Is something brewing with San Miguel Brewery (SMB) as of late? That is the question. Based on its price action for the last month or so, it looks like that the company is on to something. As you can see from its daily chart, SMB had sprung sharply from just below PHP 10.00 to a high of PHP 31.90 in an almost vertical fashion. After marking the said high, SMB has since consolidated into an ascending triangle. Remember that in an ascending triangle, the buyers are the ones who are more aggressive than the sellers as they continue to pick up the stock even at higher price levels. Therefore, a breakout to the upside is more likely than a breakdown. So in case the resistance at PHP 31.95 gets taken out, SMB could jet all the way to PHP 44.00. Moreover, one can also consider SMB’s movements in the last 2 months to be a pennant. If this is so, then it could even shoot up to PHP 54.00.
On the fundamental side, San Miguel Corporation (SMC) disclosed back in November 24, 2010 its plans to consolidate its liquor business by selling its stake in Ginebra San Miguel Inc. (GSMI) to SMB. SMC President Ramon Ang said that such deal could probably be reached in 3 months. Remember also that the Philippine Stock Exchange ordered SMB to comply with its 10-percent public ownership rule (presently, the public float only amounts to less than a percent). Increasing SMB’s public float to at least 10% would allow it to raise capitalization which it could use to finance its purchase of GSMI. In case you do not know, GMSI’s net income for the first three quarters of 2010 had risen by 29% to PHP 747.45 million from PHP 580.30 million during the same period in 2009. This increase, if sustained in the succeeding years, could be reflected in SMB’s bottom line. That is if SMB indeed goes on with the purchase.