Alerts

   Richard Lañeda, CFA

According to MEG and AGI management, AGI has acquire most, if not all, of the US$200 Mil perpetual bonds of MEG from the market. MEG will effectively convert the perpetual shares into common equity by issuing 1.82 Bil shares at Php5.70 to AGI in exchange for the perpetual bonds. This way, MEG will reduce its USD exposure and at the same time save on payments the perpetual bonds which carry a coupon rate of 5.375% in exchange for a 2.5% dilution on its EPS to common shareholders. Our fair value estimate was also reduced by 2.8% form Php7.20 to Php7.00.

   George Ching

We are maintaining our BUY rating on FGEN with a FV estimate of Php30.2/sh. FGEN’s share price has increased by 27.6% since the beginning of this year, outperforming the PSEi’s 5.3% increase. We believe that the sentiment on the stock will remain positive in the near term, given EDC’s recent delisting, and FGEN’s relative stable cash flow (89% of capacity contracted) in light of oversupply concerns in the power industry. Based on FGEN’s market price of Php25.5/sh, upside to our FV estimate is significant at 18.4%.

   Justin Richmond Cheng, CFA

We are maintaining our BUY rating on COSCO with a FV estimate of Php11.9/sh. COSCO remains severely undervalued with the market not pricing in its other businesses (apart from PGOLD) like the liquor distribution and real estate business. In fact, if we only value COSCO (adjusting for parent net debt) for its 49% stake in PGOLD based on the latter’s market value, this still translates to a target price of Php9.8/sh, presenting a 45% upside to COSCO’s current price.

   Justin Richmond Cheng, CFA

We are reiterating our HOLD rating on DMC. 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. However, valuations are unattractive. At DMC’s current market price of Php9.14/sh, upside to our FV estimate is limited at 12%.

   Richard Lañeda, CFA

We maintaining our BUY rating on AC with a fair value estimate of Php1,077. We believe that weakness in earnings of ALI and AC Energy is just temporary as ALI’s performance is largely driven by timing of booking of its sold project. As for AC Energy, we believe the net income decline is not a cause for concern as it was a result of the sell down of their stake in GNPowerMariveles and seasonality effect on the wind farm. Long term potential of AC Energy remains bright on the back of aggressive expansion of its international renewable platforms. MWC’s water supply woes are also resolved starting mid-July with 99% of East Zone having 24/7 water supply. We believe the AC Industrials is more of a concern because of challenges of the global economy but it only accounts for 3% of our NAV and FV estimate.

   Richard Lañeda, CFA

We are lowering our fair value estimate on AGI from Php21.45 to Php20.74 as we factor in lower fair value estimate of EMP (from Php8.00 to Php7.60) and MEG (from Php7.20 to Php7.00) We maintain our BUY rating on AGI despite the underperformance of RWM given that AGI’s share are priced at a 50.2% discount to our NAV estimate of Php27.66 and 45.77% discount to its market price-based NAV of Php25.41.

   Frances Rolfa Nicolas

CEB has exceeded both COL and consensus estimates during the 2nd half of the year. The airline has recorded a big jump of 149.3% on their net income for the 2nd quarter. This is due to higher-than-expected revenues and lower-than-expected operating expenses during the period. We currently have a BUY rating with an FV estimate of Php114.3/sh.

   Richard Lañeda, CFA

We maintain sell rating on RWM was be believe valuations of RWM is still expensive. It is trading at 22.4X 2019 EV/EBITDA versus the sector average of 11.4X. We believe at this price, improvements in GGR and EBITDA is already priced in but we see headwinds in the VIP segment because of the slowdown in China’s economy and the ceasing of proxy betting of Sun City and Tak Chun.

   Andy dela Cruz

Based on preliminary data from the PSA, imported goods in June 2019 declined 10.4% y/y to US$8.5Bil. This is a larger decline compared to the -1.5% forecast of consensus. The decline in imports was led by the decrease in nine of the top ten imported commodities for the month, with Iron and Steel (-40.3%) dropping the most. Imports for electronic products only grew by 1.8% y/y, and this accounted for the biggest share of the total import bill at 28.1%. Top markets for imports during the period were China (22.8%), Japan (9.7%), and Korea (8.0%). With exports increasing by 1.5% y/y and imports declining by 10.4%, the country posted a narrower trade deficit of US$2.5Bil in June versus the US$3.6Bil deficit in the same month during 2018.

   Andy dela Cruz

Preliminary data from the PSA showed that exports grew by 1.5% y/y in June 2019 to US$6.0Bil. This is in line with the 1.4% growth forecast of consensus. The growth in exports for the period was amid an increase in seven out of the top ten exported commodities for the month, led by Cathodes & Sections of Cathodes, Of Refined Copper (+41.7%). Meanwhile, export of electronic products increased by 4.3% y/y for the said month. Note that electronic products accounted for majority of the total export bill in June at 59.0%. Top markets for exports during the period were USA (16.2%), Japan (14.5%), and China (13.7%).