Alerts

   Richard Lañeda, CFA

Suntrust Group (SUN) is now majority owned by Fortune Noble Ltd, as subsidiary of Suncity. SUN will raise Php5Bil through a share sale to 3rd parties including Suncity and MEG. Post capital hike, Suncity will still maintain its majority controlling interest in SUN (51%) while MEG will have at least 34% stake. SUN has also entered into an agreement with Westside city to lease the Project Site to Suntrust for development of the Main Hotel Casino and Westside is to appoint Suntrust as the sole and exclusive operator and manager of the Main Hotel Casino. SUN is currently under voluntary trading suspension in light of the recent developments.

   George Ching

We have a HOLD rating on NIKL with a FV estimate of Php4.01/sh. While we believe that the long term outlook for nickel prices will remain positive due to rising EV battery demand and the looming Indonesian ore export ban, we believe that this has already been priced-in by the market. NIKL’s share price has risen by 76.3% YTD, outperforming the PSEi’s 4.6% rise during the period. At its current price of Php3.88/sh, upside to our FV estimate is limited at 3.35.

   George Ching

According to news sources, the Indonesian government, together with Indonesia’s nickel miners association announced the immediate suspension of exports of nickel ore. This is two months ahead of the previous year-end target date. This surprise announcement by the Indonesia government could lead to a short term shortage in global nickel supply. This will likely result to a surge in global nickel price in the near term. We maintain our view that in the longer time horizon, the tight nickel supply situation could ease from higher production from other nickel ore producing countries such as the Philippines, as well as the ramping up of Indonesia’s nickel refining capacity in the next two years.

   Frances Rolfa Nicolas

In light of the weak volumes in 3Q19, we are reducing our volumes growth forecast to -1% from 4% in 2019. Moreover, we lowered our distribution expense forecast to 17% of sales from 18%. Furthermore, we increased our interest expense by 12.3% in 2019 and 2020. Factoring these, our earnings estimate decreased by 15.8% to Php1.0Bil and by 17.4% to Php1.2Bil in 2020. Consequently, we reduce our FV estimate on CHP to Php2.1/ sh. We remain cautious on the company given funding concerns for its Solid plant expansion. Note that the company’s plan to raise equity through a stock rights offering would lead to a massive dilution considering the huge amount (US$250Mil) being raised. Moreover, at its current price of Php2.5/sh, CHP is trading significantly above our new FV estimate. Hence, we are downgrading our recommendation to SELL.

   John Martin Luciano, CFA

BPI has raised over Php3Bil from the issuance of long-term negotiable certificates of time deposit (LTNCTD) to support the bank’s loan growth. The papers carry an interest rate of 4% per annum payable quarterly. Meanwhile, LTNCDs have a tenor of five-and-a-half years.

   John Martin Luciano, CFA

MBT’s 3Q19 earnings soared 49.0% y/y to Php8.6Bil. This brought the net income for the nine-month period higher by 28.9% y/y to Php21.6Bil, beating both COL and consensus estimates at 81.1% and 81.5%, respectively. The outperformance was driven mainly by robust trading gains (+545.3% y/y), partially offset by higher than expected provisions. Net interest income ended in line with expectations, with the third quarter figure growing by 11.3% y/y to Php19.7Bil (slightly faster than the +9.6% y/y growth in 1H19). Loans expanded slightly faster at 7% y/y (from the +6% y/y in June). According to the bank, the demand for credit was broad-based, led by the corporate segment. Meanwhile, the 9M19 earnings translate to an annualized ROE of 9.7%. We reiterate our BUY rating on MBT with a FV estimate of Php100/sh based on a 1.20X 2020E P/BV. We continue to like Metrobank as it is expected to be one of the major beneficiaries of the growing demand for loans given its size, and highly liquid and healthy balance sheet. We believe its large branch network gives the bank an advantage in growing its loan portfolio given its access to low-cost funding as seen in its high CASA ratio of 64% as of end-September 2019. At its current price, the bank is also trading at a steep discount at vs its peers at 0.85X 2020E P/BV (vs BDO’s 1.7X and BPI’s 1.5X).

   Frances Rolfa Nicolas

CHP’s 3Q19 earnings reached Php72.4Mil, a reversal compared to the Php78.7Mil losses registered in 3Q18. However, this includes non-core items such as forex losses, other income, and shutdown costs in 3Q18 amounting to Php146Mil, Php22Mil, and ~Php200Mil respectively. Excluding these, we estimate that 3Q19 core net income was flattish at Php197Mil. This brought 9M19 core net income to Php715Mil, from Php74Mil in 9M18 (restated from a loss). Meanwhile, 9M19 operating performance as measured by EBITDA reached Php3.4Bil up 20.9% y/y. Results are in line with COL estimates at 78.2% of our full year forecast and above consensus estimates at 88.5%. More details after the briefing later. We currently have a HOLD rating and FV estimate of Php2.3/sh on CHP.

   Justin Richmond Cheng, CFA

Fruitas Holdings, Inc. (FRUIT) has gained the approval of the Philippine Stock Exchange, Inc. (PSE) to conduct its initial public offering (IPO) next month. The company is planning to offer 533.7Mil primary shares with an over-allotment option of up to 68.3Mil secondary shares, which will be priced up to Php1.99/sh. FRUIT will announce the final offer price on November 14. Meanwhile, the offer period will be from November 18 to 22, while the listing date will be on November 29.

   Justin Richmond Cheng, CFA

SSI announced that it has launched its online store in the Philippines. The complete collection of Zara products for women, men, and kids are now available at www.zara. com/ph/. There is also a Zara mobile apps for iOS and Android phones. SSI added that customers can pick up their purchases at any of the nine Zara stores in the country or get their orders delivered to their home or at any drop off points for free for orders that exceed Php2,995. The deliver time is estimates to be between one to three days for orders within Metro Manila, three to five days in serviceable areas, and finally five to seven days for other locations. Zara customers can also return their orders free of charge at the stores or via home collection within 30 days from the purchase date.

   Richard Lañeda, CFA

For 2020, we forecast the PSEI’s EPS to grow by 8%, slower than the 13% EPS growth in 2019.