The market has been struggling to keep up. As of the end of trading on August 11, it ended with a weekly loss of 0.70% or 44.93 points at 6,405.91.  This also drove down the market’s year-to-date performance deeper into negative territory to 2.44% or 160.48 points.  

This also meant the market was barely 5.91 points above its immediate support of 6,400, which, if broken according to most estimates, may send the market’s psychological support to fall lower by another 250 to 300 points at 6,150 or 6,100.  

Whether this may happen or not, we cannot deny the fact that some of our stock picks at this point may have performed less than expected, and may have to be either modified or completely replaced to manage our risk and position sizing.   

The combination of risk management and position sizing, which is also called money management, is one of the three keys to trading success.  

Moreover, this exercise has to be done regularly as in every six months or so. Likewise, this should be done especially at critical times. Speaking of which, we are now in such critical times of the trading year – the “ghost month.”  

The best approach is to scan for companies which are not just actively traded but whose share prices have remained resilient despite the market’s shifting behavior. More importantly, these companies must have sound financial standings in the first place.  

This strategy should lead us not just to some stock favorites but also to stock picks that will be winners all the way up to the end of the year.  

Ty family’s business

One such company is GT Capital Holdings, Incorporated,  with the trading symbol GTCAP.  It’s the holding and management company of the Ty family for their diversified business interests in banking, automotive assembly, importation, distribution, financing, property development, life and non-life insurance, infrastructure and utilities, and motorcycle financing.  

If you look at the website of the PSE, its subsidiaries are listed as follows: “Federal Land, Inc.; Toyota Motor Philippines Corporation; Toyota Manila Bay Corp.; and GT Capital Auto Dealership Holdings, Inc. The company also has significant shareholdings in Metropolitan Bank & Trust Company; Metro Pacific Investments Corporation; Philippine AXA Life Insurance Corporation; Toyota Financial Services Philippines Corporation; and Sumisho Motor Finance Corporation.”

Last Monday, August 14, GTCAP disclosed that it has more than doubled its consolidated net income to Php16.61 billion from P8.1 billion in the first half of the year.

Earnings were largely driven by the net income of Metropolitan Bank & Trust Company (Metrobank), which increased by 34% to P20.9 billion, and Toyota Motor Philippines (TMP), which realized a significant net income growth of 147% to P8.0 billion.  

In the case of Metrobank, net interest income in the first six months of 2023 surged by 27.0% to P50.6 billion on the back of a 50-basis point increase in net interest margin to 3.9% and 8.6% rise in gross loans.  

Cost to Income ratio improved to 51.8% from 53.8% last year as revenue expansion outpaced cost growth. Non-performing loans (NPLs) ratio eased to 1.8% while NPL cover is at a high of 184.4%, providing a substantial buffer against any portfolio risks. Capital ratios are still among the highest in the industry, with capital adequacy ratio at 17.9% and Common Equity Tier 1 ratio at 17.1%.

Earnings in TMP was attributed to stable economic recovery, rising consumer spending, the stabilization of supply chains, and the revival of consumer lending by banks. TMP reported retail vehicle sales of 93,575 units in the first half of 2023 from 80,090 units in the same period last year, representing a 17% increase. The automotive market, on the other hand, grew by 26% to 197,018 units from 155,930 units in the previous year.  

With a 47.5% overall market share in the first half of 2023, TMP remains to be the country’s number one automotive brand. 

Federal Land (Federal Land) likewise posted a noteworthy net income improvement of 101% to P1.46 billion for the period. Furthermore, AXA Philippines attained a higher net income of P1.3 billion. 

Contribution from the earnings in Metro Pacific Investments Corporation (MPI) also helped in GTCAP’s earnings. MPI delivered a positive performance with a core net income of P9.9 billion, representing a 33% increase, mainly driven by the strong performance of the power generation business and higher water tariff for the water concession.

Despite lingering threats of rate hikes, foreign exchange volatility, and global recession, the company expects to sustain its growth for the rest of the year. It is optimistic that its different business units will continue to benefit from what they have enjoyed so far from the insulation of the domestic economy from said factors.

Market performance

GTCAP is one of the several companies whose share prices have outperformed the market on the whole. It has a free float level equivalent to 43.7% and a foreign ownership limit of 40.0%. It has a recorded 52-week high of P550.00 on February 13, 2023 and 52-week low of P380.00 on November 10, 2022.  It has 215,284,587 of listed shares, which is also equivalent to its present outstanding and issued number of shares. 

As of Tuesday, August 15, GTCAP closed at P535.00 apiece. This is equivalent to 22.99% from its starting market price at the beginning of the year of only Php 435.00. Its market capitalization has since then also risen to P112.81 billion.  

If you think GTCAP’s traded price has gone too high, wait till you see its calculated P/E and P/B ratios. At the price of P535.00 per share, GTCAP is trading only at the P/E ratio of 5.74x and P/B ratio of 0.58x, respectively. PSEi’s current average P/E ratio is 14.13x.

The record and payment dates for GTCAP’s cash dividends for 2023 have been set as follows: 

• 1st Quarter: January 5, 2023 and January 27, 2023 
• 2nd Quarter: April 5, 2023 and April 27, 2023 
• 3rd Quarter: July 5, 2023 and July 27, 2023
• 4th Quarter: October 5, 2023 and October 27, 2023

Downward spiral

My colleague from the steel industry, who is too shy for his name to be mentioned, has a different view about the country’s economic outlook and other fundamental factors.  

He said, “The economy is in a downward spiral. The steel industry is feeling the brunt more than any industries. Volumes and margins are shrinking. A number of mills have temporarily stopped operating or have reduced their operating capacities.  The dire situation is exacerbated by rampant smuggling, not only by locals but by mainland Chinese locators now spread all over the country. Thanks to widespread incompetence and unbridled corruption.” – Rappler.com

The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. You may reach the writer at densomera@yahoo.com