A combination of a very strong run-up in the share price, coupled with rising bond yields in the Philippines, have rendered Pil Tel a sell. With government bonds now yielding 7.5%, Pil Tel's free cash flow and dividend no longer seem as attractive.
PilTel is undergoing a balance sheet restructuring courtesy of its parent Smart, which itself is owned by the dominant incumbent telco, PLDT. The strong underlying free cash flow yield (24% forecast for 2007) has been overshadowed by the company's debt burden, thus preventing PilTel from paying dividends. This makes it the cheapest mobile telephone company in the region, trading at a 50% discount to its peers. Almost 60% of revenue comes from SMS, as PilTel caters to the low-end market, and the Philippines is the world's heaviest user of SMS per capita; thus revenue is defensive. A resumption of dividend payments in 2007 would give the stock a yield of 13%.
| Sedol |
Type |
Price |
Date |
| 6707941 |
Sell |
PHP 6.475 |
10/08/2007 |
| 6707941 |
Buy |
PHP 4.433 |
14/09/2006 |
|
