Alerts

   Charles William Ang, CFA

Toyota Motor Philippines Corp. (TMPC) Chairman Alfred Ty said that the Taal eruption would affect the firm’s sales in the first quarter due to ashfall that affected the operations of the assembly plant in Sta. Rosa, Laguna. Moreover, eight dealerships in the Calabarzon region suffered from delayed deliveries as cars had to be cleaned and checked after the ashfall. Nevertheless, the company still expects to post higher sales in the first quarter compared to the same period last year.

   John Martin Luciano, CFA

Del Monte Pacific Limited (DELM) is selling shares of its local unit Del Monte Philippines, Inc. (DMPI) to a Singapore-based investor for US$130Mil. Under the agreement, DELM’s wholly-owned subsidiaries DMPI and Central American Resources will be selling 363,651,600 ordinary shares of DMPI. This represents 13% of the total issued and outstanding shares of DMPI. The proceeds of the transaction will be used to fund DELM’s capital restructuring plans. In particular, the funds raised will be used to repay/prepay certain loan facilities and credit lines to local banks such as RCBC.

   John Martin Luciano, CFA

Tycoon Edgar “Injap” Sia II’s new retailing business is looking to raise Php1.6Bil through an initial public offering. MerryMart Consumer Corp. plans to sell as much as 1.59Bil common shares at a maximum price of Php1.0/sh. Based on the preliminary prospectus filed to the SEC, the company is offering 21% of its common shares to the public. The target offer period is from March 23 to March 27, while the listing date is expected to be on April 2. PNB Capital and Investment Corp was tagged as the lead underwriter. MerryMart expects to operate a total of 27 branches by 2Q20, and is targeting to roll out 1,200 branches nationwide and generate Php120Bil in systemwide sales by 2030. In the short-to-medium term, MerryMart expects to scale up to 100 branches by 4Q21 and 600 branches by 2025.

   Frances Rolfa Nicolas

In a disclosure to the PSE, SHLPH said that normal business operations continue at its Tabangao refinery in Batangas and across all businesses amidst the eruption of the Taal Volcano. Moreover, the company assured that the Taal situation is being constantly monitored and that business protocols are in place to respond to any potential change in circumstances

   Justin Richmond Cheng, CFA

Jollibee Worldwide Pte. Ltd., a wholly owned subsidiary of JFC, raised US$600Mil from the issuance of perpetual securities. The transaction was oversubscribed by almost 10 times the original issue amount of US$400Mil, allowing the company to increase the transaction to US$600Mil as well as tighten final pricing by 35 bps to 3.9%. Proceeds from the offering are intended primarily to refinance the short-term debt from the acquisition of CBTL and to fund general corporate purposes. This transaction represents the first ever bond or perpetual securities issuance from the company and the first time it tapped the capital markets since its IPO in 1993.

   Justin Richmond Cheng, CFA

The Court of Tax Appeals (CTA) voided the Php2.1Bil improperly accumulated earnings tax (IAET) assessed on URC by the BIR. The CTA said that the BIR failed to identify the definite amount of tax liabilities despite providing a computation because this computation was subject to modification depending on the payment date. Hence, the court determined that the lack of due date negates the demand for payment. Note that URC was being questioned for its assessed liability of IAET for end September 2010.

   Richard Lañeda, CFA

ALI has come out with a disclosure, refuting claims that its lease agreement with UP for the development of the 37-hectare in UP into UP-Ayala Land Technohub. The claims focused on the lease payments and not the overall benefit UP stands to gain from the agreement. Based on ALI’s disclosure, total lease payments will amount to Php4.23 Bil by the end of the lease contract in 2033. UP will also own the 16 commercial buildings which are valued at Php6 Bil based solely on construction cost. This totals Php10.23 Bil in value which translates to Php171/sqm per month during the 25-year lease. ALI also added that the value of the land has since appreciated because of the said partnership with ALI.

   John Martin Luciano, CFA

BDO is looking to raise Php5Bil through the issuance of fixed-rate bonds in order to diversify its funding sources and support its lending activities. The bonds will have a tenor of 2.5 years and will make up the second tranche of its Php100Bil bond program launched in August 2018. The papers will also carry an interest rate of 4.408%, paid quarterly.

   George Ching

As a result of the changes in our estimates for Maynilad, we are reducing our 2020E earnings forecast for DMC by 1.78% to Php13.9Bil for 2020, and by 3.7% to Php14 Bil for 2021E. We are also reducing our FV estimate on DMC by 7.2% to Php10.29/sh. Despite the reduction in our estimates, we reiterate our BUY rating on DMC. 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 Php6.73/sh, the company is trading at a 42.2% discount to its NAV. This implies that Maynilad, its construction and nickel mining businesses are worthless, and investors are only paying for SCC and DMCI Homes (The two account for 105% of DMC’s current market capitalization). DMC is also trading at only 6.4X 2020E P/E, a discount relative to the 14.5X average P/E of its industry peers. Based on DMC’s current market price, upside to our FV estimate of Php10.29/sh is significant at 52.9%. Even if we assumed the worst-case scenario where Maynilad would become worthless, capital appreciation potential based on DMC’s current price is still 39% to Php9.36/sh.

   George Ching

As a result of the changes in our estimates for Maynilad, we are reducing our earnings forecast for MPI by 2.9% to Php17.5Bil for 2020, and by 5.6% to Php18.9 Bil for 2021E. We are also reducing our FV estimate on MPI by 7.6% to Php8.66/sh. Despite the reduction in our estimates, we reiterate our BUY rating on MPI. While near term sentiment on MPI will most likely remain negative due to the uncertainties on Maynilad, we believe that concerns are overblown given MPI’s depressed valuation. Based on MPI’s current market price of Php3.80/sh, the company is trading at a 61.2% discount to its NAV which implies that Maynilad, its toll road business and its stake in the hospital business are already worthless. MPI is even trading at a discount to the value of its 45.5% stake in Meralco (MER’s value is equivalent to 130% of MPI’s current market capitalization). Even if we assumed the worst-case scenario where Maynilad would become worthless, capital appreciation potential based on MPI’s current price is still 104% to Php7.63/sh.