Alerts

   Richard Lañeda, CFA

In light of the current situation of the COVID-19 outbreak and the uncertainties on government policies that might be implemented to contain the spread of the virus, we are applying very conservative assumptions to our forecast this year. Our base case assumption is that there would be a three-month enhanced community quarantine in Luzon, which is two months longer than what the government said it would implement. Therefore, we are adjusting our 2020 estimates to reflect the loss in revenues resulting from the lockdown. Segments that have significant downside adjustments are residential development, malls, and hotels. The changes in 2020 net income forecast range between 17% to 52%.

   Richard Lañeda, CFA

In light of the current situation of the COVID-19 outbreak and the uncertainties on government policies that might be implemented to contain the spread of the virus, we are applying very conservative assumptions to our forecast this year. Our base case assumption is that there would be a three-month enhanced community quarantine in Luzon, which is two months longer than what the government said it would implement. Therefore, we are adjusting our 2020 estimates to reflect the loss in revenues resulting from the lockdown. Segments that have significant downside adjustments are residential development, malls, and hotels. The changes in 2020 net income forecast range between 17% to 52%.

   Frances Rolfa Nicolas

In light of the Luzon-wide quarantine and COVID-19 pandemic, we will be reviewing our estimates on EAGLE.

   George Ching

We have a BUY rating on FGEN with a FV estimate of Php32.3/sh. We like FGEN given its FGEN’s relatively stable cash flow (89% of capacity contracted). FGEN is also the only clean energy play in the PSE after its subsidiary EDC was delisted. Finally, the projected shortage in 2023 improves the feasibility of its LNG regasification project which will enable its gas plants to remain competitive after the depletion of the Malampaya gas field. Based on FGEN’s market price of Php15.9/sh, upside to our FV estimate is significant at 103%.

   George Ching

Due to the reduction in our estimates for AP, we are lowering our earnings 2020E earnings forecast for AEV by 6.2% to Php23.9Bil. We also reduced our FV estimate on AEV by 3.5% to Php46.9/sh. Meanwhile, we are maintaining our HOLD rating on AEV. We continue to like AEV given the expansion plans of its power subsidiary AP. AEV is also well positioned to participate in the government’s infrastructure projects owing to its investment in republic cement as well as its strong balance sheet and excellent track record in acquiring businesses. However, based on its current market price of Php39.35/ sh, upside to our FV estimate is limited at 19%.

   George Ching

In light of the reduction in our 2020E EBITDA forecast, we are lowering our earnings forecast for AP by 7.5% to Php23.7Bil. We are also lowering our FV estimate on AP by 4.6% to Php41.1/sh. Despite the reduction in our estimates, we are maintaining our BUY rating on AP. Based on AP’s current market price of Php26.5/sh, upside to our FV estimate is at 55%. The stock is now trading at 8.2X 2020E P/E, below its 10-year historical average P/E of 12X. AP’s profits are still projected to grow by a CAGR of 5.1% from 2017 to 2020, the fastest in the power sector, even with lower contract prices and rising coal costs. AP’s vertically integrated nature (due to the fact that it owns both power generation and distribution facilities) also secures its ability to expand its power generation portfolio despite concerns of oversupply in the market.

   George Ching

We have a HOLD rating on NIKL with a FV estimate of Php3.34/sh. While we remain positive on the long term outlook for nickel due to the rising EV battery demand, we believe that nickel price could remain depressed in the near term due to the impact of previous stockpiling activities ahead of the Indonesian nickel ore ban.

   George Ching

We have a BUY rating on AP with a FV estimate of Php43.1/sh. Based on AP’s current market price of Php26.1/sh, upside to our FV estimate is at 65%. The stock is now trading at 7.5X 2020E P/E, below its 10-year historical average P/E of 12X and the 12X average P/E of industry peers currently. AP’s profits are still projected to grow by a CAGR of 7.8% from 2017 to 2020, the fastest in the power sector, even with lower contract prices and rising coal costs. AP’s vertically integrated nature (due to the fact that it owns both power generation and distribution facilities) also secures its ability to expand its power generation portfolio despite concerns of oversupply in the market.

   Richard Lañeda, CFA

Fair value estimate lowered to Php12.30, maintain BUY We are reducing our fair value estimate for BLOOM to Php12.30 from Php15.32 after adjusting our revenue and net income forecast. However, despite our more conservative estimates and outlook, our fair value estimate is still 68% higher than the current price of Php7.32. Relative valuation analysis also suggests that BLOOM is very undervalued compared to regional peers. At the current price, BLOOM is trading at 6.4X 2020E EV/ EBITDA compared to the regional average of 9.0X. Our fair value estimate also implies a valuation that is in line with regional peers as it translates to an EV/EBITDA of 9.7X. As BLOOM is undervalued based both on our fair value estimate and relative valuation analysis, we are maintaining our BUY recommendation.

   George Ching

Maintain HOLD rating. We have a HOLD rating on ICT with a FV estimate of Php125.7sh. With the exception of its port in Argentina, we believe 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. Following the 18.3% decline in ICT’s share price since the beginning of the year, ICT is trading at 16.1X 2020E P/E, nearly at par with global peer average of 15X 2020 P/E. Based on its current market price of Php105.1/ sh, upside is significant at 19.6%. However, we are maintaining our HOLD rating on ICT as the impact of Covid-19 on ICT’s earnings in 2020 remains uncertain.