Вы находитесь на странице: 1из 6

Stocks in Focus: TUE 18 SEP 2018

Philippine Market Strategy: Adjusting


estimates on rollover to 2019, higher risk-free
rate assumption (AS OF SEP 17, 2018)
INDICES
Expecting interest rates to stay elevated. We are increasing our risk-free rate assumption from
Close Points % YTD%
5.5% to 6.5% due to rising inflation and domestic interest rates. The Philippine 10-year bond rate PSEi 7,413.56 0.41 0.01 -13.38
is on the rise as can be observed from Exhibit 1. Rates are increasing due to rising inflation, higher All Shares 4,550.00 -5.30 -0.12 -8.82
budget deficit, rising Fed fund rates, and contagion from other emerging markets. Financials 1,649.22 -18.07 -1.08 -26.05
Holding Firms 7,204.48 -47.43 -0.65 -16.39
Industrial 11,071.53 122.59 1.12 -1.42
Adjusting FV estimates. Nevertheless, the negative impact of our higher risk-free rate Mining & Oil 9,557.27 -159.97 -1.65 -16.91
assumption was partly offset by the rollover of our estimates to 2019. For 2019, we forecast the Property 3,727.37 32.97 0.89 -6.30
PSEI’s EPS to grow by 11%. After factoring in the increase in interest rates and the rollover to Services 1,516.74 -0.77 -0.05 -6.36

2019, the median drop in the FV estimates of stocks in our coverage list reached 6.3%. Our end
Dow Jones 26,062.12 -92.55 -0.35 5.43
2019 PSEi target is 8,100. This is 9.3% higher than the PSEi’s current level of 7,413.56. S&P 500 2,888.80 -16.18 -0.56 8.05
Nasdaq 7,895.79 -114.25 -1.43 14.38

Other News: INDEX GAINERS


Ticker Company Price %

Economy: July cash remittances grow 5.2%; slightly higher than consensus URC Universal Robina Corp 145.30 2.83
JFC Jollibee Foods Corp 275.00 2.23
AC: AC expects Entrego to boost logistics business
RRHI Robinsons Retail Hldgs Inc 80.50 2.16
SMPH SM Prime Hldgs Inc 37.00 1.65
ALI Ayala Land Inc 41.60 1.46
Market Summary:
INDEX LOSERS
The PSEi ended flat on Monday, gaining only 0.41 points or 0.01% to close at 7,413.56. Ticker Company Price %
SECB Security Bank Corp 176.00 -3.30
Index gainers led decliners 16 to 13, while 1 issue remained unchanged. Meanwhile, sectors MEG Megaworld Corp 4.26 -2.74
AEV Aboitiz Equity Ventures Inc 47.00 -2.69
ended mixed, with Mining & Oil (-1.65%) leading the decliners and Industrial (+1.12%) leading
AGI Alliance Global Group Inc 12.44 -2.05
the gainers. Significant index gainers were URC (+2.83%), JFC (+2.23%), RRHI (+2.16%), SMPH RLC Robinsons Land Corp 20.50 -1.91
(+1.65%), and ALI (+1.46%). On the other hand, significant index decliners were SECB (-3.30%),
MEG (-2.74%), and AEV (-2.69%).
TOP 5 MOST ACTIVE STOCKS
Ticker Company Turnover
Value turnover decreased to Php3.9Bil from Php6.0Bil in the previous session. Meanwhile, BDO BDO Unibank Inc 228,677,800
foreigners continued to be net sellers, disposing Php251Mil worth of shares SMPH SM Prime Hldgs Inc 202,759,800
AC Ayala Corporation 196,285,900
GLO Globe Telecom Inc 171,719,000
ALI Ayala Land Inc 165,992,800

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside of
the COL Financial website as these may be subject to tampering or unauthorized alterations.
DAILY NOTES I PHILIPPINE EQUITY RESEARCH

TUE 18 SEP 2018

Stocks in Focus:

APRIL LYNN TAN, CFA


Philippine Market Strategy: Adjusting estimates on
VP & HEAD OF RESEARCH
rollover to 2019, higher risk-free rate assumption
Expecting interest rates to stay elevated. We are increasing our risk-free rate assumption
from 5.5% to 6.5% due to rising inflation and domestic interest rates.

The Philippine 10-year bond rate is on the rise as can be observed from Exhibit 1. Rates are
increasing due to:

Rising inflation. For the month of August, Philippine inflation hit 6.4%, exceeding consensus
forecast of 5.9%. This brought inflation for the first eight months of the year to 4.8%.
The significant increase in inflation was brought about by several factors including the
implementation of the tax reform program, higher oil prices, higher rice and food prices, the
weak peso and second round effects.

Higher budget deficit. The government’s budget deficit is expected to increase to 3.0% of
GDP this year and 3.2% of GDP next year due to the Build Build Build program which seeks to
increase spending on infrastructure from 5.4% of GDP in 2017 to 7.4% of GDP by 2022. The
higher debt requirement of the government is expected to push up interest rates.

Rising Fed fund rates. Fed fund rates are expected to increase by a total of 100 basis points
this year and 75 basis points next year in response to strong economic growth in the U.S. and
as the Fed brings rates back to normal levels.

Contagion from other emerging markets. Due to the rising yields in the U.S. brought about
by the higher Fed fund rates, funds are shifting out of emerging markets like the Philippines to
the U.S. causing emerging market currencies to weaken and bond rates to climb.

Since factors pushing up rates are expected to remain in place, interest rates will most likely
stay elevated.

COL Financial Group, Inc. 2


DAILY NOTES I PHILIPPINE EQUITY RESEARCH

TUE 18 SEP 2018

Exhibit 1: Philippine 10-year T-bond rate

Source: Bloomberg

Adjusting FV estimates. Nevertheless, the negative impact of our higher risk-free rate
assumption was partly offset by the rollover of our estimates to 2019. For 2019, we forecast the
PSEI’s EPS to grow by 11%. After factoring in the increase in interest rates and the rollover to
2019, the median drop in the FV estimates of stocks in our coverage list reached 5.7%.

Our end 2019 PSEi target is 8,100. This is 9.3% higher than the PSEi’s current level of 7,413.56.

Due to the reduction in our FV estimates resulting from the higher risk-free rate assumption,
partly offset by the rollover to 2019, we downgraded our recommendations on DNL, PGOLD,
SMPH and GLO from BUY to HOLD. Meanwhile, we are downgrading our recommendation on
URC and RWM from HOLD to SELL due to valuations. We are maintaining our recommendation
on the rest of the stocks in our coverage list, although capital appreciation potential has
decreased.

COL Financial Group, Inc. 3


DAILY NOTES I PHILIPPINE EQUITY RESEARCH

TUE 18 SEP 2018

Exhibit 2: Change in FV estimates


Price FV estimate Rating FV estimate Rating
Banks and Financials
BDO 117 137 HOLD 127 HOLD
BPI 86 105 BUY 99 BUY
CHIB 30.35 39 BUY 36.5 BUY
EW 12.66 19.1 BUY 17 BUY
MBT 68.6 103 BUY 94.5 BUY
PNB 44.8 66.5 BUY 58 BUY
SECB 182 227 BUY 211 BUY
UBP 70.05 85.6 HOLD 79 HOLD
Commercial and Industrial
ABS 21 43.1 BUY 41.7 BUY
CEB 71.05 92.1 BUY 86 BUY
CHP 3.04 3.8 BUY 3.2 HOLD
EAGLE 15.7 17.8 BUY 16.8 HOLD
EEI 9 11.8 BUY 11 BUY
GMA7 5.42 8.5 BUY 7.8 BUY
ICT 94.2 98.5 HOLD 99.36 HOLD
IMI 12.24 14.5 HOLD 14.9 HOLD
MWC 23.75 29.2 HOLD 25.8 HOLD
PCOR 8.92 11.4 BUY 10.1 HOLD
Conglomerates
AC 898 1,090.00 BUY 1,055.00 BUY
AEV 48.3 51.2 HOLD 48.65 HOLD
AGI 12.7 19.75 BUY 18.78 BUY
COSCO 5.7 11.1 BUY 10.5 BUY
DMC 12.38 12.8 HOLD 12.72 HOLD
FPH 65 138.00 BUY 125.58 BUY
GTCAP 815 1,260.00 BUY 1,150.00 BUY
JGS 52 58.3 HOLD 53.07 HOLD
MPI 5.28 8.21 BUY 7.83 BUY
SM 935 891 HOLD 906 HOLD
Consumer
CIC 42 49.5 HOLD 49.1 HOLD
CNPF 13.8 18.4 BUY 17.8 BUY
DNL 10.14 11.6 BUY 10.8 HOLD
EMP 7.25 7.39 HOLD 7.18 HOLD
JFC 269 292 HOLD 268 HOLD
MAXS 11.8 21.6 BUY 20.2 BUY
PGOLD 45 51 BUY 47 HOLD
PIZZA 12.4 14.4 HOLD 13.5 HOLD
RRHI 78.8 96 BUY 94 BUY
URC 141.3 122 HOLD 111 SELL
Gaming
BEL 2.91 3.29 HOLD 3.15 HOLD
BLOOM 8.92 14.1 BUY 13.74 BUY
MRP 6.96 12.12 BUY 12.03 BUY
COL Financial Group, Inc. 4
RWM 5.9 4.08 HOLD 3.57 SELL
DNL 10.14 11.6 BUY 10.8 HOLD
EMP 7.25 7.39 HOLD 7.18 HOLD
JFC 269 292 HOLD 268 HOLD
MAXS 11.8 21.6 BUY 20.2NOTES IBUY
DAILY PHILIPPINE EQUITY RESEARCH
PGOLD 45 51 BUY 47 HOLD
TUE 18 SEP 2018 PIZZA 12.4 14.4 HOLD 13.5 HOLD
RRHI 78.8 96 BUY 94 BUY
URC 141.3 122 HOLD 111 SELL
Gaming
BEL 2.91 3.29 HOLD 3.15 HOLD
BLOOM 8.92 14.1 BUY 13.74 BUY
MRP 6.96 12.12 BUY 12.03 BUY
RWM 5.9 4.08 HOLD 3.57 SELL
Mining
NIKL 4.66 5.3 HOLD 5.31 HOLD
PX 4 7.4 HOLD 7.03 HOLD
SCC 29 46 BUY 44.51 BUY
Power
AP 36.75 44.1 BUY 43.4 BUY
FGEN 16.66 30.20 BUY 27.38 BUY
MER 368 348 HOLD 324.4 HOLD
Property
ALI 41 52.12 BUY 49.33 BUY
FLI 1.47 1.95 BUY 1.85 BUY
MEG 4.38 6.15 BUY 5.84 BUY
RLC 20.9 26.85 BUY 24.89 BUY
SMPH 36.4 37.9 BUY 33.7 HOLD
VLL 6.3 7.61 BUY 7.18 BUY
Telecoms
GLO 2,192.00 2,310.00 BUY 2,050.00 HOLD
TEL 1,415.00 1,750.00 BUY 1,620.00 BUY

Other News:

RESEARCH ANALYSTS Economy: July cash remittances grow 5.2%; slightly higher than
ANDY DELA CRUZ consensus
JOHN MARTIN LUCIANO
FRANCES ROLFA NICOLAS Cash remittances from Overseas Filipinos reached US$2.4Bil in July, up 5.2% y/y. This is slightly
JUSTIN RICHMOND CHENG higher than consensus forecast of 5.1%. Remittances from land-based workers grew by 4.5% y/y
ADRIAN ALEXANDER YU
to US$1.9Bil, while remittances from sea-based workers expanded by 7.8% y/y to US$511Mil.
Meanwhile, the primary contributors to the growth by country were the United States, Canada,
United Kingdom, and Germany. On a year-to-date basis, cash remittances climbed 3.0% y/y to
US$16.6Bil.

AC: AC expects Entrego to boost logistics business

AC disclosed that AC Infrastructure Holdings corp. will be forming an investment holding


company with German firm Brillant 1267 GmbH & Co. Vierte Verwaltungs Kg to manage its
logistics units. The new holding firm will carry the logistics operations of Entrego (currently
handles the last mile deliveries for Zalora). The current goal is for it to be one of the leading
third-party logistics. (source: Businessworld)

COL Financial Group, Inc. 5


DAILY NOTES I PHILIPPINE EQUITY RESEARCH

TUE 18 SEP 2018

IMPORTANT RATING DEFINITIONS


BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the next six to
12 months.

HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might be poor
or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the next six to twelve
months.

SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.

IMPORTANT DISCLAIMER
Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount invested.
Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said information may be
incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the report and are subject to change
without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. COL Financial and/
or its employees not involved in the preparation of this report may have investments in securities of derivatives of the companies mentioned in this report and may trade
them in ways different from those discussed in this report.

COL RESEARCH TEAM

APRIL LYNN TAN, CFA


VP & HEAD OF RESEARCH
april.tan@colfinancial.com

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA


DEPUTY HEAD OF RESEARCH SENIOR RESEARCH MANAGER SENIOR RESEARCH MANAGER
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com

ANDY DELA CRUZ JOHN MARTIN LUCIANO FRANCES ROLFA NICOLAS


SENIOR RESEARCH ANALYST SENIOR RESEARCH ANALYST RESEARCH ANALYST
andy.delacruz@colfinancial.com john.luciano@colfinancial.com rolfa.nicolas@colfinancial.com

JUSTIN RICHMOND CHENG ADRIAN ALEXANDER YU


RESEARCH ANALYST RESEARCH ANALYST
justin.cheng@colfinancial.com adrian.yu@colfinancial.com

COL FINANCIAL GROUP, INC.


2402-D EAST TOWER, PHILIPPINE STOCK EXCHANGE CENTRE,
EXCHANGE ROAD, ORTIGAS CENTER, PASIG CITY
PHILIPPINES 1605
TEL NO. +632 636-5411
FAX NO. +632 635-4632
WEBSITE: www.colfinancial.com

COL Financial Group, Inc. 7