Alerts

   Andy dela Cruz

Credit growth continued to decelerate in May with loans expanding by 11.9% y/y from 12.7% y/y in the previous month. Loans for production activities increased at a slower pace of 11.5% y/y , driven primarily by lending to the following sectors: real estate activities (+13.6% y/y); financial and insurance activities (+21.2% y/y); manufacturing (+11.6% y/y); electricity, gas, steam and air conditioning supply (+13.1% y/y); construction (+43.0% y/y); and wholesale and retail trade, repair of motor vehicles and motorcycles (+9.3% y/y). Similarly, consumer loans grew at a slower pace of 14.6% y/y, as growth in credit card loans and other types of household loans was slightly offset by the decline in salary-based general-purpose consumption loans

   Andy dela Cruz

Headline inflation in June slowed down to 2.7% from 3.2% in the previous month, slightly better than consensus forecast of 2.8%. This brought the year-to-date average to 3.4%, within the government’s inflation target range of 2-4% for the year. Similarly, core inflation was also lower at 3.3% in June from 3.5% in May. The slower in inflation for June can be attributed to the slower price increases of selected food and non-food items. Inflation rate of most food commodities eased during the month, supported by sufficient domestic food supply conditions. In addition, non-food inflation decelerated as electricity rates declined on the back of lower generation charge, while transport inflation fell due to the reduction in prices of domestic petroleum products

   Frances Rolfa Nicolas

We are increasing our FV estimate on CEB due to stronger peso and to factor in the arrival of more efficient aircrafts which are said to be more fuel efficient aircrafts. The peso has strengthened by 2.4% since the start of the year for which gives CEB an advantage to have lower operational expense. While the company is also upgrading its fleet with bigger capacity aircrafts to accommodate growing demand. We are revising our forecast following these factors with a new FV estimate of Php114.30/sh and reiterating a BUY rating.

   Frances Rolfa Nicolas

In a disclosure to the PSE, MWC announced that it has signed and executed a joint venture with the Lambunao Water District (LWD), and Calbayog City Water District (CCWD) for the design, constructions, and operation among others of the water and wastewater system of LWD and CCWD in Lambunao, Iloilo, and Calbayog, Samar. The project with LWD is estimated to entail total capex of Php79Mil, and is estimated to deliver a potential billed volume of 2.93MLD. Meanwhile, the project with CCWD is estimated to entail total capex of Php1.2Bil and is estimated to deliver a potential a billed volume of 28.5MLD.

   Charles William Ang, CFA

MBT successfully raised Php11.25Bil in the issuance of 2-year Peso bonds which was completed last June 21, 2019. The bank’s initial target of Php5.0Bil was upsized to Php11.25Bil due to the robust demand from institutional, high net worth, and retail clients. The bonds have a coupon rate of 5.5% which will be paid quarterly. Note that the bank has raised an aggregate amount of Php56.75Bil Peso bonds since November 2018.

   Andy dela Cruz

The Bureau of Treasury (BTr) reported that the national government’s debt pile rose to another record high of Php7.9Tril in May, up 1.7% q/q, following the country’s return to the European and Chinese debt markets. For the first five months of the year, the country’s debt grew 8.5% or Php623Bil from the end-2018 level of Php7.3Tril. The BTr attributed the increase to the net issuance of both domestic and foreign loans as well as foreign exchange fluctuations. Treasury data showed that 66.4% of the total debt stock was borrowed domestically, while the remaining 33.6% was sourced from foreign creditors.

   Adrian Alexander Yu

Globe Telecom Inc. (GLO) has secured a second deal for sharable telecommunications infrastructure with the Aboitiz InfraCapital Inc and Frontier Tower Associates Philippines (FTAP). The memorandum of understanding (MoU) signed to roll out the common towers will be in the regions of Cebu, Davao, and Olongapo. Currently, the number of towers to be built by Aboitiz and FTAP is still under discussion. Note that the number of towers will not only be leasable to GLO, but also to other network operators such as PLDT Inc, (TEL) and incoming player Mislatel consortium. After signing the MoU with GLO, Aboitiz and FTAP is expected to sign a memorandum of agreement with the Department of Information and Communications Technology to formalize the government’s assistance to secure the necessary regulatory permits for the rollout.

   Richard Lañeda, CFA

AGI is looking to spend Php410Bil in capital expenditures for the next five years to sustain the growth of its various businesses. This 2020 to 2024 budget is much higher than the Php377Bil allotted from 2015 to 2019, and is also almost double the Php218Bil spent from 2010 to 2014. Around 73% of the programmed spending will be used for AGI’s property unit, Megaworld, as the latter further develops townships across the country. Meanwhile, around 15% of the capex budget will be used by Travellers International Hotel, Group that operates Resorts World Manila for the development of its second integrated resort and casino project inside Entertainment City complex in Parañaque. The balance will be allocated to its other business units such as liquor, restaurant, and infrastructure. (Source: AGI)

   Andy dela Cruz

CNPF is allotting Php2Bil in capital expenditures this 2019 for capacity expansion as the company aims to grow earnings by double-digit growth. Half of the 2019 budget will be used to finance the construction of a new tuna cannery in General Santos City, and this is scheduled to operate by 4Q19. The new cannery will bring in an additional 100 metric tons of capacity per day to CNPF, supplementing its existing tuna canneries, which are already running at full capacity of 300-350 metric tons per day. Management also noted that the new facility should be able to satisfy the company’s requirements for the next three to five years.

   Frances Rolfa Nicolas

CEB President Lance Gokongwei said that the company is looking at using its incoming A321XLRs to fly from its hubs in the Visayas and Mindanao to destinations in North Asia, Australia, and Brunei. Recall that the company ordered 10 A321XLRs, which are expected to arrive beginning 2024. Mr. Gokongwei noted that while there is an opportunity to add new destinations for long-haul flights, there are no plans for now. CEB’s long-haul routes are currently limited to Dubai, Melbourne and Sydney, and all are flying out of Manila.