Activist stockholders: Phoenix stock undervalued



A GROUP of activist stockholders, led by Rommel Ablin, immediately reacted on Wednesday to Due Diligencer on Phoenix Semiconductor Philippines Corp. and the company’s financials. I am yielding this space to his group who wanted their reactions published as soon as possible.

Due Diligencer: “Despite its consistent profitability, Phoenix may be headed for some kind of internal war, a threat that may not necessarily hurt the company’s profitability.” And on “However, an email from a reader of The Manila Times suggests the Korean group and 216 Filipino stockholders may be headed for war.”

Our comments: We confirm that our Group sent an activist shareholders’ message on February 15 to the PSPC Management demanding them to do something to maximize the value of our stockholdings in the Company. You are correct also in saying that PSPC produces consistent high profitability relative to its current value and we are actually commending the Management for its strong operational execution over the past years.

It’s just that because of the undue undervaluation by the market of our stockholdings, we were forced to do an activism campaign for the Company to remind the Management that the public shareholders are the ones that are being adversely affected in the market.  Our activism campaign enumerates six things that the Management needs to do and we believe that these are beneficial to the Company.

We have pointed out in our letter that we don’t expect this to become a struggle of the Filipino minority public shareholders interest against the controlling Korean interest.  We believe that the Management will act favorably on our demands, which as we’ve said, are also beneficial to the controlling interest.

Hence, we don’t believe that our campaign will become an “internal war” or a “brewing trouble.” The use of the words “war” and “trouble” might be extreme, Sir. Although it is yet to be seen, we are still positive that the Management and the controlling interest will protect the minority public shareholders from the mispricing in the market of their PSPC stockholdings.

Due Diligencer:  “a potential takeover by a Filipino group.”

My personal opinion on this Sir, which is also shared by some members of our Group, is that any takeover by any group will be very unlikely given that STS has a strong relationship with Samsung, PSPC’s major customer.  In addition, PSPC research and development (R&D) is dependent on STS and this might cause operating difficulties for any new ownership.

And most importantly, we doubt that PSPC Management/STS will be willing to sell their shares at less than P3.76 apiece, which was the initial public offering price before it was lowered to the final IPO price of P3.15.  They might have been willing to offer the 15-percent stake of the Company at P3.15 per share to the public previously, but we are fairly positive that if ever the controlling stockholders decide to sell, the offer value would be way above the P3.76 initial offer price.

As a matter of fact, we are actually demanding a buyback by the Management of the shares that are trading below the IPO price to take advantage of the discount offered by some stockholders. Hence, instead of the Management selling its holding interest at below the IPO price, we may expect soon the Management/STS to buy back its own shares at P3.15 apiece or below.

And lastly, we take this opportunity to enumerate our so-called PSPC activist shareholders’ demands as follows:

1. Establish a stock option/compensation program based on stock performance, to align the Management’s interest with the best interest of the public shareholders;

2. Approve a one-year buyback program for a maximum of 4 percent of the outstanding shares with a budget of about $6 million;

3. Increase dividend payout to 30 percent for this year;

4. Start studying legal options for the collection of the $23 million unfunded power subsidy;

5. Require Samsung to buy in when the contract with the company is renewed; and

6. Require the prospective partner in Phase II of the expansion to also buy in shares in the company.

And we would like to point out that our demands are reasonable, very justifiable and they make good business sense. Not only the public shareholders but also the Company will benefit from these demands for they are expected to:

1. Increase shareholder value;

2. Improve management focus and alignment with public shareholders’ interest; and

3. Increase transparency between Management and public shareholders.

On a personal note, I am happy to hear from Mr. Ablin and company and thank them for reading The Manila Times. Although I am ready to accommodate them, as well as other investors, on their analysis of certain stocks, I cannot promise to help them in any of their predicaments with regard to complaints that only concerned officials of the Securities and Exchange Commission and the Philippine Stock Exchange can possibly resolve. The best I can offer them is this space, through which they can air their grievances.


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1 Comment

  1. Alson Cons Resources (ACR) is also very much undervalued at Php 1.46 fr bookvalue of Php 1.67 as of Dec 2015 It owns Sarangani Elec 1 & 2 wd 210 MW, Mapalad diesel 300 MW power plants & San Ramon 105 MW, 400 MW coal power Tampakan, 100% Alson Land Inc in Davao City & 2.42% of the entire Tampakan Gold/Power Plant one if thebiggest in the world. A new candidate for a director to ASM in May 2016 is brewing expect aproxy fight