DigiPlus Interactive [PLUS 12.76, down 4.6%; 79% avgVol] [link] reported a Q1 net income of P2.0 billion, up 370% y/y from its Q1/23 net income of P0.4 billion. PLUS attributed its performance to revenue increases in all of its material business segments: retail games (+237%), casino rental income (+30%), hosting fees (+19%), and other leases (+12%). In the “FUTURE PLANS” portion of the Management’s Discussion and Analysis section, PLUS said that it “continues to execute on its… vision to be the number one digital entertainment group in the Philippines.” PLUS said that it is lo oking to boost customer retention through the use of “big data technologies” and plans to “embark on aggressive marketing efforts” to “enhance customer engagement.” The group’s Franchise Fees and Taxes expense grew 201% y/y to P6.8 billion, but this is the amount that PLUS pays PAGCOR and the government as a percentage of its gross gaming revenue.
MB bottom-line: It’s going to be interesting to see how PLUS handles the “p roblem” of making too much money. Will it treat these huge quarters like a windfall profit and distribute some large amount of it back to shareholders through a dividend, or will it look to put the money to work? If the management team wants to use the cash for something constructive, how will it configure its investment spend between research and development of its digital gambling platform and more conservative sources of recurring income like land and buildings? The FUTURE PLANS section tells me that they’re not finished building out PLUS into what it could be, so shareholders should probably expect the company to allocate a good amount to realizing that ambitious goal to become our “largest digital entertainment group”.
—
Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.
SP New Energy [SPNEC 1.10, down 2.6%; 92% avgVol] [link], now a Meralco [MER 374.80 unch; 80% avgVol] subsidiary under Manny V. Pangilinan’s chairmanship, confirmed reports that it plans to sell “up to 40% equity stake in the Terra Solar” project. The report quoted MVP as saying that SPNEC was in talks with three to five potential investors, and then quoted an unnamed executive who said that SPNEC would take in “at most” two of those potential foreign investors for a combined 40% stake in Terra Solar. MVP said that they were trying to engineer it so that each foreign partner might take a 20% stake. MVP noted that SPNEC still intends to meet its 2026 energization target.
MB bottom-line: Not much here has changed. One key here is that MVP and the gang are talking about bringing those investors in at the Terra Solar project level, not at the SPNEC level. I’ve seen a few commenters around in the forums trying to speculate about how a 40% stake sale at the SPNEC level would impact the stock, but that’s not what SPNEC is contemplating here. They’re looking to sell a 40% stake in a private subsidiary. Why 40%? Because the Terra Solar project owns land and foreigners cannot own more than a 40% interest in corporations that own land. This isn’t a case of MER just looking to monetize a chunk of its new toy; MVP and MER have already said that they need to sell this equity stake to finance the development of the project. So this will need to get done, probably sooner rather than later.
—
Merkado Barkada is a free daily newsletter on the PSE, investing and bus iness in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.