A READER of The Manila Times, who identified himself only as “investor guy,” reacted to a recent Due Diligencer piece titled “SMC shares at P88 disappoint investors.” He wrote: “ If you held SMC shares since November last year, you would have also been entitled to property dividend of Top Frontier shares every 10 shares = 1TFHI share which is equivalent to around P12.80 dividend per SMC share (based on P127 per share price of TFHI). I’m sure Henry Sy is not disappointed in that.”
Apparently, investor guy was already satisfied with having received that much in property dividends if he, like Mr. Sy, was also a stockholder of San Miguel Corp. If both of them sold their property dividends at Top Frontier’s listing price of P178 per share, they would have been the luckiest stockholders, because the stock’s price fell 44.4 percent to P98.95 at the close of trading on Jan. 13, 2014. What a drastic fall!
Due Diligencer did some computations and arrived at the following theoretical results: Had SMC sold and not distributed its 240.2 million Top Frontier shares as property dividend, it would have grossed P42.7 billion at P178 per TF share; P30.5 billion at P127 per TF share; and P23.8 billion at P98.95 per TF share.
By the way, in an ownership filing, Top Frontier last listed Sysmart as owner of 345,700 shares under the heading “Top 20 stockholders 2013.” Based on investor guy’s computation, Sysmart could have ended up owning said TF shares when SMC distributed 240.2 million shares as property dividends. (Was the listing correct? SMC distributed its TF shares as property dividends only in January this year.)
Since investor guy seems to be more interested in SMC than the market itself, here are some questions that he could probably answer: Why did SMC choose to distribute its TF shares instead of selling them to interested parties who may want to become indirect stockholders of San Miguel? The buyer or buyers would have controlled Top Frontier to the extent of 72.1 percent of 332.9 million outstanding shares, or 49 percent of 490.2 million issued shares including 157.3 million treasury shares.
In turn, the new owners of SMC-owned TF shares would indirectly own 72.1 percent of 1.3 billion SMC shares, or 56.6 percent, held by Top Frontier. Their 72.1 percent ownership in Top Frontier would be equivalent to 971.9 million SMC shares, which would be equivalent to about 40.9 percent.
The second question: Why did SMC sell its 305.7 million shares, or 27.1 percent, in Manila Electric Co.? Why did it not please its stockholders by distributing said Meralco shares to the loyal stockholders of San Miguel instead of selling them to JG Summit Inc. owned by businessman John Gokongwei Jr.? The sale grossed San Miguel group P71.8 billon at P235 per share, perhaps too big an amount to simply give away to its stockholders.
With SMC undertaking a major expansion into such industries as mining, highways and rail transit, should its shares trade below P80? If not, then why does it remain at P77 or even lower, when many years ago it used to be one of the market’s most active stocks and one of the most profitable companies, two factors that made San Miguel one of the market’s top performers?
Finally, based on postings on the PSE website, both SMC and Top Frontier must be eyeing the reissuance of their treasury shares. If not, why should they keep them as an entry under equity in their financial filings if they won’t reissue them to raise more money from the public?