Double Dragon (DD) has been the talk of the town last week and even the week before. It rose from P56 on Monday to P67.75 on Friday close reaching an all-time peak of P80 on Thursday, July 10. If you bought shares on Monday and sold it on Friday, you could have gained about 21% in just five days. If you managed to time it so perfectly that you were able to sell at P80, that would be an astonishing 43% profit.
Extraordinary Gains Since IPO
Since its IPO (initial public offering) in April 2014, DD has been unstoppable. Do you realise that its share price already climbed 40-fold from P2 to P80? My calculator says its 3900 percent growth! How on earth this ever happened? Imagine that if you invested P100 thousand two years ago, your money would be almost P4 million by now! Traders who played this stock last year and sold it after a short time were able to make a lot of money. But regrets hit them when they saw the stock kept on soaring. Many long-term investors who bought stocks earlier and didn’t bother to check their portfolio for ages were shocked by the enormous percentage profit they have accumulated through time. They are the real winners!
Change in Ownership
While doing my research, I found out that BDO Peso Balanced Fund is one of the top shareholders of Double Dragon with 6.28% ownership. This mutual fund recently acquired 4,419,091 shares of DD as of the end of February this year.
The Vanguard Group, Inc. bought additional 2,177,300 shares in April making its total DD shareholdings to about 10,927,200.
On the first week of June, iShares Core MSCI Emerging Markets ETF acquired almost P6 Million worth of shares.
In general, Double Dragon seems to be still attractive to institutional investors. Net foreign buyers outnumbered the sellers resulting for the stock price to continue surging.
Is Double Dragon (DD) Fundamentals Good?
Let’s have a quick look at the basic fundamental indicators of this company as of end of fiscal year 2015.
P/E Ratio: 266.31
Price to Book Ratio: 19.76
Market Capitalization: P151.06 Billion
Dividend Yield: 0.07%
Gross Margin: +65.30%
Net Margin: +50.04%
Given the figures above, DD turns out to be the most expensive real estate stock in the Philippine Stock Exchange.
Let’s do a bit of comparison on how DD is valued in relation to its competitors. Ayala Land, Inc., one of the largest real estate developers in the Philippines has a P/E ratio of 29.92. MegaWorld Corp. has a P/E ratio of only 13.50 and a market capitalization of P141.85 Billion. Did you just see that? With its current price, DD's market capitalization of P151.06 Billion is even larger than MEG’s. As we all know, market capitalization figure is used to determine a company’s size. Is the market telling us that DD which was established only in December 2009 became already larger than MEG which was founded in August 1989 and which already had a proven track record and consistent profitability? Or is this just one of the good examples of irrational behaviour of the stock market?
Many traders ignored the figures and took advantage of the hype instead. While many made a lot of money, I'm afraid there were newbie investors who were left hanging at the peak for sure (ipit as they say). What's your move this coming week?
To end this article, I am going to pose a question here. Are you going to buy a company which is trading at 266.31 times its earnings?