Alerts

   Richard Lañeda, CFA

We are raising our fair value estimate for RLC to Php31.20 from Php29.82 as we factored in higher same-mall-revenue growth and higher occupancy for office projects. We also factored in higher lease rates for RLC’s future office projects as we expect low vacancy rates to continue supporting higher lease rates. We reiterate our BUY rating on RLC as it continues to improve on its residential segment. This is being done not only through joint ventures but also improving on product offerings under its own brands. On top of this, RLC’s investment properties remain robust as it capitalizes on healthy domestic consumption and strong demand for office space.

   Frances Rolfa Nicolas

The revocation of the extension of the concession agreement puts into question the ability of MWC to recover its investments since taking over the concession. Note that both MWC and Maynilad warned that rates could significantly go up as a consequence of the shorter concession period. It also puts into question the ability of MWC to continue its capital expenditure program as stipulated in its concession agreement. It remains unclear how these developments would affect MWC as the government has not yet provided details on how it will compensate MWC for its accumulated investments or if it will even compensate the company at all.

   Justin Richmond Cheng, CFA

Reiterate BUY rating. We are reiterating our BUY rating on RRHI. We continue to like RRHI given its welldiversified portfolio of retail formats. This puts the company at the forefront in benefiting from the favorable growth opportunities in the retail sector. In addition, RRHI has made good progress in integrating and rationalizing Rustan’s. Going forward, RRHI is still expected to unlock more efficiencies from realigning the operations of Rustan’s, and this bodes well for RRHI’s growth prospects for the years to come.

   Frances Rolfa Nicolas

Macroasia Corporation (MAC) and China Communications Construction Co. Ltd. (CCCC) won the US$10Bil Sangley Airport Project in Cavite as they were the sole bidders in this auction. The five other potential bidders including the companies led by Manny Pangilinan and Manny Villar Jr. did not submit their proposals. The MAC and CCCC consortium together with the Cavite provincial government will carry out this international airport project, which includes four runways and a terminal that can handle around 100 million passengers annually. The Sangley Airport, one of the two proposed multi-billion dollar airport projects that aim to decongest NAIA, is scheduled for groundbreaking on January 15, 2020 and will be operational by 2023.

   John Martin Luciano, CFA

BSP Deputy Governor Chuchi G. Fonacier said 10 local commercial banks were recipients of funds from scandal-hit Westpac Banking Corp. which were channeled through BPI, the local partner of the Westpac’s remittance unit. BPI has already submitted findings from their initial report which showed that the funds involved were of small value and lower than those required to be flagged. Note that under the Anti-Money Laundering Act, covered cash transactions are those exceeding Php500,000. Meanwhile, BPI has already suspended its partnership with Westpac’s LitePay facility last week.

   Frances Rolfa Nicolas

MAC and China Communications Construction Co. Ltd (CCCC) were the sole bidders for the Php500Bil Sangley Point International Airport project in Cavite. Five other potential bidders including groups led by Manuel V. Pangilinan and Manuel Villar Jr. did not submit their proposals. Meanwhile, the bid of Lucio Tan and the Chinese firm were deemed complete and subject to detailed evaluation by the PPP selection committee. Given no other bidders, the MAC-CCCC consortium is poised to win the project with potential awarding date on January 15, 2020.

   Frances Rolfa Nicolas

Justice Secretary Menardo Guevarra said that the government is not thinking about replacing MWC and Maynilad as Metro Manila’s water concessionaires and that it will need a court order to rescind their contracts. The Justice Department assured that the administration wants to renegotiate the concession agreements to remove alleged onerous provisions in it. Mr. Guevarra is optimistic that the review is acceptable to both MWC and Maynilad. The government will meet with the two companies after the proposed revised contract is presented to Cabinet in January.

   Frances Rolfa Nicolas

MWSS has clarified that the extension of the water concession agreements with MWC and Maynilad is not yet fully cancelled. The revocation of the board resolution authorizing the extension from 2022-2037 will only pave the way to revise the terms of the contract. In the event that the talks fail, the water concession from 2022-2037 may be bid out to other parties. MWSS also assured that no significant hike in water rates will occur should the concessionaires end their contract in 2022. In such case, the concessionaires will be entitled to an expiration payment to recover their investments, which will be paid by the national government in the form of cash or other negotiable instruments. The recovery period can also be spread over 15 years should the concessionaires agree to the new terms that will be in the revised agreement. MWC is currently under review.

   Richard Lañeda, CFA

We are upgrading our rating for ALI to BUY, but maintaining our FV estimate of PHp53/sh. This is following that the share price has gone down to a more attractive level due to a lackluster results year-to-date. We believe that the weak performance brought by the decline in residential revenues is not a major concern as this was a result of the timing of sales and construction of projects launched in the previous year.

   Adrian Alexander Yu

SMC submitted a proposal to the Department of Transportation (DoTr) to construct an elevated expressway along Epifanio de los Santos Avenue (EDSA) for easing traffic congestion. President and COO of SMC, Ramon Ang, said that they hope to start construction of this proposed ten-lane (five-by-five) expressway by mid-2020 and complete it within two years. As such, management hopes to convince the DoTr in speeding up the process of assessing its proposal.