|
INVESTORS seldom wake up in the morning and hear the
news that their holdings are bound to increase via stock
dividend. They often receive cash dividends. It may
please them much to read a disclosure announcing a board
approval of 100-percent cash dividend. Not that the
percentage is misleading. At first glance this kind of
dividend seem huge. Neophyte investor? Think again to
grasp the meaning of a 100-percent cash dividend,
because amount is based on par value. If the par value
of, say, common shares of Philippine Long Distance
Telephone Co. is P5 per share , a 100-percent cash
dividend is P5 per share. A 100- percent cash dividend
won’t be equivalent to the market price of P3,015. If
cash dividends were computed based on closing price,
everybody would flood the market with orders to buy PLDT
common shares and other blue chips that regularly give
out cash dividend. (PLDT, however, does not announce
cash dividends in percentage terms. It says this in the
equivalent peso amount.)
****
If stock
dividends are rare among listed companies, then the
remaining minority stockholders of Chinatrust
(Philippines) Commercial Bank Corp. are lucky because
they have not been tempted by two tender offers made by
Chinatrust Commercial Bank Ltd., Taiwan’s largest
private bank. These offers increased the parent
company’s holdings in its local unit to 99.41 percent
from 57 percent.
By not
selling out, the owners of 0.49 percent of
Chinatrustbank Philippines’s outstanding shares enjoyed
two stock dividends: 15 percent in 2006 and another 15
percent early this year. But more important than their
receiving these bonanzas is the implication of stock
dividend on the
Philippines’s
foreign exchange.
Had it
chosen to distribute cash dividend, Chinatrust
(Philippines) would have remitted the equivalent amount
in US dollars to its parent company Chinatrust
Commercial Bank Ltd. Instead, Chinatrust (Philippines)
declared a 15-percent stock dividend, or 28.125 million
shares, in 2005 which, when these were distributed in
2006, increased Chinatrust Taipei’s holdings by
27,959,062 shares due its 99.41-percent ownership of
outstanding shares. In November this year, the bank
again distributed another 15-percent stock dividend, or
32,343,750 shares, which entitled its parent company to
32,152,922 shares. The two dividends add up to
60,468,750 shares, or P600,468,750 at a par value of
P10. The equivalent amount was taken from the bank’s
surplus. As of September 30, 2007, Chinatrustbank (Philippines)
had a surplus of P2,688,014,425.
****
Chinatrust (Philippines) was the first foreign-owned
bank to list on the Philippine Stock Exchange, offering
37.50 million shares via an initial public offering in
1999. As parent company, Chinatrust Taipei owns every
asset and every share its Philippine unit owns. But
after the IPO, its holdings had been diluted to 57
percent, an ownership that still allowed it to control
the board.
The
dilution was not to last long. In two tender offers at
P19 per share in 2000 and 2001, Chinatrust Taipei
attracted most of the minority stockholders. Its
acquisitions effectively raised its holdings to the
present level of 99.41 percent.
As of
September 30, 2007, Chinatrust (Philippines)
had 215,624,997 outstanding shares, which increased to
247,968,747 after the distribution of stock dividend in
November. This will leave the company with 52,031,253
unissued shares of authorized capital stock of 300
million shares, which will probably be enough to cover a
20-percent stock dividend.
****
When it
bought out its minority stockholders, Chinatrust Taipei
did what other listed companies have been doing after
listing. Buying back shares is now a common corporate
strategy. A. Soriano Corp. has been doing it over the
years. GMA Network Inc. has started buying back its own
shares after only a few months as a listed company. If
the majority stockholders of Filipino-controlled public
companies are consolidating their holdings in their
units by buying out the minority stockholders, what will
prevent foreign-owned listed companies, such as
Chinatrust, from doing the same? To Chinatrust Taipei,
controlling 99.41 percent of its Philippine unit that
should be the best corporate move it has done in the
face of what could be considered the worst development
to have hit foreign investors in the Philippines, when
Subic Bay Metropolitan Bay Administration forcibly took
over the management of Subic Bay Golf and Country Club,
which, like Chinatrust (Philippines) is also owned by
Taiwanese investors through their corporate vehicle
United International Group Development Corp.
****
The
government takeover of the golf club sent a wrong
message to foreign investors that in this country,
foreign companies are not safe from regulatory agencies.
Taking the cue from SBMA, the Securities and Exchange
Commission should now takeover listed companies for
defying its reportorial requirements and/or for refusing
to pay fines for violating the commission’s rules on
full disclosure. Of course, the five-man commission has
been performing its regulatory duties in a more
responsible manner.
The
market’s main barometer stays above 3,000 points. And it
is unfortunate that the incident at Subic happened at a
time when the leadership of the Philippine Stock
Exchange (PSE) has been campaigning to attract foreign
investors. Taiwan should be a good market for PSE
president and chief executive officer Francis Ed Lim.
Flashback: Taiwanese has so much money to invest outside
Taiwan. Sometime in the 1990s, they invested over $1.5
billion in Vietnam and slightly over-half-a-billion
dollars only in the Philippines. What a discrepancy,
which could be corrected by luring Taiwanese money to
the stock market!
But
first, Lim has a lot of work and information campaign to
do to neutralize, if not erase, the bad impression
investors have on the country as brought about by the
SBMA-Subic Golf club incident.
www.duediligencer.com |
