Alerts

   Richard Lañeda, CFA

ALI reported a slower net income growth of 11.6%, lagging both COL and consensus estimates. The underperformance was due to the lower than expected residential development revenues. As some of the projects are in the early stages of construction, revenue booking is still slow. With this, we are downgrading ALI into a HOLD with an FV estimate of php49.33

   Andy dela Cruz

BSP Governor Diokno said he expects a 50 bps cut in interest rates for the rest of 2019, with the timing of the cut depending on incoming economic data. In fact, the BSP is monitoring the upcoming inflation numbers today as well as economic growth data on Thursday. Consensus expectations predict that the central bank will cut rates by another 50 bps this Thursday to 4.25%.

   Andy dela Cruz

The Chinese Ministry of Commerce said that Chinese companies have stopped purchasing US agricultural products in response to President Trump’s new 10% tariffs on US$300Bil of Chinese goods. Recall that President Trump imposed the tariffs after accusing China of not making good on its promise to buy American agricultural goods in large quantities. China is also considering slapping tariffs on US agricultural products that it already bought. Note that China is one of the largest buyers of US agriculture.

   Adrian Alexander Yu

GLO is strengthening its non-telco related services through the rebranding of its Globe Capital Ventures Holdings, Inc to 917 Ventures. 917 will be tasked to add more pilots to fit the new business profile that GLO will embark on in the future, similar to Mynt. Note that Globe Fintech Innovations, Inc. (Mynt) and G-Xchange, Inc. (GCash) are currently under 917 Ventures. GLO has yet to disclose any additional details regarding new capital infusion into 917 Ventures.

   Adrian Alexander Yu

Preliminary data from the BSP showed that domestic liquidity (M3) grew by 6.4% y/y to Php11.8Tril in June 2019, unchanged from the rate of expansion in May 2019. On a m/m seasonally-adjusted basis, M3 increased by 0.1%. Domestic claims grew by 6.2% in June, mainly due to the sustained growth in credit to the private sector. Meanwhile, net claims on the central government further declined by 3.9% from dropping 6.4% in the previous month. Net foreign assets (NFA) in peso terms grew by 5.3% y/y in June, faster than the 4.4% growth in the previous month. The NFA of banks decreased as a result of higher foreign liabilities due to increased placements and deposits made by foreign banks with their local branches and other banks. On the other hand, the BSP’s NFA position expanded, supported by foreign exchange inflows coming mainly from overseas Filipinos’ remittances and business process outsourcing receipts. (source: BSP)

   Adrian Alexander Yu

The BSP expects inflation in July to settle within the 2.0-2.8% percent range. The central bank believes that lower rice and domestic LPG prices along with downward adjustment in electricity rates and the recent peso appreciation will temper inflation pressure during the month. However, these could be partly offset by higher prices of petroleum and food items during the month. (Source: BSP)

   Andy dela Cruz

President Donald Trump said the US is putting 10% tariffs on another US$300Bil worth of Chinese goods, effective September 1. The surprise tariff announcement came after the US and China restarted trade talks in Shanghai this week. Meanwhile, President Trump later said that the new tariffs could be raised to above 25%. (Source: CNBC)

   Andy dela Cruz

JFC reported that its net income plummeted by 50.2% y/y to Php1.1 Bil in 2Q19, causing first half earnings to also decline 34.4% y/y to Php2.7 Bil. This missed both COL and consensus estimates as it accounted for only 31.6% and 32.0% of full-year forecasts, respectively. The drop in profits came mostly from Smashburger losses and Red Ribbon’s transition to a new plant.

   Frances Rolfa Nicolas

The Court of Tax Appeals (CTA) has denied PCOR’s Php67.8Mil tax refund claim on imports of alkalyte for lack of merit. This affirmed the decision and resolution of the court’s second division, which ruled that alkalyte imports are subject to excise tax. The CTA also ruled that double taxation does not exist in PCOR’s case as imported alkalytes are taxed only upon importation and is not exempted from excise when used as a raw material.

   George Ching

We have a BUY rating on AP with a FV estimate of Php41.3/ sh. Based on AP’s current market price of Php35.4/sh, upside to our FV estimate remains significant at 16.7%. Moreover, the stock is now trading at only 11.1X 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.