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PLDT shock pulls stock market down for 2nd day
[February 08, 2006]

PLDT shock pulls stock market down for 2nd day

(Business World (Philippines) Via Thomson Dialog NewsEdge)Market heavyweight Philippine Long Distance Telephone Co. (PLDT) shares closed to its weakest level in 15 weeks yesterday, in the process pulling the stock market down for a second day.

The telecommunications firm succumbed to selling pressure as the market continued to digest reports that global financial services firm Morgan Stanley had downgraded the telecom giant to "equal-weight" after a strong rally in the company's shares over the past two years.

PLDT sloughed off 6.15% to P1,680, cornering 45.33% of market share.

Jose Vistan, Jr., research director of AB Capital Securities, Inc., said PLDT, which has the biggest weight in the index, has gone down by 11.3% since a high of P1,895 recently.

"This has created a spillover effect on the rest of the market, prompting some traders to take profits. Adding to the bearish sentiments is the strong probability that the country's outlook will not be upgraded by the credit rating agencies," he added.

The bellwether Philippine Stock Exchange composite index (Phisix) gave up 1.74%, or 36.46 points, to 2,060.92, finishing at its weakest in eight weeks. (Full story on S2/2)

Manila's equivalent of New York's Dow Jones Index, the Phisix is an aggregate measure of relative changes in the market capitalization of common stocks that provides a picture of market trends. It is composed of a basket of 30 listed common stocks selected to represent general movement of market prices.

While believing PLDT's fundamentals remain good, Morgan Stanley said there is limited room for positive surprises in the future as the mobile phone market has matured and risks that consumers may soon prefer voice over Internet protocol (VoIP) services rather than traditional telephony.

"There was panic selling due to the downgrade. The market was emotional. Almost all the foreigners are selling, especially on PLDT. This is just short-term. The market overreacted. If you look at the technical, PLDT for now has found a support at P1,680," Accord Capital Equities Wilson Chong said.

The country's leading telecommunications service provider, PLDT has a market capitalization of P323.89 billion, one of the largest among Philippine-listed companies. Its common shares are listed on the PSE and American Depositary Receipts (ADRs) are listed on the New York Stock Exchange and the Pacific Exchange.

PLDT is actively pursuing a convergence strategy through its three principal business groups - fixed line, wireless and ePLDT.

Ed Bancod, head of research for ATR Kim Eng Securities, Inc., viewed PLDT's correction as a buying opportunity.

"The slowdown in cellular subscriber take up is nothing new. While there may not be top-line surprises, PLDT could very well improve on its margins given its high operating leverage. The high proportion of its fixed cost as a percentage of total cost means any incremental sales ought to have a significant impact on the bottom line.

"We believe the stock still provides very good value on a 2006 PER (price-earnings ratio) of 10.2x against the market PER of 15x. We also estimate the net present value of PLDT's future cash flows at P2,142, 27% higher than its current price. This is based on prevailing risk-free rates, which could decline further should there be an upgrade in the country's credit rating outlook ...," he added.

PER is the valuation ratio of a company's current share price compared to its per-share earnings.

PLDT, meanwhile, yesterday remained mum on te reported Morgan Stanley downgrade.

Napoleon L. Nazareno, president and chief executive officer of PLDT and sister firms Smart Communications, Inc. and Pilipino Telephone Corp., refused to comment an ambush interview in Makati.

PLDT chairman Manuel V. Pangilinan has said the PLDT Group will beat its net profit target of P30 billion for 2005. It posted a record net of P28 billion in 2004.

PLDT Group will report its full 2005 figures on February 27.

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