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Make Easy Money On Digitel (DGTL)

Apr. 22, 2011 2:06 AM ET
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lytman02's Blog
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digital telecommunications philippines inc., digitel, DGTL philippine stocks, Philippine Long Distance Telephone Co., PLDT, TEL philippine stocks, gokongwei, ron acoba, sun cellular, JG summit, JGS philippine stocks, tender offer, manny pangilinan, daily stock picks, stock market trading

Investing in the stock market carries substantial risks. That is why perhaps a lot of Filipinos, who are generally conservative in nature, are turned off by it. But with Digitel (DGTL), one can make easy money without taking much risk. Let me tell you how.

Last March 28, Gokongwei-led Digital Telecommunications, Inc. or Digitel zoomed to a high of PHP 2.00 from PHP 1.60 on take over rumors by Manny Pangilinan-led Philippine Long Distance Telephone Company (PLDT) or TEL in the Philippine Stock Exchange. The next day, however, DGTL’s shares fell back to earth to a low of PHP 1.54 when the details of PLDT’s buy-out were reported.

In the report, JG Summit Holdings, the mother company of Digitel, the operator of Sun Cellular, would give up 51.55% of the latter to PLDT in a share-swap deal with a value of PHP 74.1 billion that would give JGS a 12.8% ownership in TEL. Under this transaction, PLDT is expected to conduct a tender offer purchase for DGTL’s shares at PHP 1.60 from minority holders by June 30, 2011. In other words, PLDT will buy it from the market at that indicative price.

An arbitrage opportunity is presented here since DGTL’s shares are only trading at PHP 1.54. This will give you a potential 3.89% gross earnings in a little more than 2 months. This, of course, is way better than the 3% or so that you can get by placing your money in a time deposit or in a Special Deposit Account (SDA) in a year in any commercial bank!

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