Phinma Energy (PHEN)

You might remember my investment in FB, if you followed me on that, you got yourself a 60%+ gains already. I got an insight that FB might become an index member and I based my investment thesis on that. This new investment PHEN is somewhat like that, but I don’t think this will be a new index member. But the idea is the same. There might be some value in the company that is not yet known that will be unlocked some time in the future. I could be wrong too.

Phinma Energy is being acquired by Ayala Corporation under its AC Energy subsidiary. The transaction will amount to P1.14 to P1.30 per share, 68% of the total outstanding shares. They might offer a tender offer to acquire and take Phinma Energy private and consolidate it into the newly created subsidiary, AC Renewable.

This piece of info might mean that they will acquire PHEN and will make it private under AC Energy (AC Renewable). If this is true, then there might be an opportunity here. Assuming that the tender offer will happen, once the company has secured the go signal from the PCC, what might be the tender offer price?

My answer is I don’t know. What we can do is to find some kind of margin of safety.

Things that Can Go Wrong

1. Ayala might not be granted the approval to acquire PHEN by the PCC and the SEC. And the stock price will drop pre-announcement of the acquisition.
2. Tender might not happen.
3. A crash could happen (both the company stock and/or overall market).

Margin of Safety

There’s nothing much to say about the earnings power of PHEN. They actually lost money because of some power plants being shut down. But there might be a value on its assets. The company have a book value of P1.85 per share. I think this is enough margin of safety.

Disclaimer

I own shares of PHEN.