MANILA — Land Bank of the Philippines (Landbank) started Tuesday its due diligence on planned purchase of the majority stake in the Philippine Dealing System Holdings Corp. (PDSHC).
Landbank President Alex V. Buenaventura on Monday met with officials of the Securities and Exchange Commission (SEC) in line with the bank’s plan to purchase 66.67 percent stake in PDSHC.
In a statement Tuesday, Buenaventura said he had “a very fruitful meeting” with SEC officials five days after requesting for it to discuss the exemption under Section 33.2 of Republic Act (RA) No. 8799 ,or the Securities and Regulations Code, for the government-owned financial institution’s move to acquire PDSHC shares.
He said he was able to discuss with SEC officials the procedure for applying for a Petition for Exemptive Relief.
Last January 23, the Landbank Board approved in principle Buenaventura’s proposal to buy PDSHC shares to boost the bank’s profit.”
“With the Board approval, the only thing left to do is to finish our due diligence and report to the Board,” Buenaventura said.
“We thank the SEC for accommodating our request, even on short notice. Rest assured that we will comply with all applicable laws in acquiring PDS,” he added.
The Landbank chief, in his Jan. 16, 2018 letter to the Board, said acquisition of PDSHC’s common shares would increase the bank’s profits and help “accelerate development of capital markets in the country.”
To date, the bank has a 1.56 percent stake in PDSHC “through the Bankers Association of the Philippines (BAP).
This after BAP signed a Share Purchase Agreement on June 15, 2017 that allowed the Philippine Stock Exchange (PSE) to acquire 1,488,902 common shares equivalent to 23.8 percent of PDS’s total outstanding stock for PHP 476,448,640 or at PHP320 per share.
“This implies a valuation of PHP2 billion for PDS and a PE (price earnings) ratio of 8.10x based on 2016 PDS earnings,” he said.
PE ratio is the proportion of a company’s share price vis-à-vis its per-share earnings.
However, this valuation is lower than it should be and noted that “research on the financials of comparable market infrastructure enterprises in the region and globally show that such businesses trade at an average LTM (last twelve months) PE ratio of 34.1x and 35.8x, respectively.”
“This indicates that at a price of PHP320 per share, PDS is undervalued and purchasing PDS shares could be a profitable investment for LBP,” he added.