Alerts

   George Ching

Maintain BUY rating. 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 20.2% in the past 12 months, underperforming the PSEi’s 11.8% rise. The stock is also the cheapest among all power companies, trading at only 9.2X 2019E P/E based on our revised earnings forecast and capital appreciation potential remains significant at 35.5%, also based on our revised fair value estimate.

   George Ching

Maintain BUY rating. 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 20.2% in the past 12 months, underperforming the PSEi’s 11.8% rise. The stock is also the cheapest among all power companies, trading at only 9.2X 2019E P/E based on our revised earnings forecast and capital appreciation potential remains significant at 35.5%, also based on our revised fair value estimate.

   Adrian Alexander Yu

GLO posted an increase in its core profits for the 3rd quarter of 2019 as it rose 20%, ahead of both COL and consensus estimates. The outperformance was driven by continued strong performance of GLO’s service revenues. We are increasing our estimates and therefore, upgrading our FV and rating. We now have a BUY for GLO with an FV estimate of Php2,150/sh.

   April Lynn L. Tan, CFA

3rd quarter GDP increased by 6.2%, beating consensus forecast of 6%. The growth was also faster than the previous quarters given the faster growth of consumer and government spending. Despite this improvement, it is crucial for the government to maintain its aggressive spending program to help offset the negative impact of the weaker global economy.

   George Ching

We are maintaining our HOLD rating on ICT with a FV estimate of Php125.7/sh. With the exception of its port in Argentina, we believe the success of ICT’s greenfield ports (Australia, Congo, Papua New Guinea and Colombia) will be the key earnings growth driver for the company in the next few years as these new ports will have a combined capacity of 3Mil TEU, equivalent to 30% of ICT’s total volume in 2018. However, in terms of valuation, ICT is relatively expensive, trading at 21.4X 2019E P/E, a premium to its global peer average of 16X 19E P/E. Based on its current market price of Php123.7/sh, upside to our FV estimate is limited at 1.6%.

   George Ching

ICTSI disclosed that a jury in Portland, Oregon USA rendered a favorable ruling to ICTSI Oregon Inc. in a case it filed against the International Longshore and Warehouse Union (ILWU) and ILWU Local 8 for unlawful labor practices. The jury verdict awarded damages to ICTSI Oregon, Inc. in the total sum of $93.6Mil. The Court has yet to enter judgement on the verdict and once this is entered the ILWU and Local 8 will have 28 days to file post-verdict motions. The potential award sum of US$93.6Mil represents ~ 2% of ICT’s market capitalization.

   George Ching

Maintain HOLD rating. Due to the reduction in our estimates for AP, we are lowering our earnings 2019E earnings forecast for AEV by 14.4% to Php20.5Bil. We also reduced our FV estimate on AEV by 0.84% to Php48.5/sh. Meanwhile, we are maintaining our HOLD rating on AEV. We continue to like AEV given the expansion plans of its power subsidiary AP. AEV is also well positioned to participate in the government’s infrastructure projects owing to its investment in republic cement as well as its strong balance sheet and excellent track record in acquiring businesses. However, we are recommending a HOLD as AEV is currently priced at a premium to the fair value of its subsidiaries. Based on its current market price of Php54.4/sh, there is no more upside to our FV estimate.

   Justin Richmond Cheng, CFA

Reiterate BUY rating. We reiterate our BUY rating for CNPF with an FV estimate of Php20.40/sh. At its current price of Php15.1/sh, CNPF is trading at only 16.9X 19E P/E, a discount relative to the 22X average 2019E P/E of its peers. We believe that CNPF deserves to trade at similar multiples to its peers given its similarly attractive medium-term outlook, the strong brand equity of its product portfolio and proven track record of growing revenues and profits. The strong performance of its milk segment also strengthens our conviction that the company can meet our double digit 2019 and 2020 earnings growth forecasts.

   George Ching

Reducing estimates, downgrading to HOLD. Due to the disappointing 9M19 results of AP’s power generation business, we are lowering our 2019E earnings forecast for AP by 18.6% to Php18.9Bil. We are also reducing our FV estimate on AP by 1.1% to Php43.1/ sh, and downgrading our rating on AP to HOLD from BUY. We continue to like AP as its profits are still projected to grow by a CAGR of 7.8% from 2017 to 2020, the fastest in the power sector, even with lower contract prices and rising coal costs. AP’s vertically integrated nature (due to the fact that it owns both power generation and distribution facilities) also secures its ability to expand its power generation portfolio despite concerns of oversupply in the market. However, based on AP’s current market price of Php39.15/ sh, upside to our FV estimate is limited at 6.6%. The stock is now trading at 15.2X 2019E P/E, a premium to its 10-year historical average P/E of 12.3X and the 12X average P/E of industry peers currently.

   Adrian Alexander Yu

GLO 3Q19 core profits rose by 20% y/y to Php5.8Bil. This brought 9M19 profits to Php17.9Bil, up 20% y/y accounting for 84.0% of COL and 83.0% of Consensus, ahead of estimates. The outperformance was driven by continued strong performance of GLO’s service revenues, which increased by 12.9% during 9M19, accounting for 75% of our FY19 forecast. GLO’s 9M19 EBITDA also rose by 17.4% y/y to Php57.9Bil driven by a 260bps improvement in EBITDA margin to 52.9% as total operating expenses including subsidy only rose by 8% y/y, slower than the 13% topline growth. This is also ahead of estimates, accounting for 77.3% of COL and 78.2% of Consensus’ full year estimates. We will release a more detailed report on GLO following the analyst briefing. We currently have a HOLD recommendation on GLO with a FV estimate of Php2,100/sh.