Alerts

   Adrian Alexander Yu

In light of EEI’s weaker than expected 2Q19 results, we are reducing our 2019 and 2020 gross profit forecast by 2.5% and by 2.9% respectively after factoring in the lower than expected margins and soft construction volumes. Similarly, we reduced our net income forecast by 5.2% and 5.5% for 2019 and 2020 respectively as we increased our forecast for financing charges given EEI’s higher debt levels and elevated borrowing rates. After factoring in our earnings adjustments, we reduced our fair value estimate by 5.3% to Php12.6/sh from Php13.3/sh. Nevertheless, we maintain our BUY recommendation on EEI due to valuations. At its current price of Php9.75/sh, capital appreciation potential is compelling at 29.2%.

   Frances Rolfa Nicolas

A bill seeking to renew the franchise of ABS for another 25 years has been refiled in the Senate. Note that a similar bill has been refiled in the House of Representatives last month. The company’s franchise is set to expire in March 2020.

   Andy dela Cruz

The BSP expects inflation in August to settle within the 1.3 to 2.1% range. The main drivers for the slowdown are lower domestic prices for gasoline, diesel, and kerosene; the continued decline in rice prices; and the downward adjustment in electricity rates. However, these could be partially offset by the recent depreciation of the peso and higher prices of selected food items.

   Frances Rolfa Nicolas

ABS has announced that its mobile digital service, TVplus Go are now available in the market. It will be sold at Php799 per unit and the device allows users to stream ABS-CBN content and other free-to-air channels using an Android phone even without an internet connection.

   Richard Lañeda, CFA

   Adrian Alexander Yu

Now Corp. (NOW)’s affiliate, Now Telecom Co. Inc, is positioning itself to be the 4th telco player through its impending partnership with local subsidiary Philippine Fiber Optic Cable Network Ltd. Inc. and Singapore’s HyalRoute. The HyalRoute group is investing between US$1-2 Billion to rollout a fiber optic cable network over 10years and will then be leased to telcos and internet service providers like Now Telecom. This partnership would allow Now to accelerate the firm’s nationwide expansion through the availability of nationwide transmission backbone.

   George Ching

Maintaining BUY rating. We have a BUY rating on AP with a FV estimate of Php41.3/ sh. Based on AP’s current market price of Php37/sh, upside to our FV estimate remains significant at 12%. Moreover, the stock is now trading at only 11.5X 2019E P/E, almost at par with its 10-year historical average P/E of 12.3X and the 12X average P/E of industry peers currently. This is not withstanding the fact that 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.

   Andy dela Cruz

Foreign portfolio investment transactions for the month of July yielded net inflows of US$1.7Bil. This is 19% higher than the inflows recorded in June 2019. Around 76.5% of the investments registered for July 2019 were PSE-listed securities, while the balance of 23.5% went to Peso government securities and Peso time deposits. Meanwhile, outflows for the month reached US$1.7Bil, which is much higher compared to the US$1.4Bil recorded in June 2019. The US continued to be the main destination of outflows as it received 77.8% of total outflows. Transactions for the month ended in net inflows of US$15Mil, a reversal compared to the US$35Mil in net outflows recorded during the previous month. Net inflows for the period were amidst better-than-expected inflation results in June and the stronger peso forecast.

   Richard Lañeda, CFA

Given the recent comments from China regarding online gaming wherein the Chinese Foreign Ministry spokesperson Geng Shuang hopes that the Philippine government go further and ban all online gambling. As a result, share prices of property developers were hit yesterday. Presidential spokeperson Salvador Panelo reiterated that online gambling is legal in the Philippines and POGOs are legitimate revenue-making project. As such, we are not making any changes to our estimates for now as there is no directive from the government regarding this. We believe that the exposure on the POGO remain manageable.

   Richard Lañeda, CFA

We are maintaining our HOLD recommendation on VLL as valuation remains unattractive at this point. At Php7.45, VLL is trading at a 11.7% premium to our fair value estimate of Php6.67. Nevertheless, we continue to have a positive outlook on the company given that it is one of the biggest developers of low- to midincome projects, which are mostly end-users, thus a more sustainable market. We also like VLL’s plans to continue expanding its leasing portfolio, which till improve earnings quality and cash flow stability.