Alerts

   George Ching

According to West Zone concessionaire, Maynilad Water Services Inc., it is going to invest Php16.8Bil in 2019 to improve and accelerate the expansion of its water and wastewater services. In fact, bulk of the budget at around Php11.4Bil will be spent for wastewater management projects, in compliance with new and more stringent standards, and to maintain network reliability. This huge sum will be used for the construction of a new sewage treatment plant (STP) in Central Manila, the installation of 30 kilometers of sewer lines, and the upgrade of existing STPs and pump stations, among others.

   George Ching

The Philippine competition Commission (PCC) said that it has not yet been notified by SMC and HLCM for the mandatory merger review. The PCC reminds both SMC and HLCM that merging firms that meet the notification threshold must notify the PCC of their transaction within 30 days from the signing of the definitive agreement. Recall that SMC and HLCIM announced on May 10 that their US$2.15Bil transaction is considered a notifiable transaction. Meanwhile, SMC President and CEO Ramon Ang expressed optimism and confidence that they can obtain the PCC’s approval given that HLCM only has a 20% share in domestic production. Furthermore, competition with imports remain strong.

   John Martin Luciano, CFA

BSP reported that foreign portfolio investment transactions for April 2019 registered net outflows of US$299Mil, a reversal from the US$279Mil net inflows recorded in the same period last year. Registered foreign portfolio investments for the month dropped 28.1% to US$990Mil, while outflows grew 17.5% to US$1.3Bil. The drop in inflows was attributed to investor reaction to the delayed approval of the 2019 national budget and the damage caused by the April earthquake that jolted parts of Luzon and Visayas. Investments for the month were mostly in PSE-listed securities with 79.2% share of the total, while the remaining 20.8% balance went to Peso GS and Peso TDs. Meanwhile, top investing countries were the United Kingdom (UK), the United States (US), Singapore, Hong Kong, and Luxembourg, with combined share of 84.8% of total investments. In contrast, the US continued to be the main destination of outflows, receiving 71.1% of total remittances.

   Richard Lañeda, CFA

We are lowering our fair value estimate on AGI from Php19.78 to Php19.29 as we factor in lower fair value estimate of EMP (Php8.00 from Php8.20) and higher parent-level net debt. We maintain our BUY rating on AGI despite the underperformance of RWM given that AGI’s share are priced at a 44.3% discount to our NAV estimate of Php25.72 and 44.4% discount to its market price-based NAV of Php25.77.

   Charles William Ang, CFA

The Monetary Board announced a gradual reduction in thrift, rural and, cooperative banks’ reserve requirement ratio (RRR) to release additional funds in into the system. For thrift banks, the RRR cut was 200 bps, bringing it down from 8% to 6%. This will be done in three phases, wherein the first 100 bps will be effective on May 31. Another 50 bps will be effective on June 28, while the remaining 50 bps will be effective on July 26. Meanwhile, the RRR for rural and cooperative banks was cut by 100 bps from 5% to 4% effective on May 31. An economist estimates that the move will free up ~Php20Bil into the system.

   Frances Rolfa Nicolas

PCOR President and Chief Executive Officer Ramon Ang said that the company will be spending US$1.0Bil for refinery optimization and network expansion. Of the total amount, US$600Mil will be focused on building two steam producer boilers to improve the operations of the Bataan refinery. The project, which started construction this year, will take 2-3 years to build. Meanwhile, the remaining US$400Mil will be used for retail network expansion to meet the company’s target of 6,000 stations in both Philippines and Malaysia.

   Frances Rolfa Nicolas

Tariff Commissioner Ernesto Albano said that the decision on whether to remove, raise or lower the safeguard duty on imported cement will be issued in June. Recall that the DTI imposed a preliminary safeguard duty of Php210/MT of cement imports for 200 days last February. Note that manufacturers have sought a higher safeguard duty on imports due to the continuous influx of imported cement.

   John Martin Luciano, CFA

The security of tenure bill, or Endo bill, was passed in the Senate on the third and final reading. According to Mr. Villanueva, chairman of the Senate’s labor, employment, and human resources committee, Senate Bill 1826 seeks to address “endo”, which is an employment practice that denies workers of the opportunity to a permanent employment status coupled with the associated benefits. Senate Bill 1826 rules out what it classifies as labor-only contracting by taking into account several factors like: the provision by a job contractor of the workers it hires; the performance by contracted workers in relation to core industry tasks; the company where these workers are assigned; and whether the contractee has a direct control and supervision of the workers supplied by the contractor

   John Martin Luciano, CFA

The National Economic and Development Authority supports the proposal to further increase the excise tax imposed on both tobacco and alcohol products in order to fund the Universal Health Care program. The Department of Finance and the Department of Health are pushing for the passage of Senate Bill 1599 to increase the current uniform excise tax rate on tobacco products from P35 to P60 per pack in the first year, and an additional 9% per annum thereafter. Moreover, excise taxes on alcohol will be increased to at least Php40 per liter and impose a unitary tax system on fermented liquors.

   Richard Lañeda, CFA

AC bought back Php3,805,644 AC shares at Php838/sh from Mitsubishi. This completes the portfolio rebalancing of Mitsubishi regarding their AC shares. Mitsubishi remained to be the second largest shareholder of AC despite reducing their AC holdings to around 37.78 Million shares. The move of AC to buy back the shares from Mitsubishi shows that the company thinks their shares are cheap. We currently have a BUY rating with a FV estimate of Php1,077.