Alerts

   George Ching

Maintain BUY rating on DMC. We have a BUY rating on DMC with a FV estimate of Php11.09./sh. We like DMC as it is poised to benefit from its investment in SCC and its construction business will be the key beneficiary of the government’s rising infrastructure spending. At DMC’s current market price of Php8.05/sh, upside to our FV estimate is significant at 40.4%.

   George Ching

We have a BUY rating on SCC with a FV estimate of Php31.2/sh. While near term sentiment may not improve in the near term due to the weakness in coal price, we believe that much of the negative news is already priced-in, as SCC’s share price has declined by 9.6% in the past 12 months, underperforming the PSEi’s 16.1% rise. The stock is also the cheapest among all power companies, trading at only 9.4X 2019E P/E based on our revised earnings forecast and capital appreciation potential remains significant at 32.5%, also based on our revised fair value estimate.

   George Ching

We are maintaining our BUY rating on FGEN with a FV estimate of Php32.3/sh. FGEN’s share price has increased by 21.9% since the beginning of this year, outperforming the PSEi’s 6.5% increase. We believe that the sentiment on the stock will remain positive in the near term, given EDC’s delisting, and FGEN’s relative stable cash flow (89% of capacity contracted) in light of oversupply concerns in the power industry. Based on FGEN’s market price of Php24.35/sh, upside to our FV estimate is significant at 33%.

   Justin Richmond Cheng, CFA

JFC disclosed that its wholly owned subsidiary Golden Plate Pte. Ltd. (GPPL) entered into a JV agreement with Dim Sum Pte. Ltd. (DSPL) to form a JV in China. After the incorporation of the JV, it shall sign a unit franchise agreement with Tim Ho Wan Pte. Ltd, the authorized master franchisor of Tim Ho Wan in the Asia-Pacific, to develop and operate Tim Ho Wan stores in Shanghai and other cities in China. GPPL will own 60% of the business and will invest up to US$13Mil (or ~Php661.1Mil) to the JV.

   Justin Richmond Cheng, CFA

Maintain BUY rating. We are maintaining our BUY rating on MRSGI with a FV estimate of Php4.32/sh. We continue to like MRSGI as the company remains poised to recover and deliver better earnings growth over the short-to-medium term, given the reopening of its flagship stores and its rapid expansion plan. Furthermore, valuations remain attractive with MRSGI still trading at 10X 19E P/E (using core earnings ex-insurance claims), a steep discount to the consumer average of 21X.

   Justin Richmond Cheng, CFA

Reiterate BUY rating. We are reiterating our BUY rating on SSI with a FV estimate of Php4.28/sh. The company managed to grow operating profits even faster in the third quarter. This reaffirms our bullish view on the company, underpinned by strong consumption trends and expanding margins due to efficiencies. At its current price of Php2.86/sh, valuations are attractive with SSI trading at only 11.5X 2019E P/E, still below the average 21X P/E of consumer stocks. Upside to our FV estimate is also significant at 50%.

   Justin Richmond Cheng, CFA

Maintain BUY rating. We currently have a BUY rating on PGOLD with a FV estimate of Php54.5/sh. We continue to like PGOLD given its strong positioning in the grocery retail industry. We believe Puregold only’s profitability should bounce back in the short-to-medium term as domestic consumption starts to recover given the subdued inflation environment. Furthermore, the fast growing S&R segment looks very promising as this is driven by both sustained mid-to-high single-digit SSSG and rapid store expansion. Valuations are also already attractive with PGOLD trading at only 16X 2019E P/E vs the average P/E of consumer companies at 21X.

   Richard Lañeda, CFA

We maintaining our BUY rating on AC with a fair value estimate of Php1,077. We believe that weakness in earnings of ALI and AC Energy is just temporary as ALI’s performance is largely driven by timing of booking of its sold project. As for AC Energy, we believe the net income decline is not a cause for concern as it was a result of the sell down of their stake in GNPower Mariveles and seasonality effect on the wind farm. Long term potential of AC Energy remains bright on the back of aggressive expansion of its international renewable platforms. We believe the AC Industrials is more of a concern because of challenges of the global economy but it only accounts for 3% of our NAV and FV estimate. In addition to this, AC is already trading 17% below it market-based NAV which we believe prices in potential downside in AC Industrials.

   Justin Richmond Cheng, CFA

Maintain BUY rating. We are maintaining our 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 31%.

   Frances Rolfa Nicolas

In light of the less favorable outlook of the Manila Concession’s billed volume, we are reducing our billed volume growth forecast to -1.5% from 0.5% in 2019, to 1.5% from 3% in 2020 and to 2% from 3% in 2021. Moreover, we slightly lower our basic water rate forecast of Php31.12 /cu.m. in 2020 from Php31.37 /cu.m. due to the lower-than-expected inflation adjustment. Note that MWC is allowed to increase the Manila Concession’s basic water rate next year by the CPI adjustment recorded in the month of July of the current year. We originally expected July inflation to be at 3.3%, but actual results were lower at 2.4%. Factoring these, our net income forecast decreased by 5.5% to Php5.4Bil in 2019, by 6.9% to Php6.7Bil in 2020, and by 8.7% to Php7.0Bil in 2021. Accordingly, we reduce our FV estimate to Php22.7/sh. At its current price of Php19.0/sh, upside potential to our new FV estimate is at 19%. However, we believe that the piling regulatory issues on MWC such as recoverability of corporate income tax, penalties, and water supply adequacy will serve as an overhang on the share price. Hence, we maintain our HOLD rating on MWC.