Alerts

   George Ching

Due to the recent decline in LME nickel price, we are decreasing our 2020E LME average selling price (ASP) forecast by7.7% to US$6/lb, and our 2021E forecast by 7.5% to US$6.1/lb. As a result, we are lowering our 2020E earnings forecast by 7.1% to Php4Bil, and our 2021E earnings forecast by 8% to Php3.5Bil. We are also reducing our FV estimate by 3.75% to Php3.34/sh, and maintaining our HOLD rating on NIKL. 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. At its current price of Php2.86/sh, upside to our FV estimate is limited at 16.8%.

   Frances Rolfa Nicolas

In light of recent developments regarding the travel ban, we will be reviewing our estimates on CEB.

   Frances Rolfa Nicolas

We think that the Php13/sh price acquisition, which is 7% higher than last week’s closing price of Php12.16/sh, signals optimism from the buyer of a more positive outcome on the talks regarding the new water concession contract. Nevertheless, the details of the new contract will ultimately determine the value of the company as the East Zone accounts for majority (~90%) of its value. As such, we are maintaining the company under review until further details come to light.

   Adrian Alexander Yu

IMI announced on January 30, 2020 the company’s decision to delay the resumption of work in the selected plants in China in compliance with the local government’s notices regarding the outbreak of the Novel Coronavirus (n-CoV). In accordance with the Emergency Response Law and Infectious Disease Prevention and Control Law of the People’s Republic of China, the holidays were extended to ensure better implementation of controlling the spread of the n-COV. IMI is currently developing contingency plans to recover backlog production as a result of suspensions in these plans. Management is in the process of communicating with local government offices regarding the possible earlier resumption of work at reduced production capacity. Note that during 9M19, 20.8% of IMI’s revenues were generated in China. Moreover, 27% of the company’s new contract wins were in China, only second to the 34% wins generated from the Philippines. As such, we believe that any prolonged delay in manufacturing in China would significantly impact the company’s bottom line and push back the company’s recovery into late 2020 or early 2021 at the earliest. In light of the new developments in China, we will be reviewing our estimates on IMI. We believe that the delays in production would push back the company’s turnaround as the company will need to address capacity constraints, which could result in an increase in the cost of production. Note that we previously had a HOLD rating on IMI with a FV estimate of Php9.40/sh.

   Adrian Alexander Yu

In light of the new developments in China, we will be reviewing our estimates on IMI. We believe that the delays in production would push back the company’s turnaround as the company will need to address capacity constraints, which could result in an increase in the cost of production. Note that we previously had a HOLD rating on IMI with a FV estimate of Php9.40/sh.

   Adrian Alexander Yu

The Department of Information and Communications Technology (DICT) received assurance from Dito Telecommunity’s top executives on the telco’s ability to roll out by July. A closed-door meeting was called by DICT Secretary Gregorio Honasan with the executives of Dito to discuss the status of the telco’s roll out. Some of the updates reported by Dito included their tower building activities, secured deals for infrastructure development, construction updates on network operation centers, rollout of crucial infrastructure, and projected timetables. After the discussions, Honasan mentioned that Dito is on track to deliver its promise of cheaper and more efficient service to the public.

   John Martin Luciano, CFA

BDO raised Php40.1Bil through the issuance of fixed rate bonds, which is 8x their initial offer of Php5Bil. The bonds have a tenor of 2.5 years carrying a yield of 4.408% per annum. HSBC served as the sole lead arranger in this fund raising activity while BDO Unibank, BDO Private Bank, and HSBC served as the selling agents. BDO President and CEO Nestor Tan stated that the bank continues to diversify its funding sources for their business expansion plans.

   Frances Rolfa Nicolas

In a disclosure to the PSE, CHP announced that it has completed its stock rights offering last week and raised Php12.8Bil from selling 8.3Bil common shares. The proceeds will be used to fund CHP’s expansion of its Solid cement plant and to pay outstanding debt to its parent company, Cemex Asia B.V. The offer shares are targeted to be listed at the Philippine Stock Exchange on March 4.

   John Martin Luciano, CFA

Maintain BUY. We currently have a BUY rating with a FV estimate of Php69/sh based on 0.95X 2020 P/ BV. Although we believe that the salary loans segment still faces headwinds as this could still be refinanced by the GSIS with more lenient loan terms, we believe that downside risks have already been priced in. Going forward, we expect the strong growth in the bank’s credit cards, mortgage, and commercial loans, coupled with declining funding cost, to drive the growth in the bank’s lending income.

   Justin Richmond Cheng, CFA

Upgrading to BUY given more convincing signs of a turnaround. We are upgrading or recommendation on URC to a BUY given better visibility in the turnaround of the business. We believe URC’s prospects are brighter this 2020 coming from an inflection point in 2019 with 9M19 core earnings up 10.6% y/y. Recall that core earnings were on a decline for three straight years at a -12% CAGR.