Alerts

   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.

   George Ching

Raising estimates, maintain BUY rating on MPI. In light of the changes made in our estimates for MER, we are increasing our 2019E earnings estimate for MPI by 6% to Php15.8Bil, and our 2020E estimate by 4.5% to Php12.3Bil. We are also raising our FV estimate for MPI by 2.8% to Php8.19/sh. We are maintaining our BUY rating on MPI. MPI’s share price has increased by 1.7% since the beginning of this year, underperforming the PSEi which has risen by 8.5% during the same period. We believe that the underperformance was mainly due to regulatory concerns surrounding its water and toll roads businesses. However, we believe that these concerns are overblown. Maynilad has already won its second arbitration case against the government. Meanwhile, MPTC has already secured the first tranche of toll hike this year for the NLEX and SCTEX, and is awaiting approval for the toll hike application for its other toll roads. Moreover, valuations are already very attractive. Based on MPI’s current market price of Php4.78/sh, the company is trading at a 48.4% discount to its NAV. The toll road business and Maynilad are nearly worthless as investors are only paying for MPI’s 45.5% stake in Meralco (representing 97% of MPI’s market value). MPI is now trading at only 9.5X 2019E P/E, a discount relative to the 14.6X average P/E of its industry peers. Based on its current market price, upside to our FV estimate of Php7.97/sh is significant at 71%.

   Andy dela Cruz

Reiterate HOLD. Following our reduced earnings forecast, we decreased our fair value estimate for IMI to Php9.20/sh from Php10.40/sh and we reiterate our HOLD rating given all the risks surrounding IMI this year. Moreover, at its current price of and the steep drop in net income for the year, IMI is trading at 45.5X 2019E P/E. This is a premium compared to the 13X median 19E P/E of its global peers. Nevertheless, although industry supply issues will likely remain in the short term, we continue to like IMI and believe that its long-term growth story remains intact. We also note that a slow recovery in IMI’s profitability should begin in the second half of the year and the upside risk of a fasterthan-expected recovery could catapult IMI’s earnings growth.

   Richard Lañeda, CFA

MEG is allocating Php10Bil for the development of eight new malls in the provinces until 2020 as it targets to hit one million sqm in retail space by then. These eight new malls will span over 200,000 sqm and will be located in key growth areas like Cebu, Bacolod, Davao, and etc. The new malls in the pipeline will be added to MEG’s current 17 lifestyle malls spanning 710,000 sqm in total retail space.

   Frances Rolfa Nicolas

CEB Vice President for Marketing and Distribution Candice Jennifer Iyog said that the company is targeting to reach 300Mil passengers flown by 2022. Note that CEB hit its 170 millionth passenger milestone in 2018 and is aiming to fly another 22.5-23Mil passengers by the end of 2019. Ms. Iyog said that they intend to accomplish the said goal by replacing smaller aircraft with bigger ones, and by adding more frequencies to its fights in gateways with less congestion.

   Andy dela Cruz

RFM said that it aims to have at least a 10% profit growth this 2019 as a result of lower inflation, stabilizing crude oil prices, and the stronger peso in the second half. Furthermore, according to RFM, profit growth may still be much stronger due to its milk business.

   Andy dela Cruz

President Rodrigo Duterte has signed House Bill 8677 into law, which increased the excise tax placed in tobacco products. The new law will increase the excise tax to Php60/ pack by 2023, from the Php35/pack currently. This new law is expected to generate Php74Bil, Php77.8Bil, Php81.2Bil, Php84Bil, Php85.6Bil in revenues in the next five years respectively.

   John Martin Luciano, CFA

S&P Global Ratings said that it sees more rate cuts from the Bangko Sentral ng Pilipinas over the next two years. It expects BSP to cut interest rates by 75 bps this year and by 50 bps next year due to the continued inflation downtrend and soft economic growth.

   Frances Rolfa Nicolas

2Q19 earnings rebound to Php338Mil, in line with estimates. CHP reported that 2Q19 net income reached Php634Mil, a reversal compared to the Php654Mil net loss registered in 2Q18. Excluding non-core items, core net income reached Php338Mil. This brought 1H19 core net income to Php517Mil, a reversal from the Php125Mil core net loss registered in the same period last year. Meanwhile, 1H19 operating performance as measured by EBITDA reached Php2.37Bil, up 18.0% y/y. Results are in line with COL estimates at 54.7% of our full year forecast and above consensus estimates at 64.5%. Note, however, that 1H19 volumes dropped 2% due to the slowdown in construction activity as a result of the delayed approval of the 2019 budget and construction ban during the mid-term elections. More details to follow after the briefing later. We currently have a HOLD rating and FV estimate of Php2.1/sh on CHP.

   Charles William Ang, CFA

With the easing inflation, this will give the BSP more room for the BSP to cut both policy rate and reserve requirement ratio (RRR) this year. As a result, we expect EW’s net interest margin to start recovering. Also, despite the headwinds faced by the public school teachers salary loans, this now accounts for a smaller part of the business. We currently have a BUY rating and a FV estimate of Php15.6/sh.