Alerts

   Richard Lañeda, CFA

Due to realignment of our list of covered stocks, we are discontinuing our coverage on RWM.

   Richard Lañeda, CFA

Due to realignment of our list of covered stocks, we are discontinuing our coverage on BEL.

   John Martin Luciano, CFA

Purefoods-Hormel Co., a unit of FB, assured the public that its hotdogs, bacon and canned products are not affected by the African Swine Fever (ASF). The company noted that its pork ingredients are produced from company-controlled hog facilities, which observe the highest level of bio-security measures, and that its imported meat parts are sourced from ASF-free countries. Purefoods also noted that it has other products that do not contain pork, such as chicken hotdogs, nuggets, and corned beef, among others.

   John Martin Luciano, CFA

AllHome Corp. (HOME) has set its final offer price for its IPO at Php11.50/sh, near the low end of its previously indicated indicative range. Note that the final price is also much lower than the company’s previous target of Php16.00/sh. HOME will offer up to 1.25 billion shares, consisting of 750 million primary common shares, 375 million secondary shares offered by the selling shareholder with an overallotment option of up to 168.75 million shares. HOME will be able to raise Php8.6Bil gross of fees from the IPO, where proceeds will be used for the construction of 43 stores until 2020 while a portion will also be used to repay debt from working capital. Upon listing, Home will have a public float of 34.5% assuming over allotment. The offer period will run from September 30 to October 4, with the listing scheduled for October 10.

   John Martin Luciano, CFA

The Monetary Board reduced the interest rate on the BSP’s overnight reverse repurchase facility by 25 bps to 4.0%, in line with consensus expectations. The interest rates on the overnight deposit and lending facilities were also reduced accordingly to 3.5% and 4.5%, respectively. The decision was based on its assessment that price pressures have eased further with the central bank’s latest forecasts indicating that inflation is likely to settle within the lower half of the target range of 2-4% from 2019 to 2021. In terms of risks to the inflation outlook, the Monetary Board noted that the balance of risks has shifted toward the upside for 2020, but is seen to tilt to the downside for 2021. Upside risks to inflation in the near term include a) the volatility in oil prices due to geopolitical tensions in the Middle East and b) the potential impact of the African Swine Fever outbreak on food prices. On the other hand, the subdued pace of global economic activity continues to temper the inflation outlook. Prospects for global economic growth are seen to remain weak mainly due to uncertainty over trade policies. However, firm domestic spending and progress on policy reforms will serve as a buffer against global headwinds. In light of these factors, Monetary Board believes that the benign inflation outlook provides room for a further reduction in the policy rate to support economic growth.

   John Martin Luciano, CFA

The Asian Development Bank (ADB) revised downward its 2019 growth forecast for the Philippines to 6% and 6.2% in 2020 from the original target of 6.4% for both years. The revision comes from the slowdown in domestic investment in the first half because of the delayed passage of the national budget, which held back public expenditure. Nevertheless, ADB Country Director Kelly Bird said that public spending should regain traction for the rest of 2019, with the government committed to catching up with its spending plans. This should also boost private consumption, which is currently well supported by steady overseas workers’ remittance, moderate inflation, and low unemployment.

   John Martin Luciano, CFA

The BSP lowered its average 2019 inflation forecast to 2.5% from 2.6% previously. This was made ahead of its monetary policy meeting on Thursday, which the BSP is expected to cut its benchmark rate by another 25 bps.

   Justin Richmond Cheng, CFA

PIP disclosed that its board has approved the closure of its snacks production line in a move to discontinue local production of snacks and focus on its core business of carbonated soft drinks (CSD) and non-carbonated beverages (NCB). Nevertheless, management still intends to continue importing these well-known snack brands like Cheetos, Lays, Doritos, and Ruffles, among others. Meanwhile, the employees of the snacks plant will be transitioned into new roles that will help strengthen the production and distribution of its beverage business. PIP’s share price fell by around 6% since its updated disclosure yesterday regarding the discontinuation of its snacks business. Nevertheless, the discontinuation of the snacks business is actually beneficial for PIP as the snacks segment is less than 1% of sales and is losing money. As of 1H19, the snacks business booked a Php40Mil loss after deducting cost of goods from sales. As such, stopping local production and focusing on importation of these snacks should help PIP turn this segment into positive territory on the gross profit level. Note that the Php40Mil already translates to roughly 9% of the company’s first half net income.

   Adrian Alexander Yu

Globe Telecom Inc, (GLO) has signed a memorandum of understanding (MOU) with a wholly owned subsidiary of American Tower Corporation, Transcend Tower Corporation for 150 towers in North Luzon. This comes after GLO recently signed a MOU with the joint venture of ISOC Infrastructure and etodco group Sdn Bhd for 150 towers in CALABARZON and with the joint venture of Aboitiz InfraCapital and Frontier Tower Associates Philippines for a yet undetermined number of towers. GLO previously disclosed that partnering with tower providers not only helps accelerate infrastructure build for their customers but also helps alleviate Capex concerns, which could be invested in building active telecommunications infrastructure instead.

   John Martin Luciano, CFA

According to BSP Governor Diokno, the Philippine economy’s growth potential is expected to expand even faster in the coming three years, hitting the government’s growth target of 7-8% by 2022. Growth will be driven by the vital reforms made since 2016 and onwards that aim to unleash the Philippines’ faster growth potential. These structural reforms include tax reforms, the liberalization of rice importation, universal healthcare, relaxation of Foreign Investments Negative List, the Ease of Doing Business law, and the revised Corporation Code, among others.