Alerts

   Charles William Ang, CFA

Toyota Motors Philippines Corp., a unit of GTCAP, said that it is not confident of meeting is 2019 annual sales target of 165,000 units. This is despite the company’s car sales growing by 4.3% y/y to 114,117 units in the nine months ended September.

   George Ching

MPI announced that the Toll Regulatory Board (TRB) has approved the rate adjustment of Cavitex R-1 Expressway and the Provisional initial toll rate for Segment 3A-1 of C5 South Link Expressway. The adjustment approved for Cavitex R-1 was Php0.89/entry (4.15% of existing rate) pertaining to the road widening of R1, while the provisional toll rate for Segment 3Q of C5 South Link was Php19.64/entry. The start of the implementation is expected on Oct 24. The expected impact on revenues is ~ Php180Mil annually, representing only 0.2% of MPI’s total revenues. However, this could be viewed as another positive development for MPTC after it was able to secure tariff adjustments for NLEX and SCTEX earlier this year.

   George Ching

Cutting FV estimate to Php3.12/sh, but upgrading to BUY. Despite the 5.7% reduction in our FV estimate to Php3.12/sh from Php3.31/sh, we are upgrading our rating on PHEN from HOLD to BUY. PHEN’s share price has declined by 22% in the past month due to uncertainty on how the asset-share swap would impact PHEN’s valuation. After the factoring in the details of the transaction, the 22% drop in the share price was too much. At Php2.30/sh, PHEN is trading at 14.9X 2020E P/E, a discount relative to the 16.3X average P/E of industry peers. Furthermore, upside to our FV estimate of Ph3.11/ sh is significant at 35.3%.

   George Ching

The Department of Environment and Natural Resources (DENR) announced the lifting of the suspension of mining operations of Zambales Diversified Metals Corp. Zambales Diversified Metals Corp. is subsidiary of DMC and it holds the operation of the Acoje Nickel Mine in Sta. Cruz Zambales. Its operation was suspended in 2016 due to breach of environmental standards. This is a positive development for DMC as the lifting of the suspension order will pave way for the resumption of operation of the Acoje Mine. We assume the operation of Acoje will restart in 2020 with an annual shipment of 500,000WMT, we estimate that the mine will generate Php800Mil in revenues and net profits of Php200Mil. We are upgrading our rating on DMC from HOLD to BUY. DMC’s share price has declined by 32.2% in the YTD period, underperforming the PSEi’s 4% gain during the same period. 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. Earnings from its nickel mining business could also rebound as a result of the lifting of the suspension order on the Berong and Acoje Mines, further boosted by the prospects of rising nickel prices as a result of the pending Indonesian ore export ban. At DMC’s current market price of Php8.66/sh, upside to our FV estimate of Php10.39/sh is significant at 20%.

   Justin Richmond Cheng, CFA

In a disclosure to the PSE, Chelsea Logistics and Infrastructure Holdings Corp. announced that it has acquired 100% of The SuperCat Fast Ferry Corp (SFFC) from its affiliate 2GO. SFFC is engaged in transporting passengers in Mindanao (e.g. Bacolod-Iloilo, CebuOrmoc, and etc) with its twin hulled fast ferry catamaran. The company did not disclose the exact amount of the transaction as it is less than 10% of CLC’s Total Shareholders’ Equity. Note that Chelsea holds a 28.15% indirect economic interest in 2GO.

   George Ching

Upgrading rating to BUY. We are upgrading our rating on DMC from HOLD to BUY. DMC’s share price has declined by 32.2% in the YTD period, underperforming the PSEi’s 4% gain during the same period. 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. Earnings from its nickel mining business could also rebound as a result of the lifting of the suspension order on the Berong and Acoje Mines, further boosted by the prospects of rising nickel prices as a result of the pending Indonesian ore export ban. At DMC’s current market price of Php8.66/sh, upside to our FV estimate of Php10.39/sh is significant at 20%.

   Frances Rolfa Nicolas

Philippines Air Asia is deferring its initial public offering (IPO) to the third quarter of 2020 or first quarter of 2021. Philippines AirAsia Chairman Joseph Omar Castillo noted that there are still a number of things they need to do on the corporate side in preparation for the IPO. Recall that the company has postponed its planned IPO several times already due to market volatility.

   Frances Rolfa Nicolas

MWC said that water rates may increase by as much as Php26.7/cu.m. if the Supreme Court does not reverse its decision to fine the company for failure to comply with the Clean Water Act. The company said that if it were to compress into five years what was planned as a 40-year project would require hundreds of billions of pesos and in turn significantly increase the water bill of consumers. Moreover, MWC said that worse traffic could also be expected since hundreds of kilometres of roads would have to be dug up all at the same time. Note that the company has already filed its motion for reconsideration with the Supreme Court earlier this month.

   Justin Richmond Cheng, CFA

SSI has entered into a territory agreement with Crystal Jade Management PTE Ltd to own and operate Crystal Jade restaurants in the Philippines. This will include Crystal Jade Golden Palace, Crystal Jade Hong Kong Kitchen, Crystal Jade La Mian Xiao Long Bao, and Crystal Jade GO. Among the four international formats, SSI will first launch Crystal Jade Hong Kong Kitchen in 1Q20 located in Central Square in Bonifacio Global City.

   Marian Cathleen So

The benchmark Philippine Stock Exchange index (PSEi) on Wednesday moved lower with the rest of the region following the selloff in Wall Street overnight as optimism dimmed over upcoming trade talks between the United States and China.