Happy Wednesday, Barkada --

The PSE lost 49 points to 5988 ▼0.8%

Shout-out to Kirito500m for saying that GCash would solve the problem by halving its valuation (that's one way haha), to /u/grinsken for calling GCash a "hot potato", to /u/LocalSubstantial7744 for calling a GCash IPO in 2030 (that's not far off), to /u/catske_9991strayzz for predicting a GCash post-IPO drop, to Ivana Alawiwi for saying that a public float exemption would set a precedent (it would, and not for the better), to Whatwherewhenhowwhowhywhich for saying that Globe is just teasing us, to Makisig Tan for supporting my "price is king" thesis on GCash, to Shanley Matthew Lumagod for noting GCash's "potential to disrupt the PSE" and provide some much-needed activity, and to arkitrader for the intense "everything has a price" meme.

▌In today's MB:

• Senate approves ban on raw materials export
  • Would force miners to process locally
  • Imposes heavier "windfall" tax burden
• Ayala Group to sell KonsultaMD to mWell
  • KonsultaMD has 2.7M users
  • No price/terms disclosed
• Phoenix still too broke to pay dividends
  • Suspended for 9 months
  • Still no retained earnings
  • Why hasn't PSE delisted it?

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▌Main stories covered:

• [NEWS] Senate approves bill banning export of raw minerals... The Senate approved Senate Bill 2826 on its third and final reading [link], which seeks to impose a tiered tax system on mining profits and impose a ban on the export of raw minerals. On the tax side, SB 2826 is the government’s attempt to capture a greater share of the “windfall” profits the mining sector has experienced in recent years. This change has reluctant support from lobbying groups representing the mining industry like COMP (Chamber of Mines of the Philippines) and PNIA (Philippine Nickel Industry Association), due in part to the seeming thirst of the house to pursue a similar tax scheme and the general sentiment that some form of tax right-sizing was probably overdue to bring the Philippines in-line with neighboring jurisdictions. The big issue, however, is the raw export ban. After a 5-year grace period, this measure would prohibit miners from exporting shipments of unprocessed ore, and would force some kind of processing to be done in the Philippines before being sold internationally. Both COMP and PNIA oppose this portion of the law, citing the insufficiency of the power grid and transportation network to handle such fast-paced industrial expansion. They say that the ban will likely have “considerable unintended consequences”, and will lead to mine closures and disruption of existing long-term supply contracts leading to a “loss of trust in the Philippines as a reliable trading partner.”

  • MB: In business, this is known as climbing the “value chain”. Depending on how specialized you want to get, there can be as many as eight distinct processing stages needed to get raw nickel ore into a state that is ready to be used for applications like EV batteries, and at each stage, the processing increases the value of the resulting product. Raw ore is concentrated, smelted, refined, purified, and then converted to special forms depending on the particular battery application. I don’t have domain knowledge in nickel, but a Google search showed global prices of raw nickel ore to be around $15k/ton, with the price jumping up to $18k/ton for smelted nickel ore. The goal of this legislation (aside from the predictable tax-grab) is to force more of that processing to happen here. That means more facilities and jobs, but it also means more environmental problems and sensitivity to shifting global needs. This is a potential moment of chaos for the mining industry, and it’s not clear (to me) how each player will react if the law is implemented.

• [NEWS] Ayala Group to sell 100% of KonsultaMD to MPI subsidiary... The Ayala Group is reportedly selling 100% of KonsultaMD to the Metro Pacific Health Tech Corporation (mWell) [link], which is a subsidiary of the unlisted Metro Pacific Investments Corporation (MPIC). The parties did not disclose a transaction cost or any details on the timing of the sale of closing conditions, other than to say that the Ayala Group would continue to support both KonsultaMD and mWell post-closing. KonsultaMD is an app-based telehealth corporation owned by 917Ventures, the startup incubator subsidiary of Globe [GLO 2280.00 ▲0.4%; 55% avgVol], and boasts 2.7 million users and a large database of doctors and specialists. mWell is also a health and wellness app that reports having 3.1 million users. MPIC said that it will continue to operate the KonsultaMD brand under mWell’s management team.

  • MB: While I’m really interested in the acquisition price, I’m more interested in MPIC’s long-term strategy with mWell. Aside from being burdened with just one of the worst names I’ve ever heard, mWell is going to be the dominant telehealth operator in the Philippines once this transaction is done. Health (especially telehealth) is one of the sectors I’d look at with my middle-class growth thesis, partly because of the margins available for medical services of any kind, but also because of the cross-selling opportunities that could come from operating the country’s default telehealth platform. There are considerable insurance, pharmacy, lab, and woo woo wellness product opportunities here for a well-managed superapp. Huge opportunities. But can Manny V. Pangilinan seize those opportunities? Readers will know that I’ve lost my confidence in his ability to add value through acquisitions.

• [UPDATE] Phoenix Petroleum still too broke to pay dividends on prefs... Phoenix Petroleum [PNX suspended] [link] was asked by regulators to provide an update on its non-payment of dividends. In its response, PNX said that there’s been “no significant change in the financial position of [PNX]”, and that PNX has “no unappropriated retained earnings” from which to make dividend payments. PNX said that it is “focused on restructuring its debts or still negotiating for its Liability Management Exercise with [its] creditors while managing its current resources internally in order to increase working capital.” PNX is currently owned by the failed tycoon, Dennis Uy. As of its last Quarterly Report in Q3, PNX was losing approximately ₱1.6 billion per quarter. PNX’s stock price is at levels that have not been seen since before Rodrigo Duterte was elected president in 2016. Dennis Uy was one of Rodrigo Duterte’s top campaign donors.

  • MB: It really is a dust-to-dust 10-year chart for PNX’s stock price. From the time Durterte took office in 2016, it only took 18 months for the stock price to double. PNX maintained that level for roughly four years--even through Duterte’s disastrous handling of COVID--but the stock fell off a cliff starting in August 2021 and it hasn’t yet reached the bottom. Well, it got suspended last May so we don’t know where it would trade now, but I can’t imagine it would be any better. In fact, by the PSE’s rules, it should have been involuntarily delisted months ago. To be honest though, I’m really not sure what these inquiries are meant to accomplish, other than to rub PNX’s nose in the turd it dropped on the PSE’s rug. Everybody knows PNX has no retained earnings to pay dividends.

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