Market bullish on DITO after share-swap deal

INVESTORS loaded up on Dennis A. Uy-led Dito CME Holdings Corp. last week after it unveiled a P68.43-billion share-swap deal to buy an indirect stake in the telco startup Dito Telecommunity Corp.

A total of 213.85 million Dito CME shares worth P1.36 billion were traded between Nov. 9 and 11, making it the eighth most actively traded stock last week despite the trading suspension implemented by the Philippine Stock Exchange on Nov. 10 and Nov. 13 to the company as it sought further clarification on its proposed restructuring plans.

Trading was suspended on Thursday due to bad weather caused by Typhoon Ulysses.

Shares in DITO, the company’s ticker symbol, closed at P6.30 apiece of Wednesday, up 3.1% from their P6.11 finish on Nov. 6. Year-to-date, the stock’s share price has gone up by 62.4%.

“There is quite a big restructuring by Udenna Corp. with regards to their Telco and CME companies. Basically, it gave a big valuation to Dito Telecommunity Corp. that’s why the market reacted bullishly,” Mercantile Securities, Inc. Analyst Jeff Radley C. See said last week.

China Bank Securities Corp. Research Director Rastine Mackie D. Mercado noted that there was some volatility happening on Wednesday as the stock price began at P7.00, an increase of 19% from its P5.88 closing price on last Monday.

“The volatility may be partly driven by a mix of investor optimism from DITO’s forward prospects, and concerns on the potential dilutive effects of the share swap transaction,” Mr. Mercado said in an e-mail interview.

“We think that the provision of further information (relating to the transaction) to investors is positive for the market, especially as Dito Telecommunity looks to have its commercial launch by next year,” he added.

Last Tuesday, the listed holding company told the local bourse that it is buying an indirect stake in its telco startup unit Dito Telecommunity by acquiring 100% of its affiliate Udenna Communications Media and Entertainment Holdings Corp. (Udenna CME) through a share-swap deal with Udenna Corp.

Udenna CME holds the telco interests of Udenna Corp.

According to the deal, Dito CME will issue fresh 11.20 billion shares at a price ranging from P6.00 to P6.90 apiece.

The deal is still pending Securities and Exchange Commission’s approval.

Last Friday, Dito CME told the stock exchange that the share swap is priced at P6.11 apiece, bringing the total amount of the transaction to P68.43 billion.

It also told the local bourse that Chelsea Logistics and Infrastructure Holdings Corp. and Udenna Corp. transferred their combined 60% stake in Dito Telecommunity to Dito Holdings Corp., another holding company, last Nov. 11.

Prior to the share-swap deal, Udenna CME hiked its stake in Dito Holdings to 89% from 58% after subscribing to 7.38 billion Dito Holdings common shares at P1 apiece, the disclosure said.

Dito CME posted a P55.31-million net income during the first semester from a P50.29-million loss last year.

“The stock is currently suspended, but there is a strong resistance at P7.00, while support levels will be at P5.50 and P5.00,” Mr. See said.

Mr. Mercado pegged the stock’s initial support and resistance at P5.50 and P8.00, respectively. — Jobo E. Hernandez