Stock Pick: Semirara Mining Corp.

Recommendation: BUY/ ACCUMULATE

Semirara Mining Corp. December 23, 2008 = 100
Share Price	51
High (past 52 weeks)	51
Low (past 52 weeks)	22.25
Market Cap. (M)	14,156.21
Price-Earnings Ratio	10.98
Earnings Per Share	2.87
Source: Technistock

INVESTORS are advised to accumulate shares of coal producer Semirara Mining Corp. as the stock remains relatively cheaper than any other mining stock, AB Capital Securities, Inc. said.

“The stock is cheaper at a price-earnings ratio of 10x and this makes Semirara shares a good buy,” said Prince Anthony A. Yeung, an analyst at the brokerage firm.

Mr. Yeung also said a possible pullback in the Philippine Stock Exchange index (PSEi), which already broke the 3,000 level this year, is likely so that investors should start accumulating at this time.

Among others, Semirara has shown consistency in its business growth. Coal revenues in the nine months to September reached P9.2 billion surpassing 2008’s full-year sales of P8.5 billion. Its strong sales were due to increases in production volume and better selling prices.

“This trend has actually been observed for the last four years, where the company’s financial performance always equal or even breach its total sales for the previous year,” Mr. Yeung said.

An expanded market, higher volume of sales and an improvement in the quality of its products are contributing to Semirara’s growth.

Mr. Yeung estimates Semirara’s coal revenues to top P11 billion by yearend, translating to a net income of P1 billion.

While most of listed mining firms recorded net losses for the third quarter, Semirara bucked the trend by profiting P580.6 million during the July to September period, more than triple last year’s P172.8 million.

On Wednesday last week, shares of Semirara closed at its intraday high of P51 apiece, extending a rally for the third straight trading day.

Semirara shares have gained by 43.7% so far this year from just P35.50 apiece at the first trading day of January. The stock price, however, is 1.9% off its 52-week high of P52 recorded on Dec. 1.

Semirara is also set to mine an additional 7,200 hectares in Caluya and Sibay Islands in Antique, after the Department of Energy (DoE) approved its application to amend its coal operating contract (COC) last week.

In a Dec. 21 disclosure to the stock exchange, the DMCI Holdings, Inc. unit said the DoE had approved the amendment of the company’s COC No. 5 to add 3,000 hectares in Caluya Island and another 4,200 hectares in Sibay Island, both in Antique.