Looser lockdown, approval of P20-B preferred shares issuance lift Jollibee’s stock price

By Ana Olivia A. Tirona, Researcher

IMPROVED market sentiment drove up Jollibee Foods Corp.’s share price last week due to the gradual reopening of the economy as well as news of the fastfood giant’s approved preferred shares.

A total of 3.43 million Jollibee shares worth P686.13 million were traded from Sept. 20 to 24, data from the Philippine Stock Exchange (PSE) showed.

The homegrown restaurant group closed at P202 apiece on Friday, up 2.5% from the P197 close in Sept. 17. Compared with the first trading day of the year, its stock price has grown by 3.9%.

In an e-mail interview, China Bank Securities Corp. Research Associate Zoren Philip A. Musngi said the stock’s price benefited from the “market-wide bullishness” of traders as quarantine levels eased down in the National Capital Region (NCR) — which now allow restaurants to accommodate dine-in customers at a capacity.

Meanwhile, Timson Securities, Inc. Trader Darren Blaine T. Pangan said market players reacted positively to the approval of Jollibee’s shelf registration of P20-billion perpetual preferred shares.

“Traders may have felt optimistic about this, because apart from using the proceeds to partially finance the redemption of their senior perpetual securities, the proceeds may also be used for store expansion,” Mr. Pangan said in a Viber message.

In a statement on Sept. 17, the Securities and Exchange Commission (SEC) approved 20 million cumulative, nonvoting, non-participating, nonconvertible and redeemable perpetual preferred shares of Jollibee priced at P1,000 each, which may be issued in tranches within three years. The shares will be listed and traded on the main board of the PSE.

For its initial issuance, Jollibee will offer P8-billion worth of preferred shares with an overallotment option of up to P4 billion. Its public offering is slated for Sept. 28 to Oct. 4.

The company may net up to P11.9 billion in proceeds from the first tranche, which will be used to partially finance the redemption of its senior perpetual securities and to fund its commissary and store expansion.

Last Wednesday, the PSE approved Jollibee’s shelf listing of these preferred shares, although the local bourse said its approval is still “subject to the company’s compliance with all of the conditions and post-approval requirements of the exchange.”

“Preferred share issuances typically don’t have any direct effect to the price movement of the firm’s common equity. Though based on price action, it appears that investors greeted the development with bullishness, considering that the issuance will improve the company’s debt structure, interest burden, and enable the firm to continue its expansion plans,” China Bank Securities’ Mr. Musngi said.

“On a long-term basis, Jollibee’s prospects remain promising due to continuing global economic recovery, the company’s strong brand profile and steady expansion of its presence across the world,” he added.

Jollibee reported around P976 million in attributable net income in the second quarter, turning around from the P10.29-billion net loss recorded in the same three months last year.

Compared with its second-quarter performance in 2019, the latest figure is a 6.2% decline from the P1.04 billion it generated pre-pandemic.

Revenues in the second quarter grew by 57.2% to P36.69 from P23.34 billion a year ago.

As of end-May, the Jollibee group has 3,209 stores in the Philippines. Globally, it has 5,815 branches under 17 brands in 33 countries.

The company aims to open 450 stores this year, the majority of which will be abroad, and at least 500 new stores yearly in the following years.

“The pandemic adversely affected the balance sheet of Jollibee due to the more cyclical nature of its business. Given that more than 50% of its sales are still derived from the Philippines, recovery back to its pre-pandemic levels of profitability will hinge mostly on the country’s vaccination rates and pandemic mitigation measures,” Mr. Musngi said.

“From a technical perspective, Jollibee appears to be nearing the conclusion of its three-month consolidation, with the possibility of retesting the P217.00 resistance once it’s able to break out of P208.00. Initial support is currently pegged at P190.00, while critical support is at P187.00,” he added.

For Timson Securities’ Mr. Pangan: “With the stock moving sideways over the past few weeks, we’ll have to watch if its resistance at the P206.00 area would be broken in the coming days. Otherwise, P190.00 — P193.00 seems to be the nearest support area,” he said.