FREE Stock in Focus: BLOOM (2 Oct 2019) by AP Securities

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Summary of Broker’s Recommendation
BROKER RECOMMENDATION TARGET PRICE ISSUED ON
AP Securities BUY 14.00 2 Oct 2019

 

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Our Partner Broker’s Recommendation

Bottomline: the Singapore Tribunal arbitral award will be a source of overhang for BLOOM in the near term. Our long-term view is intact though, especially as BLOOM is on track for the construction of its Vertis North casino which will open by early 2024 and as earnings continue to outperform on the back of strong growth from premium mass. We would look to accumulate on further weakness.

 

Our Partner Broker’s Analysis

BLOOM disclosed yesterday that it has received arbitral award from the Singapore Tribunal relating to case filed by GGAM back in 2013. The total damages awarded amounted to $100 Million, while GGAM’s 921 Million shares in BLOOM is worth $281 Million.

Based on our talk with BLOOM last week, their view is that: a) the legal case is not yet finished as they have a pending case against GGAM that may nullify the recent decision; and b) the arbitral award cannot be enforced until a PH court confirms the decision. BLOOM’s stance is that it will take a long while for the case to move, and they will not recognize provisions in their books as they look to exhaust all their legal options to win the case.

Our view: We simulated the potential impact of an unfavorable ruling. Firstly, the GGAM shares are non-dilutive since they are already issued shares. If sold though, BLOOM’s real float will increase to 35% (from 28%), and the increase in supply of shares is likely to put pressure on price. This will not impact our Target Price.

Secondly, the $100 Mn in damages if applied in 2020 would decrease our DCF-based Target Price to PHP 14.00/share (from PHP 14.40).

 

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AP Securities (formerly Angping & Associates Securities)
AP Securities (formerly Angping & Associates Securities)

AP Securities (formerly Angping & Associates Securities) is one of PinoyInvestor’s partners in delivering superior and reliable stock research reports that help Filipino investors make smart stock investing decisions! Learn more about them here.