AP Securities Inc. raised its price target for Globe Telecom (GLO) after its parent company, Ayala Corp., and Japanese financial giant MUFG Bank agreed to invest P46 billion in its mobile payments unit, GCash.
The purchase of a 16 percent stake valued GCash’s parent firm Mynt at P290 billion, more than double its valuation in 2021.
Globe shares rose as much as 4 percent to touch a new 52-week high of P2,218 on Friday before paring gains to about 2.6 percent by the finish as the broader Philippine Stock Exchange index slumped almost 2 percent.
Globe a strong buy
Alfred Benjamin R. Garcia, head of research at AP Securities Inc., said the deal justifies a “Strong Buy” rating for Globe, assuming a modest dilution or decrease of its 36 percent stake in Mynt.
“GLO’s investment in Mynt was logged in its first-quarter balance sheet as P12.5 billion, and we last estimated the stake to be worth P19.8 billion in our Jan 15 APS Weekly. The difference between this estimate and the new valuation would result in an additional value of P532.40 per share,” he said.
“This would then result in a revised target price of P2,689.32, a 24.4 percent upside from GLO’s last traded price of P2,162,” he added.
Ownership dilution
In a stock exchange filing on Friday, Globe said Ayala and MUFG will each purchase 8 percent of Mynt worth about $800 million or P46 billion in total.
COL Financial Group chief equity strategist April Lynn Tan said their research indicated Mynt’s principal shareholders, which are Globe and China’s Ant Group, will be diluted by 1-2 percent after the deal is completed.
When a company issues additional shares to attract new investors, existing shareholders end up owning a smaller portion of the company, even though the overall value of the company might increase.
Still undervalued
Another market analyst, who requested anonymity, said their brokerage house has no plans to revise Globe’s share price target, despite considering the purchase value “cheap” based on GCash’s projected earnings.
“We’re not pricing GCash as part of Globe because it’s not really their core business. It’s still the telco business,” the analyst said.
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.
