{"id":327231,"date":"2024-03-22T01:07:37","date_gmt":"2024-03-21T17:07:37","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=327231"},"modified":"2024-03-22T01:07:38","modified_gmt":"2024-03-21T17:07:38","slug":"stock-in-focus-bloomberry-resorts-corp-bloom-22-march-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-bloomberry-resorts-corp-bloom-22-march-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: Bloomberry Resorts Corp. (BLOOM) – 22 March 2024 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>BLOOM<\/td><\/tr>
Company Name<\/strong><\/td>Bloomberry Resorts Corp.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>22 March 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 14.78<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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We remain a BUY on BLOOM based on consensus Target Price of P14.78.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

BLOOM overpays to make the problem go away<\/h3>\n\n\n\n

BLOOM\u2019s share price took a nosedive on Tuesday after the company disclosed that it has reached a settlement deal with GGAM to end its long-running dispute. To recall, the two parties have been locked in a vicious cycle of arbitration, appeals, suits and counter-suits for ten years ever since BLOOM terminated its management agreement with GGAM in 2014. <\/p>\n\n\n\n

The settlement deal will require Sureste Properties, Inc. (SPI), a wholly-owned subsidiary of BLOOM, to buy the 921.2-Million shares of BLOOM held by GGAM at a premium price of P18.32 per share. This is 59.3% higher than BLOOM\u2019s closing price of P11.50 on Monday, and 66.0% higher than BLOOM\u2019s YTD VWAP of 11.0381. The total would amount to around $300.0-Million, a tad higher than the $296.6-Million awarded by a Singapore arbitration court to GGAM.<\/p>\n\n\n\n

It\u2019s an investment, not an expense<\/h3>\n\n\n\n

We are expecting BLOOM to book the purchase as an investment rather than as an expense, which means that it should not have an impact on the company\u2019s bottom line unless SPI divests the shares at a lower price. In which case, it would be recognized as a loss on the sale of investment. <\/p>\n\n\n\n

Alternatively, BLOOM can buy back the shares from SPI (at the same price to avoid booking a loss) and it would revert to treasury shares, effectively reducing its outstanding shares. In any case, the settlement would represent a quite significant P16.9-Billion cash outflow for BLOOM. For reference, BLOOM had cash & cash equivalents amounting to P39.8-Billion as of 2023.<\/p>\n\n\n\n

Float reduction<\/h3>\n\n\n\n

Since SPI is BLOOM\u2019s wholly-owned subsidiary, the purchased shares would be treated as non-public following the transaction. This would effectively reduce BLOOM\u2019s public float from 37.2% to 29.1%, which will have an impact on BLOOM\u2019s weighting in the PSE index and other indices. <\/p>\n\n\n\n

This may be the main reason for Tuesday\u2019s sell-down, as index-tracking funds would have to sell shares of BLOOM to maintain their exposure. On the upside, these same funds would have to buy up shares of other index companies to make up for the reduction.<\/p>\n\n\n\n

Smart move<\/h3>\n\n\n\n

By taking a share-based settlement deal, BLOOM effectively avoided booking expenses from the settlement. To recall, the original arbitration award included the payment of damages, pre-termination, and foregone revenues to GGAM. These would have been logged into the income statement as expenses.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>