Alerts

   Justin Richmond Cheng, CFA

The country’s overall balance of payments (BOP) position recorded a deficit of US$404Mil in June 2019. This is much lower compared to the US$1.2Bil deficit posted in June 2018. The high outflows for the period was due to principal and interest payments of the National Government (NG) on its foreign exchange obligations. This outflow was partly offset by the NG’s net foreign currency deposits, the BSP’s foreign exchange operations, and the income from its investments abroad.

   Andy dela Cruz

The Asian Development Bank (ADB) trimmed its Philippine economic growth projection to 6.2%, from its previous forecast of 6.4%, due to the four-month delay in the 2019 budget enactment and slowing export of goods and services. Nevertheless, the ADB’s 2019 projection for the Philippines will still be the region’s third-fastest after Vietnam at 6.8% and China at 6.3%. Moreover, the reduced forecast matches the Philippines’ pace of economic growth last year and compares to a downgraded official 6-7% 2019 target adopted by state economic managers, down from 7-8% originally.

   Adrian Alexander Yu

PLDT Inc, (TEL) and its subsidiary Smart Telecommunications are unlikely to begin 5G network services given that the company is still searching for a technology partner. According to PLDT Chairman and CEO Manuel V. Pangilinan, the 5G network standards still needs to be determined as well as finalize deals with the 5G equipment providers. This is a slight delay from the previously disclosed fourth quarter of 2019 start of 5G network operations for the Home and Enterprise.

   Andy dela Cruz

The development Budget Coordination Committee (DBCC) slashed its inflation rate assumption for 2019 to 2.7% to 3.5% from previously 3% to 4% given the slowing increase in prices of goods and services. Meanwhile, inflation assumptions for 2020 until 2022 have been kept at the 2% to 4% range. The DBCC’s assumption for exports was also cut to 2% growth in 2019 versus 6% in light of slower global growth, while import growth was reduced to 7% this year from 9%. Lastly, the DBCC also adjusted its pesodollar exchange rate to a stronger Php51 to Php53 per USD from its previous assumption of Php52 to Php55 per USD given the possible appreciation of the peso in light of easing inflation pressures and positive market sentiment as seen thru the recent sovereign ratings upgrading by the S&P to “BBB+” last April.

   Andy dela Cruz

Manny Villar Jr. is planning to take his home improvement company, All Home Corp. public by this year. The company will offer up to 1.125 Bil shares at Php16/share. It expects to raise Php11.5Bil in net proceeds which shall be used for capital expenditure and initial working capital to fund stock expansions of 19 stores in the 2nd of 2019 and 19 more in 2020.

   George Ching

As a result of our higher nickel ASP assumption, we are increasing our 2019E earnings forecast for NIKL by 9.7% to Php3.3Bil, and our 2020E earnings forecast by 14% to Php3.5Bil. Meanwhile, we increased our FV estimate for NIKL by 7.1% to Php 3.0/sh. We are reiterating our BUY recommendation on NIKL. The upgrade on our rating is mainly due to NIKL’s increasingly attractive valuation. Investor sentiment on NIKL has been weak as the relaxation of Indonesia’s ore export ban continue to put downward pressure on nickel ore negotiated contract prices and LME prices. However, we believe that these factors have largely been priced-in. NIKL’s share price has declined by 2% in the past 12 months, underperforming the PSEi’s 10.8% rise during the period. At its current price of Php2.43/sh, there is an upside of 24.7% to our FV estimate.

   Richard Lañeda, CFA

AKL Properties, an affiliate of ALI, has entered into an agreement with the Manila Jockey Club (MJC) to develop the latter’s 60-hectare property in Cavite into a business hub. The property is currently a mixed use venue which includes the iconic race track, a casino and a small venue for cockfighting. ALI was appointed as the development manager of the property while MJC will have an economic interest in the development.

   George Ching

We have a BUY rating on SCC with a FV estimate of Php30.16/ sh. While near term sentiment may not improve in the near term due to the weakness in coal price, we believe that much of the negative news is already priced-in, as SCC’s share price has declined by 24.3% in the past 12 months, underperforming the PSEi’s 12.1% rise. The stock is also the cheapest among all power companies, trading at only 9.2X 2019E P/E based on our earnings forecast and capital appreciation potential remains significant at 25.9%, also based on our revised fair value estimate.

   Adrian Alexander Yu

ABS said that it has tallied a cumulative 8Mil TVplus boxes sold as of July, growing 1Mil from the 7Mil it recorded in February. The company noted that digital television adoption across the country continues to grow since it launched the TVplus product in 2015. Last month, ABS also launched a mobile version of its TVplus boxes, the ABS-CBN TVplus Go, which acts as a dongle to allow users watch live television from their smartphones.

   George Ching

The Cement Manufacturers Association of the Philippines (CEMAP) is keenly awaiting the decision of the Tariff Commission on the safeguard measures for imported cement. CEMAP said that the safeguard duty of Php8.4/bag has failed to curb the surge in cement imports and that the industry is already reeling from decreased market share and profits. CEMAP also noted that volume for cement imports grew 64% y/y in the first quarter of 2019. Tariff Commission Director and Task Force on Cement (TFC) Head Lourdes Saluta said that the task force's report and recommendation would be ready for presentation before the end of the month.