Alerts

   Adrian Alexander Yu

IMI reported 4Q19 net loss of US$8.2Mil. This brought FY19 reported net loss to US$7.1Mil, well below COL’s forecast of US$6.5Mil. The underperformance can be largely linked to the decline in volume and continued margin contraction during the fourth quarter. IMI’s 4Q19 revenues were down 8.0%y/y to USD311Mil, bringing FY19 revenues to USD1.25Bil, accounting for only 93.7% of COL’s full year forecast. FY19 gross profit was also down 24.7% to US$102Mil as GPM contracted from 10.0% during FY18 to only 8.2%. We will release a more detailed report following the briefing for any off charges related to inventory write-offs and other provisions. We are currently reviewing estimates on IMI in light of the poor 2019 performance and the impact of the delays in IMI manufacturing capabilities in China. Note that we previously had a HOLD rating on IMI with a FV estimate of Php9.40/sh.

   Justin Richmond Cheng, CFA

HOME is projecting its FY19 net income to hit Php1Bil from Php746Mil in 9M19 due to the robust sales during Christmas season. HOME Vice Chairman Camille Villar said that they are confident of ending 2019 with at least Php1Bil in net income because historically the fourth quarter has consistently been their strongest quarter. This year, the company plans to continue its expansion program by increasing its selling space from 313,000 sqm to its target of 450,000 sqm by year end. Management mentioned that they were able to secure 6 to 8 months worth of inventory for their planned store expansions and existing stores through the IPO that was conducted last year. Management also said that China remains to be a major inventory source for AllHome so should the corona virus epidemic last any longer, the company plans to shift to other existing sources like Vietnam, Indonesia, Malaysia, Thailand, and others.

   John Martin Luciano, CFA

Maintain HOLD rating. We currently have a HOLD rating on JFC with a FV estimate of Php220/sh. We expect consensus to downgrade their estimates, which could drive the weakness in the share price performance in the near term. Although we believe there will be recovery in Smashburger and its domestic business in 2020, earnings could still be dragged by the first full year consolidation of CBTL and the coronavirus outbreak given its impact on Chinese sales. Valuations are also not yet attractive as at its current price of Php185.2/sh, JFC is still trading at 31.8X 2020 P/E, a premium over its global peers median P/E multiple of 28.1X

   John Martin Luciano, CFA

Moody’s has cut its Philippine growth forecast while also trimming its outlook for other Asian countries. This is largely due to expectations that some sectors would take a hit from the coronavirus outbreak (COVID-19) in late 2019. The debt watcher decreased its 2020 GDP growth forecast to 6.1% from 6.2%, previously. Moody’s noted that for the Philippines its forecast was slightly reduced as they expect the economic impact of the COVID-19 to be limited to the first quarter. Afterwards, Moody’s expects a normalization of economic activity resuming in 2Q20.

   John Martin Luciano, CFA

The Bureau of Customs (BOC) is seeing a 50% y/y drop in trade volume in the first half of February as the coronavirus disease outbreak disrupt global supply chains. The lower trade volume was attributable to the decline in cargo from China, which is the biggest trading partner of the Philippines. Nevertheless, the Department of Finance remain confident that the government will hit its revenue collection target this year. Note that the Customs Bureau is tasked to collect Php731Bil, accounting for 22% of the Php3.3Tril goal this year.

   Frances Rolfa Nicolas

We believe this year will be better for CHP due to expected better volumes growth, stable margins, and lower financial costs. However, we believe the recent stock rights offering will remain as an overhang on the company’s share price as the market absorbs the additional 8Bil shares it will be issuing. As such, we are upgrading our rating on CHP to HOLD and maintaining our FV estimate of Php1.8/sh.

   Charles William Ang, CFA

We are upgrading our rating on GTCAP from HOLD to BUY following the recent selloff in the stock. Recall that last December 16, we downgraded our recommendation to a HOLD on the back of increased uncertainties on the water concessionaires, which could adversely affect GTCAP’s investment in MPI. Over the last two months, GTCAP’s share price has dropped 18% (and as much as 25.6%) from Php895/ sh to Php731/sh, underperforming the PSEi’s 7% decline during the same period. While the concerns with the concessions still persist today, we believe that the decline has already been overdone. Note that GTCAP’s 15.55% stake in MPI accounts for just 13% of GTCAP’s gross asset value and 18% of its net asset value (NAV). Since the concession issue surfaced in early December, MPI’s share price has gone down by 27.6%. We are retaining our FV estimate on GTCAP of Php1055/sh. At its current price of Php731/ sh, it already offers an upside of 44%. Even valuing MPI at its current price of Php3.18/ sh, our target price for GTCAP would still be at Php936/sh, offering a 28% upside from the current price.

   Frances Rolfa Nicolas

The Senate Committee on Public Services will no longer wait for the transmittal of the bill on the franchise of ABS from the House of Representatives and will begin deliberation of the application for renewal. Senator Grace Poe-Llamanzares, who is also the chairperson of the said committee, noted that although franchise bills should emanate from the House, the Senate may begin tackling a bill simultaneously. Moreover, Senate Minority Leader Franklin Drillon filed a resolution to formally extend the validity of the company’s franchise until Dec 31, 2022 so that ABS’ existence after March will not be questioned while deliberations on its franchise renewal are pending.

   John Martin Luciano, CFA

Cash remittances coursed through banks in December 2019 grew by 1.9% y/y to US$2.9Bil from US$2.8Bil, lower than the estimated growth forecast of 3.4% for the month. This brought cumulative cash remittances in 2019 to grow by 4.1% y/y to an all time high of US$30.1Bil from US$28.9Bil in 2018. Cash remittances from land-based and sea-based workers grew by 3.5% and 6.5% y/y to US$23.6Bil and US$6.5Bil, respectively. USA still registered the highest share to total remittances at 37.6% followed by Saudi Arabia, Singapore, Japan, UAE, UK, Canada, Hong Kong, Germany, and Kuwait.

   John Martin Luciano, CFA

The Department of Tourism (DoT) announced on Monday that tourist arrivals for 2019 reached 8.26 million, exceeding the government’s 8.2 million target. This was 15.2% higher than the 7.2 million international tourists received in 2018. DoT Secretary Bernadette Romulo-Puyat noted that the strong growth can be attributed to the department’s convergence programs with other government bodies, such as improving access coupled with stronger marketing efforts. Despite the strong growth witnessed in 2019, industry stakeholders are bracing for a decline in international tourist arrivals as many have cancelled or put off travel plans due to fears of the continued spread of the coronavirus disease 2019 (Covid-19). Note that Ms. Puyat acknowledged previously that the tourism industry could lose approximately Php43Bil from February to April on slower international tourism volume. Despite this, the DoT is still targeting 9.2million tourist arrivals for 2020.