• Fears and doubts on disclosures

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    Emeterio Sd. Perez

    Emeterio Sd. Perez

    REACTIONS and comments to Due Diligencer usually reach me a day or two after publication. But to receive a letter citing a piece that I wrote on May 8, 2014 made me presume that The Manila Times reader in question collects columns for a hobby.

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    Recently, I received two letters. One came from a reader who preferred not to be named, but I decided to identify him as “GF,” which stands for Great Friend. The other I decided to identify only as “DI” because I sensed him to be a “depressed investor,” having invested based on disclosures that did not happen at all.
    Really? DI really needs help from regulatory authorities. Will the officials of the Securities and Exchange Commission be willing to provide him the assistance he urgently needs?

    Following are the two letters without their names, which I decided should remain secret between them and me:

    From GF:

    “I’m writing as regards the article you wrote for The Manila Times particularly this,
    http://www.manilatimes.net/layers-of-ownerships-make-corporate-research-expensive/95078/.
    “I’m curious as to what this would entail and how reliable are the information provided by publicly listed companies that guide the investing public.

    “If you have any information as to whether it is safe to assume that publicly listed corporations are just a shell of a company or if there is a greater conspiracy involved in the ownership of Filipino companies, please shed light on it.

    “I’m only concerned about the information provided by the companies I’m researching. If there are things about them that do not add up, I’m bound to decide that these companies cannot be trusted and the public should not invest in them.”

    From DI:

    “I am writing as a holder of SBS (SBS Philippines Corp.) shares. Being an investor in listed stocks, I was enticed to invest in the company after reading the company’s disclosures last April 25 and 26 about the cash sale of their 34,263-square-meter property in Las Piñas City and 1,083- square-meter property in Bonifacio Global City, Taguig for P858,965,500 and P444.03 million, respectively.

    “The total proceeds of P1,302,995,500, according to the disclosure, were to be used to finance working capital and to pursue new investment opportunities. Thinking that such a large cash windfall will definitely help the company grow and expand into other businesses, I was convinced to put my savings on the stock.
    All was well until last August 11, 2016, when the quarterly report for the second quarter 2016 came out.
    Imagine the shock I got when I found out that virtually all the proceeds from the sale of the two aforementioned
    properties were used to pay loans as shown by the reduction in the said account from P1,042,500,000 to P25 million while the cash and cash equivalents account increased by a measly P58,652,679.
    “Where will the company get the money now to pursue new investment opportunities?

    “In the spirit of transparency and considering that SBS is a listed company, can the minority holders request from the company, more information on their loans payable account? Specifically details of loans 1, 2, 3, 4, and 5, which were all paid (except for a portion of loan 1) using the proceeds of the sale of the two properties. I would like to know if, indeed, these loans were from banks as claimed in their FS (financial statements) and how they were paid.

    “In short, two questions need answers from the management of SBS:

    “1. Why did they – referring to SBS top executives – disclose last April 25 and 26 that the proceeds from the cash sale were to be used to pursue new investment opportunities? Was there any misrepresentation on their part if an investor relied on the said statements?

    “If they mentioned that the proceeds were to be used to pay debts, which was what actually happened, then I would have avoided putting my hard earned money on the stock.

    “2. Can the company provide the minority shareholders a copy of all the documents related to the loans payable that were paid and proofs of payments?

    “This leads me to another issue which I hope the SBS chairman of can clarify. It concerns his statements which appeared in a newspaper during the listing of the company on the PSE.” (Note: Necisto Sytengco is the SBS chairman.)

    The news item quoted Sytengco as saying SBS was “very much undervalued,” pointing out that the IPO price did not take into account the value of the prime property owned by the company on Ayala Avenue in Makati, in Fort Bonifacio, in Las Piñas and on EDSA. Sytengco placed the value of the properties at P8 billion to P10 billion.

    DI continued:

    “In the said statements, there are four properties which the chairman said were worth “within the range of P8 billion to P10 billion.

    “Since the properties in Fort Bonifacio and in Las Pinas were sold for a total of only P1.3 billion, are the two remaining properties (the one in Makati and the other in EDSA) worth P7 billion to P9 billion?

    “I am planning to ask the help of the Shareholders Association of the Philippines but decided to write you first to seek your advice on this matter, as I have noticed that you covered this company in your earlier articles.”

    I thank the two readers for including Due Diligencer in their daily reading habit. I assure them that I will research on the issues they raised in their letters. Thank you for reading.

    esdperez@gmail.com

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