Alerts

   Adrian Alexander Yu

Reiterate HOLD rating After factoring in a higher risk premium of 9.0% from 5.5%, considering the risks posed by the coronavirus pandemic, we reduced our FV estimate of GLO by 11.6% to Php1,900/ sh from Php2,150/sh. We continue to like GLO because of its a) dominant position in the wireless business; b) strong growth of its fixed line business; c) resiliency of demand for data despite the COVID-19 pandemic; and d) the attractive growth potential of the financial technology sector where GCash is a leader. Nevertheless, at its current price of Php2,230/sh, valuations are no longer attractive. We recommend investors to wait for prices to go below Php1,700/sh before buying the stock.

   George Ching

We have a BUY rating on DMC with a FV estimate of Php8.77/sh. While near term sentiment on DMC will most likely remain negative due to the uncertainties on Maynilad, we believe that concerns are overblown given DMC’s depressed valuation. Based on DMC’s current market price of Php4.29/sh, the company is trading at a 56.5% discount to its NAV. This implies that Maynilad, real estate, construction and nickel mining businesses are worthless, and investors are only paying for SCC (It accounts for 107% of DMC’s current market capitalization). Based on DMC’s current market price, upside to our FV estimate is significant at 104.4%. Even if we assumed the worst-case scenario where Maynilad would become worthless, capital appreciation potential based on DMC’s current price is still 89% to Php8.09/sh.

   Justin Richmond Cheng, CFA

April 15, 2020. Downgrading to HOLD; wait for pullbacks to buy Fundamentally, we continue to like DNL because of its successful move to grow the share of its high margin products and its resilience to rising input costs and exchange rate volatility. However, we are downgrading our rating on DNL from BUY to HOLD given the significant rally in DNL’s share price. Recall that two weeks ago, we upgraded our rating on DNL to a BUY despite reducing our earnings and FV estimates to account for the impact of COVID-19 and a higher risk premium. Since then, DNL’s share price has rallied by nearly 20%, and the stock is also ~48% up from its low. Hence, upside to our new FV estimate of Php6.0/sh is minimal at 2%. We recommend clients to wait for pullbacks closer to our new buy below level of Php5.2/sh before buying.

   Richard Lañeda, CFA

April 08, 2020 The median reduction in our 2020 earnings forecast is 27.3%, while the median reduction in our FV estimate is 29.3%. For 2020, we now forecast earnings to fall by a median rate of 18.2% compared to year ago levels. This is compared to our previous forecast of a 12% growth in earnings for 2020. Even with the downgrade, most stocks are still trading significantly below their fair value estimates. Median capital appreciation potential based on stocks’ current price and our new FV estimate is still 21.2%. However, stocks belonging to sectors that are resilient to the crisis have rallied significantly from their March lows and are no longer attractively valued (telcos, consumer staples, retailers of basic goods). Wait for pullbacks before buying the said stocks.

   George Ching

In an interview with Bloomberg, ICT CEO Enrique Razon said that container volume across ICT’s port porfolio has been negatively impacted by the COVID-19 pandamic. For its flagship port MICT, Mr. Razon said that volume was down in 1Q20. MICT’s volume was also hampared by port congestion since the beginning of the lockdown, although volume is already sligtly improving as the government imposed new guidelines to alleviate port congestion. Across ICT’s entire port portfolio, total volume saw a 10%-15% decline in March, and the company expects decline to accelerate further in April. In terms of geographic location, ICT’s ports in Latin America (Mexico, Ecuador, Brazil, Colombia) suffered the worst decline. Mr. Razon said that the extend of the decline in volume will depend on the duration of the COVID-19 pandemic. Furthermore, he also warned that it will take some time for consumer demand to return to normal level even when the enhanced community quarantine in Luzon is lifted. Based on our forecast, we expect the COVID-19 to significantly bring down ICT’s volume for 2Q20, but to start recovering in 2H20. For the full year 2020, we estimate ICT’s throughput volume for 2020 to decline by 1%. We reiterate our HOLD rating on ICT with a FV estimate of Php96.8/sh. Based on its current market price of Php73.75/sh, capital appreciation potential is significant at 31%. However, we are maintaining our HOLD rating on ICT given the significant downside risk on global trade brought about by the COVID-19 outbreak. With the exception of its port in Argentina, the success of ICT’s greenfield ports (Australia, Congo, Papua New Guinea and Colombia) will be the key earnings growth driver for the company in the next few years as these new ports will have a combined capacity of 3Mil TEU, equivalent to 29% of ICT’s total volume in 2019. However, the near-term outlook of the said ports has deteriorated given the COVID-19 pandemic.

   Justin Richmond Cheng, CFA

April 13, 2020. Maintain BUY rating. We currently have a BUY rating on PGOLD with a FV estimate of Php43.50/sh. PGOLD is one of the most resilient companies amidst the COVID-19 outbreak in the country due to its defensive nature that focuses on selling basic, shelf-stable goods. Hence, the company’s 2020 growth prospects look robust given the increased demand for its goods. Moreover, long term prospects also remain robust for PGOLD given its strong positioning in the grocery retail industry. We recommend clients to buy on pullbacks closer to our buy below level of Php37.8/sh.

   George Ching

The median reduction in our 2020 earnings forecast is 27.3%, while the median reduction in our FV estimate is 29.3%. For 2020, we now forecast earnings to fall by a median rate of 18.2% compared to year ago levels. This is compared to our previous forecast of a 12% growth in earnings for 2020. Even with the downgrade, most stocks are still trading significantly below their fair value estimates. Median capital appreciation potential based on stocks’ current price and our new FV estimate is still 21.2%. However, stocks belonging to sectors that are resilient to the crisis have rallied significantly from their March lows and are no longer attractively valued (telcos, consumer staples, retailers of basic goods). Wait for pullbacks before buying the said stocks.

   Adrian Alexander Yu

The median reduction in our 2020 earnings forecast is 27.3%, while the median reduction in our FV estimate is 29.3%. For 2020, we now forecast earnings to fall by a median rate of 18.2% compared to year ago levels. This is compared to our previous forecast of a 12% growth in earnings for 2020. Even with the downgrade, most stocks are still trading significantly below their fair value estimates. Median capital appreciation potential based on stocks’ current price and our new FV estimate is still 21.2%. However, stocks belonging to sectors that are resilient to the crisis have rallied significantly from their March lows and are no longer attractively valued (telcos, consumer staples, retailers of basic goods). Wait for pullbacks before buying the said stocks.

   Frances Rolfa Nicolas

The median reduction in our 2020 earnings forecast is 27.3%, while the median reduction in our FV estimate is 29.3%. For 2020, we now forecast earnings to fall by a median rate of 18.2% compared to year ago levels. This is compared to our previous forecast of a 12% growth in earnings for 2020. Even with the downgrade, most stocks are still trading significantly below their fair value estimates. Median capital appreciation potential based on stocks’ current price and our new FV estimate is still 21.2%. However, stocks belonging to sectors that are resilient to the crisis have rallied significantly from their March lows and are no longer attractively valued (telcos, consumer staples, retailers of basic goods). Wait for pullbacks before buying the said stocks.

   Adrian Alexander Yu

The median reduction in our 2020 earnings forecast is 27.3%, while the median reduction in our FV estimate is 29.3%. For 2020, we now forecast earnings to fall by a median rate of 18.2% compared to year ago levels. This is compared to our previous forecast of a 12% growth in earnings for 2020. Even with the downgrade, most stocks are still trading significantly below their fair value estimates. Median capital appreciation potential based on stocks’ current price and our new FV estimate is still 21.2%. However, stocks belonging to sectors that are resilient to the crisis have rallied significantly from their March lows and are no longer attractively valued (telcos, consumer staples, retailers of basic goods). Wait for pullbacks before buying the said stocks.