Alerts

   George Ching

The Supreme Court (SC) rules that all Power Supply Agreement (PSA) application submitted by the power generation company filed with Energy Regulatory Commission (ERC) on or after June 30, 2015 are required to comply with the Competitive Selection Process (CSP) rule. This means that affected companies (MER, AP, and SCC) will have to submit new PSAs for their projects to push through. However, we believe that these projects will likely be significantly delayed as new PSAs will need to go through the CSP in order to be approved by the ERC. We are reducing the FV estimates after removing affected projects.

   Justin Richmond Cheng, CFA

RRHI underperformed our estimates with 16% decrease on their 4th quarter net income as margins across businesses like drug stores, and specialty stores are lower. We are reducing our estimates following their 2018 results. We are maintaining a HOLD rating with a new FV estimate of Php 89/sh.

   Adrian Alexander Yu

GLO recorded a 40% growth on their 1st quarter profits, outperforming both COL and consensus estimates. The main driver for the growth is the significant drop on their interconnection costs and subsidy expenses. Subscriber count has jumped 32% brought by the government’s new regulation of extending the prepaid sim cards expiration to 1 year. We are increasing our estimates for GLO given their stronger performance but maintaining a HOLD rating with a new FV of Php1,890 as capital appreciation is limited at 5%.

   Frances Rolfa Nicolas

According to management, the disruption in flights resulted mainly from the traffic in the Manila hub and the temporary shutdown of the Clark airport following the recent earthquake in Central Luzon. This event is expected to negatively impact CEB’s revenues and earnings. Note that the cancelled flights account for ~3% of the average number of flights for the month. Furthermore, the cancellations will happen in the second quarter, which is a peak season when fares are at its highest. Finally, the Civil Aeronautics Board (CAB) is also examining whether the company should be penalized for the cancellations. This could potentially increase costs and further drag CEB’s earnings. As such, we will be reviewing our estimates on CEB for a potential downgrade. We currently have a BUY rating and FV estimate of Php99.0/sh on CEB.

   Frances Rolfa Nicolas

CEB announced that it will be reducing 10 flights a day in May, out of a daily operations of 400 flights, due to unprecedented levels of disruption to its operations. This is in addition to the 23 flight cancellations from April 28 to 30. Moreover, the company is currently reviewing adjustments required for June and beyond. Passengers affected are given the options to rebook, refund or re-route to and from alternate airports.

   Adrian Alexander Yu

Udenna Corp. (ISM) has signed a US$5.4 Billion agreement with China Telecommunications Corp. to formalize their agreement to serve as the third major telco player in the Philippines. The Mislatel Consortium, comprised of Udenna Corporation, ISM, Chelsea Logistics Holdings Corp., C and China Telecom, previously committed Php279 Billion to invest in Mislatel with Php150 Billion to be spent during the first year of its operation. Despite the finalization, there is still a lack of clarity regarding how ISM and C will fund their share of the US$5.4Bil investment deal to become the Philippines’ third telco player.

   Charles William Ang, CFA

BPI’s earnings for the 1st quarter of the year rose to 7.6% driven by strong net interest income and non-interest income. However, this was offset by higher provisions and operating expenses bringing the earnings in line with both COL and consensus forecasts. We currently have a BUY rating with an FV estimate of Php98/sh. We currently like BPI as it is one of the major beneficiaries of the country’s healthy economic growth and the bank’s large branch network should generate healthy CASA growth to temper increases in funding costs.

   Frances Rolfa Nicolas

CHP reported that net income grew 137.4% for the 1st quarter of 2019 largely due to lower distribution expenses and lower forex losses. However, core net income only reached Php183 Million, 48.8% down. Earnings missed COL estimates due to higher costs but was in line with consensus estimates. CHP recently announced that it is looking to raise equity capital of up to Php13 Billion by increasing its authorized capital stock to Php18.3 Billion from Php5.2 Billion, including but not limited to a rights offering. Funds will be used to improve its capital structure, fully fund the ongoing Solid plant expansion, and provide balance sheet flexibility. Despite the better earnings and financial positions, we reiterate a HOLD rating and decreased our estimate to Php2.1/sh after factoring in the increase in shares.

   Charles William Ang, CFA

BPI expects its loan portfolio to grow by 10-12% in 2019. Broken down, the bank is looking at about a 15% growth in its consumer and SME segments, while corporate loans are expected to expand by 10-12%. Overall, BPI is focusing its growth initiatives into consumer lending that includes auto, housing, credit card and microfinance given its higher margins.

   Frances Rolfa Nicolas

CEB is cancelling several flights until Tuesday due to an unprecedented level of disruption in its operations since last week. The company announced that it has cancelled a total of seven flights yesterday, nine flights today, and seven flight on Tuesday to stabilize flight timings, improve on time performance and reduce inconvenience to passengers.