Alerts

   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.

   Adrian Alexander Yu

The International Monetary Fund (IMF) further slashed its economic growth forecast for the Philippines amid weaker-than-expected external demand and government spending given the delayed passage of the 2019 budget. In fact, the IMF now sees Philippine GDP growing by 6% in 2019 from its prior forecast of 6.5% made in April 2019 and 6.7% in September last year. The IMF also reduced its 2020 growth forecast to 6.3% from 6.6%.

   Adrian Alexander Yu

The House is targeting the approval of all remaining tax reform bills by the end of the year. The senate president Ralph Recto noted that the Senate will need to wait for the House to pass its version as tax measures are supposed to emanate from them under the law. The remaining tax reform proposal include the reduction of corporate tax to 20% by 2029, overhaul fiscal incentives, centralize real property valuations, simplified taxation on financial instruments, increase in government’s share of mining revenues and increase in excise tax on alcoholic products. The bills still remain at the Committee level in the Senate as the 17th Congress has adjourned on June 3, 2019.

   Andy dela Cruz

In a disclosure to the PSE, ALLHC, announced that it has acquired 100% of shares in Unity Realty & Development Corp. (URDC) for Php2.39Bil. URDC owns a property in Mabalacat, Pampanga, which is a suitable location for the development of a new industrial park by ALLHC. Note that ALI, ALLHC’s parent company, has mandated ALLHC to be its main vehicle in the development of industrial estates in the country.

   Andy dela Cruz

The BSP said that inflation could settle below the government’s full-year target of 2-4% in 3Q19 due to easing of food and oil prices and the high base effect from last year. BSP Deputy Governor Francisco Dakila, Jr. added that rice prices have declined given the ongoing harvest season as well as the continued arrival of imports. Lastly, world oil prices have dropped significantly and should help support the further easing of inflation.

   Frances Rolfa Nicolas

A bill seeking to renew the franchise of ABS for another 25 years has been refiled in the House of Representatives for the 18th Congress. Recall that the franchise renewal was previously filed but was not passed when the 17th Congress closed session in June. Note that the company’s franchise is set to expire in March 2020.

   Andy dela Cruz

Just in! JFC has disclosed its plan to acquire 100% of The Coffee Bean & Tea Leaf (CBTL). This will be the largest and most multinational (presence in 27 countries) acquisition of JFC so far. According to the disclosure, this will add 14% to its global system wide sales, 26% to its total store network, will bring international business' contribution to 36% of worldwide sales and will bring JFC closer to its vision to be one of the top 5 restaurant companies in the world in terms of market capitalization. The total consideration for this acquisition is USD350 million on a debt-free basis. *Insights from our research team to follow.

   Richard Lañeda, CFA

SM said that it is now part of the FTSE4Good Index Series and FTSE4Good Emerging Index. Note that the FTSE4Good Index identifies companies showing strong ESG practices based on globally recognized standards. SM President and Chief Executive Officer Frederic C. DyBuncio said that SM’s inclusion in the index affirms the company’s commitment to sustainable operations and strong adherence to good corporate governance.

   Andy dela Cruz

Villar Group’s home improvements retail chain, plans to more than double its store network in 2020 from 25 stores at present. During 2H19, the company plans to open 19 stores with another 19 new sites planned for 2020. This would bring ALLHOME’s store network count to 63, exceeding the original 50 store target. ALLHOME also plans to expand into new segments, namely the ALLBuilders format. ALLBuilders will focus more on contractors and builders by offering a vast selection of hardwares, tiles, sanitary wares, and other construction materials. These stores will be located primarily outside Metro Manila, where there is significant growth and therefore demands a one-stop shop solution. ALLHOME plans six ALLBuilders store in 2H19.