Majority owners’ secrets of profitability remain hidden

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Emeterio Sd. Perez

THE story “PSE-listed companies hit record profit in 2016” written by Angelica Ballesteros of this paper is news. It rightly deserved a prominent space in Tuesday’s Business Times because it told us about the financial performance of what are supposed to be public companies (although not all are necessarily public).

Due Diligencer need not repeat the figures in Ms. Ballesteros’s story. It is enough that her report is factual. However, for this piece, I am dissecting the “record profit” she cited in her story.

What really caused the 17.8-percent increase in the net profit of listed companies in 2016?

The question should have been addressed to the Philippine Stock Exchange (PSE) and possibly to the Securities and Exchange Commission (SEC). If Due Diligencer did, would they provide the answers that would satisfy the public’s hunger for an explanation?


What Due Diligencer is posing might be tantamount to asking the impossible. How did listed companies become more profitable in 2016 than they were in 2015 when their consolidated revenues grew only 6.6 percent (rounded off from 6.579 percent) to P7.29 trillion, from P6.84 trillion?

Computations

To use the figure in yesterday’s column by Mr. Yen Makabenta, the Philippines has a population of 104 million. Assuming Filipinos and foreigners in this country never experienced poverty, does this mean each of them availed himself or herself of P70,096 worth of goods and services provided by more than 300 listed companies?

Other computations should provide the public with a better understanding of the PSE data. Don’t you know that P683.3 billion equals 9.373 percent of the P7.29-trillion revenues of listed companies in 2016? In 2015, net profit of P580.15 billion over P6.84-trillion revenues equaled 8.482 percent.

The computations showed that listed companies scored more net profits as their revenues grew. However, their net profit slowed down in 2016 relative to 2015 despite revenue increase of 6.6 percent to P7.29 trillion.

The elite group of PSE-listed companies, meaning the stocks that make up the Philippine Stock Exchange index or PSEi, did better in 2016. As the more profitable among listed companies, “they accounted for 69.2 percent of the total market’s net profit,” according to Ms. Ballesteros’ report, which placed the amount at P472.93 billion.

Missing data

Important data are missing from the PSE report, which failed to fully inform the public about the profitability of
listed companies. Only the owners know about their businesses but would never make them public for reasons known only to them.

However, Due Diligencer can only suggest that the public investors-turned stockholders of listed companies should become more active by asking questions.

Sometimes, public investors do not know who they may be dealing with when they trade on listed stocks. Who owns what and how many shares are really available for trading? Due Diligencer also wants to know the answers, which can only come from regulators.

Public investors may be misled into believing that all common shares lodged with PCD Nominee Corp. are owned by individual investors.

No one knows this except the stockbrokers, who are trusted by the majority stockholders to keep the identities of some of them secret.

Due Diligencer’s take

This piece is not all about the refusal of the owners of listed companies to disclose their true holdings. It is more about full disclosure of the profitability of listed companies.

For instance, public ownership reports (POR) are intended to make a listed company seem more public than others.

If public investors go by disclosures posted on the PSE website, they would find these PORs incomplete.
They paint only a semblance of a company being public.

Public investors need more than PORs. They should be told about profitability.

For instance, how many among listed companies were more profitable in 2016 because of the uncontrolled increases in the prices of goods and services that they sell?

Certainly, the majority owners of listed companies would not be willing to divulge the secrets of the profitability of their businesses.

More profits mean more retained earnings, which, in turn, would translate to bigger dividends either in cash or in stocks. If they won’t, who will? Just asking.

esdperez@gmail.com

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