippine Dealing System Holdings Corp. (PDS), saying that five years is too long a time for the Philippine Stock Exchange (PSE) to carry out the acquisition, to the detriment of long-overdue capital market reforms.

“It has been five years,” the Cabinet official told reporters recently. “They (PSE) promised me then end of February, now it’s March. I’m afraid to meet them because it might be postponed again.”

“It’s very important for us… We want to develop this market — it’s not going to get developed when every time we talk to people who wants to buy it, they postpone it, so we might as well do it ourselves.”

The Landbank board approved on Jan. 23 the acquisition of at least 66.67% common shares of PDS, subject to a final offer price and timetable.

Currently, Landbank owns 1.56% of PDS through the Bankers Association of the Philippines (BAP).

The state-run bank is pursuing the buyout parallel to PSE’s own steps which started in 2013, as it eyes to merge the country’s equities and fixed income bourses. Since June last year, the PSE has signed share purchase agreements with the BAP; Whistler Technologies Services, Inc.; Investment House Association of the Philippines; The Philippine American Life and General Insurance Co.; FINEX Research and Development Foundation, Inc.; San Miguel Corp. and Tata Consulting Services Asia-Pacific Pte. Ltd., giving the PSE a 61.03% total stake in PDS.

The Philippine Competition Commission approved the agreements in November.

The Securities and Exchange Commission (SEC) initially rejected the PSE-PDS merger in 2016 after denying the local bourse’s request to be exempted from an ownership cap. Under the section 33.2 (c) of the Securities Regulation Code, the government only permits a maximum of 20% industry ownership and 5% individual ownership of an exchange.

However, SEC is allowed to grant exemptions to industries and individuals to acquire more than the law permits, provided that the control “will not negatively impact on the exchange’s ability to effectively operate in the public interest.”

Landbank is requesting a similar exemption, bank president and chief executive officer Alex V. Buenaventura has said.

Mr. Dominguez said the acquisition of PDS will “certainly move the capital market ahead,” aligned with a government-wide strategy unveiled in August 2017.

The Bangko Sentral ng Pilipinas, Bureau of the Treasury, the Department of Finance, and the SEC rolled out an 18-month road map meant to deepen the local debt market, with the goal of providing an alternative source of financing for corporates, especially for long-term borrowing for big-ticket infrastructure projects.

“We are forced to do this… It’s not a priority for us but if the private sector cannot do it and we see the need for the improvement in the capital market, we will do it,” Mr. Dominguez added.

Ayala-led Manila Water acquires stake in Thailand-based firm East Water

MANILA WATER Co. has signed a share purchase agreement to acquire an 18.72% stake in a publicly listed water supply and distribution company in Thailand, the Ayala-led company told the stock exchange on Monday.

Metro Manila’s east zone water concessionaire said the stake in Eastern Water Resources Development and Management Public Co. Ltd. is the company’s first point of entry in Thailand as part of the its expansion in Southeast Asia.

“Manila Water marks another milestone in its regional growth, as it establishes its presence in Thailand through East Water. We recognize the opportunities this new market presents for us, and we are eager to share the technical expertise and service quality which Manila Water has developed over the last twenty years,” said Fernando Zobel de Ayala, president and chief operating officer of Manila Water.

“From the conglomerate perspective, Ayala sees this development as a strategic entry point into Thailand,” he added.

Mr. Zobel de Ayala, who is also Manila Water board chairman, said with Manila Water leading the way, “we hope to leverage our various capabilities to enlarge our footprint in the country.”

Manila Water said the Thai company provides raw and tap water supply services in the eastern region of Thailand, the country’s main industrial area and home to various heavy industries, including automotive, electronics and petrochemicals.

It said East Water provides raw water supply to three provinces, holds concession contracts to operate in 11 locations, and provides water service to several industrial estates. These areas cover 13,285 square kilometers, which is almost as large as the Calabarzon, the region made up the provinces of Cavite, Laguna, Batangas, Rizal and Quezon.

Ferdinand M. dela Cruz, Manila Water president and chief executive officer said: “Our entry into the Thailand water space aligns squarely with our internationalization strategy, with focus in Southeast Asia.”

He said East Water presents “great potential” as its future growth would come from the Eastern Economic Corridor, the Thai government’s initiative to further develop the country’s eastern seaboard into a leading economic zone in the Association of Southeast Asian Nations.

Manila Water will finance the acquisition through a combination of internally generated funds and bank debt.”

The Ayala company’s foray into Thailand comes after it embarked on bulk water and concession projects in Vietnam. It also conducted pilot projects in Bandung, Indonesia for a non-revenue water reduction program and in Yangon, Myanmar for leakage reduction.

On Monday, shares in Manila Water rose 1.09% to close at P27.70 each. — Victor V. Saulon

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