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SMDC HPI
Source: COL estimates
Before 47.20% 0%
# of SMPH shares for SMDC # of SMPH shares for HPI Total number of SMPH to be exchanged
Source: COL estimates
Before 7,114.8
After 5,095.7
Step 2: SMPH issues new shares to acquire SM Land After consolidating SMDC and HP under SM Land, SMPH will issue 14.34 Bil new shares to acquire 100% of SM Land. From its current outstanding shares of 17.27 Bil, SMPH will increase outstanding shares to 26.64 Bil. Note that SM Land still owned 5.01 Bil shares of SMPH after step 1 of the transaction, and these shares will be put under treasury shares. Step 3: SMPH issues new shares to acquire SMICs other property assets Finally, SMPH will issue another 1.55 Bil new shares to consolidate other property assets held by SMIC and the Sy Family. Companies to be acquired are Tagaytay Resort Development Corp, SM Hotels and Conventions Corp, SM Arena Complex Corp., Costa Del Hamilo Inc.
RICHARD LAEDA, CFA r i c h a r d . l a n e d a @ co l fi n a n ci a l .co m
After all the transactions, SMPH will have increased its total issued shares to 33.3 Bil while outstanding shares (net of treasury shares) will be around 28.2 Bil. Consolidated revenues of the new company for FY12 is around Php57.4 Bil with a net income of Php16.34 Bil. Net debt-to-equity would drop from 0.60X to 0.42X
Exhibit 4. Summary of changes to SMPH due to merger (data as of FY12)
in Php Mil
Authorized capital stock Issued shares Treasury shares Shares outstanding Revenues Net Income to shareholders EPS (in Php) Net Debt-to-equity ratio (X) ROE
Source: COL estimates
After 40,000 33,307 5,115 28,192 57,399 16,337 0.579 0.42 10.99%
SMPH
COMPANY UPDATE
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The merged company is expected to have a market capitalization of around US$12 Bil. With a much larger market cap, the company would be able to take advantage of more financing options. Note that with the exception of SMPH, the funding options of the individual companies are limited due to their size. The company will also be able to capitalize on its size operationally and create value through its scale and synergies.
SMPH
COMPANY UPDATE
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BUY
Stocks that have a BUY rating have attractive fundamentals and valuations, based on our analysis. We expect the share price to outperform the market in the next six to twelve months.
HOLD
Stocks that have a HOLD rating have either 1.) attractive fundamentals but expensive valuations; 2.) attractive valuations but near term earnings outlook might be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely inline or underperform the market in the next six to twelve months.
SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to twelve months.
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SMPH
COMPANY UPDATE
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