Alerts

   Charles William Ang, CFA

SECB will maintain its profit-oriented strategy even with the new president, Sanjiv Vohra, and avoid irrational pricing. The bank expects loan growth to be driven by robust growth in consumer loans which is partially caused by the fast turnaround time as the bank continues to increase it efficiency. We believe that disciplined loan pricing and easing pressure on funding costs will cause net interest margin to improve over the next 2 years. We are maintaining a BUY rating and a FV estimate of Php197/sh.

   George Ching

MPI shared that they have started the process for the planned stake sale for its hospital business. Proceeds will be used as capital expenditure for its toll road business for the next 5 years. MPI’s management plans to conduct a dual-track process (conducting an IPO first before selling a stake to a new investor). According to news sources, the projected valuation for their hospital business is estimated to be at least US$2Bil which is higher than the company’s, COL and the consensus estimates. We believe that this stake sale is a catalyst to unlock MPI’s value and possibly increase its FV estimate of Php9.38/sh. We currently have a BUY rating on MPI with an FV estimate of Php7.97/sh as valuations are quite attractive at this point.

   George Ching

Vehicle sales in June 2019 grew by 8.7% y/y to 31,950 units. Passenger car sales rose by 22% to 9,532 units while commercial vehicle sales were up by 3.9% to 22,418 units. The Chamber of Automotive Manufacturers of the Philippines Inc. said that they remain very optimistic that the local auto industry is already on path of steady growth. For the first six months of the year, vehicle sales grew by 1.46% y/y to 174,135 units.

   Frances Rolfa Nicolas

In a disclosure to the PSE, HLCM announced that it has completed its project to raise the production capacity of its Davao plant in June. The expansion involved the activation of a finish mill and installation of a new pipe for loading cement to the silos pier, eco-hoppers to improve dust emissions and an overhead crane. The said improvements are expected to add 700,000 MT to the cement production of the company’s Davao plant.

   Andy dela Cruz

Based on preliminary data from the PSA, imported goods in May 2019 decreased 5.4% y/y to US$9.4Bil. This is below consensus forecast, which expected only a 1.1% decline. The decline in imports was led by the decrease in six of the top ten imported commodities for the month, with Iron and Steel (-25.5%) dropping the most. Imports for electronic products only grew by 2.0% y/y, and this accounted for the biggest share of the total import bill at 26.1%. Top markets for imports during the period were China (22.8%), Japan (8.7%), and Korea (8.0%). With exports increasing by 1.0% y/y and imports declining by 5.4%, the country posted a more narrow trade deficit of US$3.3Bil in May versus the US$3.9Bil deficit in the same month during 2018.

   Andy dela Cruz

Preliminary data from the PSA showed that exports increased by 1.0% y/y in May 2019 to US$6.2Bil. This is in contrast to the 0.8% decrease expected by consensus. The growth in exports for the period was amid an increase in eight out of the top ten exported commodities for the month, led by Copper Concentrates (+192.1%). Meanwhile, export of electronic products increased by 6.2% y/y for the said month. Note that electronic products accounted for majority of the total export bill in May at 56.1%. Top markets for exports during the period were USA (17.6%), China (14.6%), and Japan (14.0%).

   Andy dela Cruz

FDI net inflows in April reached US$961Mil, 11.8% lower compared to the US$1.1Bil recorded in the same month last year. The decline was mainly due to the contraction of equity capital by 85.5% y/y to US$39Mil. Equity capital placements came mostly from Thailand, the United States, Singapore, Hong Kong, and Japan. Meanwhile, nonresidents’ investments in debt instruments grew 12.6% US$830Mil from the US$737Mil posted last year. This brought the FDI net inflows in the first four months of the year to US$2.9Bil, down 14.0% y/y. According to the BSP, the drop in the year to date net inflows was attributable to the decline in net equity capital investments as placements dropped by 44.5% to US$712Mil, coupled with a 204.9% increase in withdrawals to US$377Mil during the period.

   Andy dela Cruz

BSP Governor Benjamin E. Diokno said that the central bank is likely to cut policy rates in the second half before moving to reduce the reserve requirement ratio. Furthermore, the central bank is still waiting for important metrics such as 2Q GDP growth and inflation rates in July and August before deciding the monetary policy action.

   George Ching

Maintaining BUY rating. 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 26.6% in the past 12 months, underperforming the PSEi’s 11.7% 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 31.1%, also based on our revised fair value estimate.

   Adrian Alexander Yu

According to Dito spokesperson Adel Tamano, although commercial operations was originally slated for September 2019, the target has been moved to the second quarter of 2020. The pushed back commercial operations will help ensure better network quality for the public as the company believes their first offer should be really good. By 2020, Dito will immediately offer LTE and 4G technology, while the customers can expect 5G network quality by 2021. Regarding competition, Dito believes it will be a war won by the company that provides the best quality instead of a price war, hence the decision to delay commercial operations to improve network quality.