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Equity Security
Market
In this topic:
• Philippine Stock Exchange
• Corporate Compliance
• Disclosure Rules
• Platforms for Capital Market
• Market Capitalization
• Share Valuation
• One Period or Multiple Period Valuation Model
• Dividend-Based Valuation Techniques
• Zero-Growth Model

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Philippine Stock Exchange
• It is the national and sole stock exchange of the Philippines.
• PSE is considered as one of the oldest stock exchange in Asia starting in 1922 when it was still
Manila Stock Exchange.
• Composed of a 15-man Board of Directors with Jose T. Pardo as Chairman.
• It was created in 1992 due to the merger of the country’s two former stock exchanges;
• The Manila Stock Exchange (MSE) – August 8, 192
• The Makati Stock Exchange (MkSE)- May 2, 1963

• PSE has been granted a “Self-Regulatory Organization” (SRO)

• Formerly, PSE used to be an on-profit, non-stock , member-governed organization.
• Uses computerized book-entry system.
• PSE regulates trading activities through the Capital Markets Integrity Corporation (CMIC)

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Capital Markets Integrity Corporations (CMIC)
• A spinoff of the Market Regulation Division of PSE, to monitor and penalize trading
participants that violate the Securities Regulation Code and its implementing rules and
regulations; the Anti-Money Laundering Law and its implementing rules and
regulations; the Code of Conduct and Professional Ethics for Traders and Salesman; the
CMIC Rules and other relevant laws and regulation.
• It oversees the market through a world-class and sophisticated surveillance system
called Total Market Surveillance (TMS).
• Total Market Surveillance (TMS) is equipped with the critical elements of the
surveillance process and provides a robust monitoring cand warning mechanism.

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 Other Initiatives to Safeguard Interests of the
Investors
 Enforcement of Static and Dynamic Threshold to Protect Against Unusual
Share Price Fluctuations
Dynamic Threshold is the maximum allowable price difference between
an update in the Last Traded Price (LTP) of a given stock or group of stock.
 Disclosure Requirements for Publicly Listed Companies
 Securities Investors Protection Fund, Inc or SIPF
SIPF seeks to build and enhance investors’ confidence in the market and is
envisioned to protect the investing public from extraordinary losses.

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 Corporate Compliance
Companies who plan to list publicly in the Philippine Stock Exchange should:
Comply with the laws, regulations and full disclosure rules and policies of the Philippine
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government.
2 Have standards of quality, operations, and size under efficient and effective management.
Conduct issuance, offering and marketing of securities in a fair and orderly manner and ensure that
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securities are widely and equitably distributed to the public.
Give adequate, fair, and accurate information about the company and its securities to the general
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public to enable them to make informed investment decisions.

Ensure that directors and officers act in the interest of all security holders as a whole, particularly
where the public represents only a minority of the securityholders or a where a director or security
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holder owning a substantial amount of shares has a material interest in a transaction entered into by
the company.

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General Criteria for
Admission to Listing
in the PSE
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 a. Track Record of Profitable b. Exception to the 3-year Track
Operations Record Requirement

c. Positive Stockholders’ Equity d. Market Capitalization

e. Operating History f. Minimum Capital Requirement

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 g. Minimum Offering to the Public h. Minimum Number of Stockholders

j. Full Payment of Issued and

i. Valuation of Assets Outstanding Shares

k. Investors Relation Program

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 Market Capitalization Public Offer

Not exceeding P500M 33% or P50M whichever is higher

Over P500M to P1B 25% or P100M whichever is higher

Over P1B to P5B 20% or P250M whichever is higher

Over P5B to P10B 15% or P750M whichever is higher

Over P10B 10% or P1B whichever is higher

 g. Minimum Offering to the Public h. Minimum Number of Stockholders

j. Full Payment of Issued and

i. Valuation of Assets Outstanding Shares

k. Investors Relation Program

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Corporate Website contains at the minimum, the following information

Company Information  Company News

 Financial Report  Disclosures

 Investor FAQs  Investor Contact

 Stock Information
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Disclosure Rules
• The basic principle of the Exchange is to ensure full, fair, timely and accurate
disclosure of material information from all listed companies.

1 Classification of Corporate Disclosure 2

Structure Corporate Unstructured Corporate

Disclosure Disclosure

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Classification of Corporate Disclosure
Structured Corporate Disclosures are reportorial
requirements submitted within specific time frames
1 such as annual, quarterly and
Monthly reports.

Structure It includes the following

1. Annual report (SEC Form 17-A)
Corporate 2. Three Quarterly Reports (SEC Form 17-Q)
3. Reports on Beneficial Ownership
Disclosure 4. Other periodical reports to update and keep
current information on the operation
of the business and financial condition of the
company
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Disclosure Rules
• The basic principle of the Exchange is to ensure full, fair, timely and accurate
disclosure of material information from all listed companies.

1 Classification of Corporate Disclosure 2

Structure Corporate Unstructured Corporate

Disclosure Disclosure

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Classification of Corporate Disclosure
Structured Corporate Disclosures are reportorial
requirements submitted within specific time frames
1 such as annual, quarterly and
Monthly reports.

Structure It includes the following

1. Annual report (SEC Form 17-A)
Corporate 2. Three Quarterly Reports (SEC Form 17-Q)
3. Reports on Beneficial Ownership
Disclosure 4. Other periodical reports to update and keep
current information on the operation
of the business and financial condition of the
company
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Classification of Corporate Disclosure
Structured Corporate Disclosures are reportorial
requirements submitted within specific time frames
1 such as annual, quarterly and
Monthly reports.

Structure It includes the following

1. Annual report (SEC Form 17-A)
Corporate 2. Three Quarterly Reports (SEC Form 17-Q)
3. Reports on Beneficial Ownership
Disclosure 4. Other periodical reports to update and keep
current information on the operation
of the business and financial condition of the
company
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Disclosure Rules
• The basic principle of the Exchange is to ensure full, fair, timely and accurate
disclosure of material information from all listed companies.

1 Classification of Corporate Disclosure 2

Structure Corporate Unstructured Corporate

Disclosure Disclosure

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Classification of Corporate Disclosure

Are communications of corporate developments as 2

they happen and are intended to update the
investing public on the activities, operations and
business of the company.
Unstructured
-The objectives is for the company to update the
investing public with any material fact or event that
Corporate
occurs which would reasonably be expected to Disclosure
affect investors’ decision in relation to the trading
of its securities.

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 Corporate Website contains at the minimum, the following information

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 Corporate Website contains at the minimum, the following information

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 Corporate Website contains at the minimum, the following information

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 Corporate Website contains at the minimum, the following information

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Platform for Capital
Market
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1. Conventional Brokerage
• In conventional brokerage, investors buy or sell share by
opening an account with a stockbroker. The broker will
buy and sell shares in behalf of the investor in exchange
for payment called commission.

• Commissions are normally percentage of the amount

being traded.

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2. Online Trading
• Online brokers are shifting towards digital
platforms to trade shares. However, they do
not offer any investment advice and other
services that a traditional broker can give.

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 3. Mutual Funds
• Mutual Funds are an investment company that pools
money from various investors and invest them to
different securities based on the investment objective
of the fund.
• It allows investors to diversify their portfolio since
mutual funds hold share in different companies.

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Market Capitalization
Market Capitalization refers to the total market value of
all outstanding shares of a company.
It allows investors to benchmark the relative size of the
company against another.
Reflects how much investors are willing to pay for the
shares.
Formula: Total Outstanding Shares x the prevailing
market price per share.
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 Example:
If a company has 25 million shares outstanding
and each is worth P100, the company’s market
capitalization amounts to 125 billion.

Answer: P2.30 billion.

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Share Valuation
• Share Valuation Techniques are commonly grounded in
identifying how much cash flow can be received in the future
if the investor purchases the share now.

• The value of share is equivalent to the present value of the

future cash flows that can be received from an investment.
This approached is commonly called as the discounted cash
flow approach.

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One-Period or Multiple Period Valuation Model
Investors look at share purchases to receive a greater return. If
the investor intends to sell the share after a fixed number of years,
he/she holds the share.

Formula:

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Illustration 1:
Investor TBA want to buy shares of Flix Company. When he looked it up at
the stock exchange, Flix Company can be bought at P30 per shares. Further
research showed that dividends are stable at P5 per year end and it is
expected to be resold at P40 per share after a year. Investor TBA expects a
10% return on his investments and only expects to hold Flix Company share
for a year.
What is the value of the shares based on investor TBA’s computation?

Answer: The value of the share currently is at P40.91.

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Dividend-Based Valuation Techniques
• The most common share valuation techniques is
through dividends.
• Future Dividends are the most relevant input for
share valuation.
• The basic dividend-based valuation model can be
further interpreting by anticipating how much
dividend will grow in the future.
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 3 Models

Zero-Based Model Constant Growth Variable Growth

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3 Models • It assumes that the dividend will be fixed
and not change anymore in the future.
• This is the simplest approach to share
valuation.
• It is very useful in valuing preference shares
Zero-Based are expected to be received as long as the
shareholders hold the stock.
Model
Formula:

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 3 Models

Constant Growth Variable Growth

Zero-Based Model

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Thank you.
Members:
Ona, Christel Joyce
Pacia, Jade
Paz, Riza Lyn
Protacio, Andrei
Reata, Mharlyn Joy

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