OUTLIER: ABS-CBN franchise rejection drives trade volume of rival GMA

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By Lourdes O. Pilar, Researcher

NEWS of Philippine lawmakers rejecting the franchise application of ABS-CBN Corp. drove market players to take positions — and later profits — on the stock of rival GMA Network, Inc. last week.

A total of 100.65 million shares of GMA stock worth P682.51 million exchanged hands on the trading floor from July 13 to 17, data from the Philippine Stock Exchange showed.

“GMA Network, Inc. is among the active stocks [last] week as the media outfit stands to benefit most from media business after its main rival station ABS- CBN was denied of a franchise by Congress,” said Diversified Securities, Inc. Equity Trader Aniceto K. Pangan in an e-mail.

“[A] number of investors took profits in the first two days as prices sizzled with the announcement as it gave the investors the opportunity to gain especially in these challenging times,” Mr. Pangan added.


In a separate e-mail, Mercantile Securities Corp. Analyst Jeff Radley C. See shared this view: “The market took their chance to take profit on GMA Network as the stock is not really active for years.”

Voting 70 to 11, the House of Representatives committee on legislative franchise on July 10 denied the 25-year extension plea of ABS-CBN, saying it is “undeserving” of the privilege. The broadcast network is known to be critical of President Rodrigo R. Duterte.

Last Wednesday, ABS-CBN released a statement that it would be implementing a retrenchment program effective Aug. 31, following Congress’ non-renewal of its franchise.

From its closing price of P6.03 in July 10, GMA’s stock price went up as high as P8.50 last Monday before settling at P6.65 that day. The remainder of the week saw most market players taking profits with the stock’s closing price reaching P5.36 on Wednesday before ending the week at P5.53.

GMA reported a 19% decline in its first-quarter attributable net income to P583.4 million from P721.8 million in the same period last year. Its total revenues were likewise down by 7% to P3.5 billion from P3.8 billion previously.

Broken down, its advertising and subscription revenues were down 7% (to P3.3 billion from P3.5 billion) and 11% (P243 million from P274.5 million). Production revenue also decreased by 12% (P10.7 million from P12.1 million) while those from distribution and content provisioning increased by 52% (P23.7 million from P15.6 million).

“As the second quarter remains a challenge to all companies due to the two-month enhanced community quarantine that slowed down the economic activity, we may see a consolidation in price in the near term, but outlook remains positive as the economy continues to reopen with ease in restrictions,” Diversified Securities’ Mr. Pangan said.

“Definitely, we could see [GMA’s] advertising revenues increase as the economy reopens with further ease in restrictions, especially with the absence of its main rival,” he added.

Mr. Pangan placed the GMA stock’s short-term price support at P5.30 per share and resistance at P5.76 per share.

For Mercantile Securities’ Mr. See: “Revenue more or less will be the same or even might go down due to COVID-19 (coronavirus disease 2019).”

Mr. See pegged the stock’s support levels at P5.2 and P4.8, and resistance levels at P5.76 and P6.65.