With a market value below P6 billion and relatively low volume, the company is often overlooked by investors and funds.
And while holding companies often trade at a discount, AP Securities said the group remains deeply undervalued. It rates Phinma (PHN) a “strong buy” with a target price at P32.23 per share using sum-of-the-parts analysis.
This suggests significant upside over its last traded price of P20.35 per share.
“Despite material risks such as the stock’s trade liquidity issues (which we believe we have sufficiently baked into our valuation), the company’s exposure to the notoriously low-margin construction materials sector, and its foray into the fickle and highly-competitive property and hotel sectors, we feel that the discount placed by the market on the company is undeserved,” said Alfred Benjamin R. Garcia, research head at AP Securities.
At P20 per share, the stock was trading at a 6.4 times projected earnings this year. It has been trading at a single-digit price to earnings ratio since 2022, AP Securities noted.
Education is Phinma’s 'Midas Touch'
Garcia said the company’s education segment focuses on acquiring schools, expanding capacity, and improving operational efficiency.
The company aims to reach 175,000 students by 2025 and 200,000 by 2028 through organic growth and potential acquisitions.
A recent P8.3 billion deal with KKR and Kaizen provides a P4.5-billion capital infusion to fund expansion without additional debt.
“[T]he post-money valuation of the company’s stake in its education business following the KKR transaction is almost 2.6 times of PHN’s entire market cap,” Garcia said.
“Looking at it from another perspective, the estimated book value of its property business is almost 58 percent of the company’s market valuation, which is incongruous when we consider that this segment is only a small fraction of PHN’s business,” he added.
Property, cement & ESG
Garcia said Phinma is also reviving the Union Cement brand, with the segment projected to generate “annual net income growth of around 17 percent from 2024-2028 as the economy normalizes from post-pandemic distortions and as the company’s expansion efforts start to bear fruit.”
He said property will also grow thanks to earnings from its Soledad Township in Bacolod.
“Aside from being a value play, PHN is also a viable option for ESG investors given its socially-responsible and altruistic approach to business,” Garcia said.
Risks
Garcia highlighted key risks such as lower liquidity and Phinma’s “exposure to the notoriously low-margin construction materials sector, and its foray into the fickle and highly-competitive property and hotel sectors”.
Nevertheless, he noted that the price discount on the company “is undeserved”.
On liquidity, he said Phinma is planning to address this with a stock rights offering that is expected to raise its market value, making the business more attractive to larger, institutional investors.
Financial market recommendations and comments on InsiderPH News belong solely to the analysts and institutions making them. They do not represent buy, sell or hold recommendations of InsiderPH News. Investments held by analysts or institutions may influence their recommendations. Investors should conduct their own research and carefully evaluate all relevant market information before making investment decisions. As always, the past performance of any investment does not guarantee its price appreciation in the future.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
