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Monday, April 15, 2024

Budget overrun to temper appetite for PLDT–analyst

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Investors might become reluctant to put their hard-earned money into PLDT Inc. after its controversial P48-billion “budget overrun” announcement on Friday, with foreign investors already weighing in on the issue over the weekend.

First Grade Finance Inc. Managing Director Astro C. del Castillo believes that investors will be risk-averse toward one of the Philippines’s blue-chip telco stocks, especially since the issue is far from conclusion.

“It will definitely bite them— it’s not a small amount,” he said in a phone interview. “PLDT is far from over in searching for more skeletons in their closet, until then investors will somehow be risk averse considering that it has yet to conclude.  I’m sure there are still bumps along the road.”

On Friday, PLDT disclosed that it had a “budget overrun” of P48 billion, which represents 12.7 percent of its total capital expenditures (capex) spend of P379 billion over the last four years.

PLDT heavily invested in its network over the past four years, building a fiber optic cable footprint of over 1 million kilometers, covering almost all of the provinces and municipalities with a mix of 3G, 4G, and 5G.

The overruns, uncovered through “ongoing internal forensics,” were incurred when PLDT Chairman Manuel V. Pangilinan was the concurrent president and CEO of the telco titan.

He stepped down in mid-2021 and was replaced by Alfredo S. Panlilio, who was then chief revenue officer and president of subsidiary Smart Communications Inc.

Despite this, the telco highlighted that, as far as initial investigations are concerned, “fraudulent transactions, procurement anomalies, or loss of assets arising from the capex spend” are “not uncovered.”

“The good thing is at least PLDT has realized some oversight actions that they need to address. But somehow there will be a negative reaction, you saw a knee-jerk reaction in New York on Friday,” del Castillo said.

Data from the New York Stock Exchange (NYSE) showed that PLDT’s depository receipts closed at $26.81 apiece on Friday in the United States, down by 2.44 percent from its previous close.

Investors, del Castillo, said may “opt to stay away or opt to sell,” their stake in PLDT given the situation. However, some may also take advantage of the expected decrease in stock prices, “but not until the fat lady sings or when the dust settles.”

“It will hound them for the next few months, until the so-called final audit has been concluded. It will definitely affect expansion plans possible moving forward. Considering they have to reinstitute a new procedure to protect their financial assets,” he said.

PLDT has started “requesting” its vendors for the “reduction of outstanding work.”

“They will eventually adjust moving forward, especially for their capex and other projects,” del Castillo said.

As part of initial oversight actions, PLDT is undertaking a “management reorganization process.”

A day before the announcement, PLDT appointed Joseph Ian G. Gendrano as Chief Technology Officer, Danny Y. Yu as the Group Controller, and Emmanuel Ramon C. Lorenzana as Chief Transformation and Customer Officer.

Before Gendrano’s appointment, PLDT only had a “chief technology advisor” through Joachim Horn. Yu most likely replaced Gil Samson D. Garcia, who was sitting as “officer-in-charge of financial reporting and controllership,” while Lorenzana’s position is new.

“Heads will continue to roll considering that the amount definitely is not only an oversight or overlooked by an individual, but most probably by a group of individuals,” del Castillo said.

When sought for clarification, Panlilio simply replied that the company “will have a briefing this week to answer all the questions.”

“Core business remains to be strong,” he said.

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