Alerts

   Adrian Alexander Yu

Maintaining estimates and HOLD rating. We are maintaining our estimates on WLCON, while reiterating our HOLD rating on WLCON. We continue to like WLCON because of their 1) aggressive store openings, 2) consistent growth record, and 3) dominant position in the home improvement industry. However, at its current price of Php18.5/sh, valuations are still unattractive with WLCON currently trading at 29.7x 2020 P/E. We reiterate our HOLD rating on WLCON with an FV estimate of Php15.4/sh.

   Frances Rolfa Nicolas

Senator Franklin Drilon has filed the concurrent resolution that will allow ABS to continue its operation beyond the May 4 expiration of its franchise, while its renewal is pending in Congress. Likewise, Congressman Rufus Rodriguez has filed a similar resolution in the House of Representatives. Mr. Rodriguez noted that the resolutions will give members of Congress enough time to thoroughly study and debate on the 11 bills filed for the company’s franchise renewal.

   Frances Rolfa Nicolas

Congressman Rufus Rodriguez said that ABS does not need provisional authority from the National Telecommunications Commission (NTC) to continue to operate once the House of Representatives and the Senate approves the joint resolution extending the validity of the company’s franchise until the end of the 18th Congress on June 30, 2022. Note that a joint resolution has already been filed in both the upper house and lower house. Moreover, Justice Secretary Menardo Guevarra clarified that ABS’ franchise will lapse on May 4, 2020, not March 30, 2020.

   Frances Rolfa Nicolas

In a hearing by a Senate panel on Monday, various government agencies clarified that ABS abides by tax, labor, and corporate laws. In particular, the BIR said that ABS regularly files and pays its taxes, while the SEC said that they are not aware of any violation or investigation involving the company’s corporate practices. Moreover, ABS was able to secure a clearance from the Labor department stating that it is fully compliant of rules governing labor standards, occupational safety and health and security of tenure.

   George Ching

Reiterate HOLD rating on MER. We have a HOLD rating on MER with a FV estimate of Php342.7/sh. We remain positive on MER’s long term outlook as it will be the main beneficiary of rising power demand in the country brought about by faster GDP growth. Although capital appreciation potential based on MER’s market price of Php262/sh is already attractive at 30.8%, investor sentiment will most likely remain subdued in the near term due to numerous risks. The biggest risk facing MER is the looming distribution tariff cut in the next regulatory period. The SC’s decision in 2019 further increases the likelihood that the distribution tariff cut will be significantly more than our base case assumption.

   John Martin Luciano, CFA

According to Socioeconomic Planning Secretary Ernesto Pernia, the 2020 economic growth will hit the low-end of the government’s 6.5%-7.5% target despite the ongoing corona virus outbreak and recent Taal Volcano eruption. Meanwhile, the ASEAN+3 Macroeconomic Research Office (AMRO) mentioned that the economy is projected to grow by 6.4% in 2020 from 2019’s slow 5.9% growth as government spending is expected to pick up. The AMRO report did not include the impact of the corona virus on the Philippine economy but did mention that estimates could be shaved off by 50bps due to short-term risks such as global slowdown and trade conflicts.

   Richard Lañeda, CFA

MEG is building a 16-storey residential project in its 140-hectare Maple Grove township in Cavite. This 238-unit residential project, which will be called La Cassia Residences, is expected to raise Php1.4Bil in sales and is scheduled for completion by 2025. Aside from the La Cassia Residences, MEG also previously launched a 10-storey residential building, a 17-storey office building, a two-level mall, and a 35-hectare commercial district within the township. The company is planning to invest Php15Bil over a 10-year period to develop the entire Maple Grove township.

   John Martin Luciano, CFA

According to Trade Secretary Ramon M. Lopez, the government should look into raising duties on imported cars as means to protect local assemblers. This inquiry comes after news of Honda Car Philippines Inc.’s decision to shut down its facility starting next month. Note that Honda, no.6 in the Philippines based on market share, considered ‘optimization efforts’ in Asia and Oceania leading up to its decision to close its Philippine facility. Honda announced that it would continue selling cars in the Philippines through its regional network in an effort to keep costs down The Philippines currently does not impose tarrifs on vehicles imported from Thailand and Indonesia, making importing from these countries a viable option. Safeguard duties on imported vehicles could be justified to convince car makers to continue local assemblies. Note that total vehicle sales rose by 3.5% to 369.941 units last years, according to the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and Truck Manufacturers Association (TMA). Meanwhile, the Association of Vehicle Importers and Distributors, Inc notes that imported vehicle sales dropped slightly in 2019 to 87,984 units.

   Justin Richmond Cheng, CFA

Maintain BUY rating. We currently have a BUY rating on CIC with a FV estimate of Php40.6/sh. We continue to like CIC for its strong growth prospects given its market leading position in the underpenetrated air-conditioning and refrigerator markets and increasing share in the fast-growing laundry market. Upside to our FV estimate is also significant at 35%.

   Adrian Alexander Yu

DITO Chief Administrative Office Adel Tamano announced yesterday that DITO’s commercial roll-out will be in March 2021 as mandated in the company’s Certificate of Public Convenience and Necessity (CPCN). Meanwhile, what will actually happen in July this year will be its technical launch as required by the DICT. During the technical launch, the NTC will audit the company’s compliance with their commitment to cover 37% of the country’s population with 27mpbs. DITO Chief Technology Officer Rodolfo Santiago and Tamano mentioned that the company has already installed 600 towers to date, of which are a mix of company-owned and common towers, and has enough resources for their technical launch in July. They also said that it is possible for the commercial launch to happen before March 2021 if its pre-commercial trials in September run smoothly. DITO is aiming to invest Php150Bil this year mainly through foreign banks and they have already drawn US$500Mil from the Bank of China. If DITO is unable to meet its commitments, the government will take back the company’s CPCN.