• Know what to look for in GIS and audited reports

    Emeterio Sd. Perez

    Emeterio Sd. Perez

    IF you are a corporate researcher, you won’t be satisfied with the ownership filings of listed companies posted on the website of the Philippine Stock Exchange. Chances are, you need more than the “Public Ownership Reports” and the “List of Top 100 Stockholders” which may only be reliable in identifying the majority stockholders and some but not all minority stockholders.

    Despite the two listings, you still need to go to the Securities and Exchange Commission which, as the securities regulator, maintains the complete library on private companies, including non-stock-non-profit corporations, and their stockholders.

    As Due Diligencer wrote in the previous piece, you should be ready to spend more time and money when you do corporate research because of the layers of ownerships of holding companies, which, in turn, may also be controlled by corporate stockholders.

    Don’t think of the difficulty in trying to dig into the identities of individual owners of a corporation. Instead, learn what corporate documents the SEC keeps in its library. Compared with the pre-computerization era, you are luckier these days when documents are printed out of the SEC computers.

    Remember, your successful identification of the individuals who own more or most of a listed company would be most gratifying. And to achieve this, here are some suggestions to facilitate your research:

    Step No. 1. Get the names of significant corporate stockholders from “Top 100 Stockholders” list of listed companies you are researching. “Significant” here refers to stockholders owning at least five percent of outstanding capital.

    Step No. 2. At the SEC, get the general information (GIS) sheets of each of these corporate stockholders, which may also be units or subsidiaries of holding companies. In which case, you also have to obtain their individual GIS.

    In other words, with one GIS, you may be dealing with more corporate stockholders that can only be identified by going over their own GIS. As you go deeper in your research, you find yourself not only buried in piles of documents but spending more because you are not satisfied with your initial findings.

    Step No. 3. If you need to know the changes in the ownership of corporate stockholders, get old files. If these are not immediately available, ask SEC personnel where you can find them and you may be told that they are stored “off-sites.” This could mean only one thing: SEC is maintaining old files outside their main headquarters.

    Before following these three steps, you may also want to obtain copies of the Articles of Incorporation (AOI) of corporate stockholders you are researching. The original AOI lists the owners and incorporators while the amended AOI contains the names of their successors if the companies have changed ownerships.

    Finally, the audited annual financial statements (FS) is the most important document that should complete your research, especially if you are into corporate research as an investor on listed companies. In it, you will find the state of financial health of the company in whose shares of stock you are investing or have already invested.

    Basically, the FS tells you and the public how a company performed, say, in 2013. Did its net income improve compared with that of 2012?

    There are so many things to learn from an FS. But to the more involved but big investor, it would be better to play it safe by availing himself or herself of the assistance of professionals. It may be risky to go by the numbers alone as they are presented in an audited financial report.

    Of course, it is easy to read the net income as resulting from revenues. But how about the footnotes especially when these are contained in the consolidated reports of a holding company? In which case, you need to know which of the units or subsidiaries contributed more to the revenues and to the net profit.

    Again, you have to go to the SEC to know the financial performance of subsidiaries because the listed parent reports their contributions only in its own consolidated audited report. When you do, try also to get the units’ GIS for their complete ownership profile.

    Due Diligencer is citing the Philippine Stock Exchange as an example to illustrate its suggestion. In its 2013 consolidated financial statements audited by Punongbayan & Araullo, PSE listed as 100-percent owned units the Securities Clearing Corporation of the Philippines and Capital Markets Integrity Corp. No problem.

    Here is the problem: PSE owns 20.98 percent of Philippine Dealing Systems Holdings Corp. (PDSHC). If it is only a PDSHC stockholder, then who are the majority owners? Try finding them out and you may—again—end up dealing with thick layers of ownerships that may take you more time to study and more money to spend on SEC documents.



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