Financial Adviser: 5 Best Performing Stocks in 2022 That Gained Up to 120% in One Year

It has been a challenging year for the Philippine stock market as it has gone through ups and downs during the year with the PSE Index ending the year with an 8.2 percent loss to date.

Although inflation and interest rates have started to slow down the past few weeks, it may take some time before this crisis finally comes to an end.

So far, only nine of the 30 big cap stocks belonging to the PSE Index are expected to end the year on a positive note, led by Semirara Mining (PSE: SCC) with +63.9 percent followed by Aboitiz Power (PSE: AP), +14.5 percent; Bank of Philippine Islands (PSE: BPI), +8.3 percent; Universal Robina Corp (PSE: URC), +7.5 percent; Jollibee (PSE: JFC), +6.3 percent; and BDO (PSE: BDO), +6.2 percent.

The top five biggest losers in the PSE Index are Converge (PSE: CNVRG), -56.4 percent; Megaworld (PSE: MEG), -33.0 percent; Globe Telecoms (PSE: GLO), -32.9 percent; PLDT (PSE: TEL), -32.1 percent and AC Energy (PSE: ACEN), -31.3 percent.

More than the PSE Index stocks, most of the stocks that have risen this year amidst the bearish sentiment were the small and mid-cap stocks.

As an investor, if you are looking to invest in safer stocks, it would be good to put your money among the PSE index stocks that have underperformed this year.

But if you are looking for higher returns with expectations of higher market volatility, you need to take more risks by investing in riskier, non-index stocks.

What stocks were the biggest gainers this year? How risky are these stocks? Do they have emerging fundamental value that may be worth looking at next year?

Note that the best performing stocks this year do not necessarily mean that they will do well next year.

In fact, all the top five biggest winners last year ended lower this year such as Ever Gotesco (PSE: EVER), -24.2 percent; ACE Enexor (PSE: ACEX), -66.9 percent; Del Monte Pacific (PSE: DELM), -8.5 percent; GMA Network (PSE: GMA7), - 20.5 percent; and Ginebra San Miguel (PSE: GSMI), -5.5 percent.

Here are the top five biggest stock market winners in 2022:

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1| AbaCore Capital Holdings

Price: P2.00

Year-to-date gain: +119.6 percent

AbaCore Capital Holdings (PSE: ABA) is an investment holding company with interests in various industries such as financial services, real estate, mining, and leasing of gaming equipment.

For the past five years, ABA’s main source of income has been the gain on disposal of its properties. In 2018, ABA booked gain on disposal of properties of P500 million and another P318 million in 2019. Last year, the amount was P432 million.

ABA has generated a total operating income, net of expenses, of P810 million since 2016. Without the gain on disposal of properties, ABA’s total revenues for the past five years would have amounted only to P17 million against total operating expenses of P430 million.

The other source of ABA’s income is the accounting recognition of fair value adjustments of its property holdings. Last year, ABA booked total fair value adjustment of P4.6 billion. Previously, ABA also booked fair value adjustments of P426 million in 2019 and P3.8 billion in 2018.

Because fair value adjustments have no direct cash flow benefit to the company, ABA incurred a negative operating cash flow of P606 million in 2021.

To raise cash to finance its deficit, ABA disposed some shares of its subsidiaries, as well as properties to raise a total of P575 million. It also issued new shares to raise P250 million capital.

With the fair value adjustments, ABA’s investment in properties in its balance sheet increased by 53.8 percent from P8.4 billion in 2020 to P13.01 billion in 2021.

The increase in investment properties raised ABA’s book value per share to P3.50 per share as of September of this year, which offers 42.8 percent discount at the stock’s current share price of P2.00 per share.

Interestingly, if we include the fair value of ABA’s coal and gold mining rights, which have a combined appraised value of P5.2 billion, ABA’s current book value should increase further by P1.05 per share to P4.55 per share.

At a book value per share of P4.55, current share price of ABA at P2.00 per share offers 56 percent discount.

For the stock to justify its share price to equal its book value, ABA must generate sustainable cash flows and returns from its investment properties.

2| Prime Media Holdings

Price: P1.95

Year-to-date gain: +66.7 percent

Prime Media Holdings (PSE: PRIM) is a dormant company majority owned and controlled by RYM Business Management Corporation.

PRIM has not been operating since it was acquired via backdoor listing from Banco De Oro a few years ago. The company has been incurring losses, resulting to capital deficiency of P148.8 million to date.

Last year, PRIM, along with its controlling shareholder, RYM, entered into a Memorandum of Understanding with New Era Empire Realty Corp to pursue potential ventures into real estate development and gaming. 

PRIM also signed a Memorandum of Agreement to acquire the majority ownership of its sister company Philippine Collective Media Corporation (PCMC) via share swap.

PCMC is a subsidiary of RYM Business Management Corp that operates a television station under PRTV and 13 radio stations in Tacloban.

PRIM’s current share price at P1.95 per share is highly speculative as it has no earnings and book value reference. The company is expected to increase its authorized capital stock in the near future in order to accommodate the acquisition.

The infusion of assets through acquisition of PCMC should provide a better basis for earnings and valuation in the future.

3| Semirara Mining and Power Corporation

Price: P35.00

Year-to-date gain: +63.9 percent

Semirara Mining and Power Corporation (PSE: SCC) is the largest coal producer in the Philippines, and the only power producer in the country that owns and mines its own fuel source (coal).

SCC operates the largest and most modern pit mine in the Philippines with operating capacity of 16 million metric tons of coal per year. SCC also installed a generating capacity of 900 MW, with an additional 1,200 MW in the pipeline.

SCC’s revenues, which is comprised of 65 percent coal sales and 35 percent power revenues, have been growing by an average of eight percent per year pre-pandemic, from P22.8 billion in 2010 to P44.2 billion in 2019.

SCC’s steady revenue growth resulted to an annual net income growth of 10 percent—from P3.9 billion in 2010 to P9.6 billion in 2019.

During the 2020 pandemic, SCC’s total revenues fell by 36 percent to P28.2 billion from P44.2 billion in 2019, which cut its net income by about two-thirds to only P3.3 billion.

Last year, with the recovery in the global prices for coal, SCC’s total revenues more than doubled to P52 billion from P28.2 billion in 2020.

This increased SCC’s net income by over three times to P16.2 billion from P3.2 billion in the previous year.

This year, SCC’s total revenues from coal and power rose to P73 billion for the first nine months, almost doubling its revenues of P38 billion in the same period last year.

SCC’s strong revenue performance drove its net income to rise by more than three times to P35.9 billion from only P10.3 billion in 2021.

Because of the strong earnings, SCC also increased its cash dividends this year by 66.7 percent to P5.00 per share from P3.00 per share last year.

In 2021, SCC also increased its cash dividend payments by more than two times from P1.25 per share in 2021 to P3.00 per share on strong earnings performance. At the current dividend of P5.00 per share, SCC currently enjoys an attractive dividend yield of 14.2 percent.

Even if SCC cuts its dividends next year by 50 percent to P2.5 per share, buying the stock at current price will give you a decent dividend yield of 7.1 percent.

Despite the rise in SCC’s stock price this year, its Price-to-Earnings (PE) ratio based on its 12-month trailing income stands at only 3.5 times.

Again, even if SCC’s revenue momentum growth slows down next year that may cause its earnings to correct by 50 percent, buying the stock at current share price will give an attractive PE ratio of only 7 times.

SCC will most likely sustain its earnings growth this year given the global demand for coal power generation from the post pandemic recovery.

4| Leisure and Resorts World Corp

Price: P2.41

Year-to-date gain: +61.7 percent

Leisure and Resorts World (PSE: LR) is the leading retail gaming company in the Philippines that provides multi-gaming platforms and products.

The company operates professional bingo games with a 35-percent market share. It also operates online gaming as well as casino and property ventures.

LR’s total revenues have been declining since it peaked at P10.6 billion in 2019. During the 2020 pandemic, total revenues fell sharply 66 percent to P3.6 billion and this continued to fall to P2.8 billion in 2021.

This declining trend in LR’s total revenues resulted in P1.3 billion net loss in 2020 from net income of P95.6 million in 2019. Last year, LR’s losses improved to P828 million despite the lower total revenues due to lower financing charges and operating expenses.

Early this year, LR received a new PAGCOR license to start a new business product called “BingoPlus,” a traditional bingo on a technology platform, which helped the company to recover its revenues this year.

LR’s total revenues for the first nine months grew almost three times to P5.5 billion due to the strong performance of its Bingo games from P1.8 billion revenues in the same period last year.

The recovery in LR’s total revenues resulted in a turnaround in net income of P180.5 million from a net loss of P455 million in 2021.

The rise in LR’s stock price was fueled by the company’s earnings recovery. If we annualize LR’s earnings this year, the company should be able to achieve net income of P240 million.

Although at this target net income, LR’s prospective PE ratio will still be comparatively high at 37 times, but given the momentum in the company’s earnings growth, LR’s net income next year should be stronger.

5| Now Corporation

Price: P1.98

Year-to-date gain: +53.5 percent

Now Corporation (PSE: NOW) is in the business of providing telecommunications, media and information technology products and services.

NOW derives its total revenues mostly from service fees. Since 2017, the company has been generating an average of P208 million in total revenues.

Last year, NOW’s total revenues slightly declined by 2.4 percent to P196 million from P201 million in 202, but net income was higher at P8.2 million from P5.07 million in 2020 due to lower operating expenses and financing charges.

This year, NOW’s total revenues for the first nine months continued to slow down, falling slightly by 1.7 percent to P147.3 million from P149.8 million in the same period last year.

But its net income sustained its growth by seven percent to P11.5 million from P10.8 million last year as management continued to rationalize its operations by lowering its operating expenses.

Trading of NOW shares has been active lately due to the approval of a grant by the United States Trade and Development Agency (USTDA) in favor of NOW’s subsidiary, NOW Telecom Company, to fund technical assistance for the development of Wireless Telephony Network to advance digital infrastructure in the country.

The technical assistance is seen to support NOW’s development and implementation of a mobile and fixed wireless network using 5G technology.

At NOW’s current share price of P1.98 per share, which has almost doubled from its recent low at P0.85 per share in October, its Price-to-Earnings (PE) ratio stands at 385.9 times.

This is comparatively lower than its PE ratio average in the past five years at 697 times. At this ratio, NOW’s stock price could rise to as high as P3.58 per share given the speculative momentum in the market.

Sometime in 2018, during the height of the third telco debate, NOW’s stock price went as high as P20 per share.

The stock price of NOW has corrected over the years, losing about 96 percent of its value from its peak, but with the prospect of 5G technology, the stock price could go back to its former glory.

Henry Ong, RFP, is an entrepreneur, financial planning advocate and business advisor. Email Henry for business advice [email protected] or follow him on Twitter @henryong888