Alerts

   John Martin Luciano, CFA

March 19, 2021. We currently have a BUY rating on PNB with a FV estimate of Php53.7/sh based on a 0.55X 2021E P/BV. We expect PNB to benefit as economic growth recovers amidst the arrival of the vaccines. Although we believe provisions will remain elevated this year in light of its low NPL cover of ~43%, we believe it has the room to book these provisions given that it has yet to revalue its three prime properties. Overall, we believe that the negatives have already been priced in. At its current price, the bank is only trading at 0.2X 2021E P/V, below its historical average.

   John Martin Luciano, CFA

We currently have a BUY rating with a FV estimate of Php16.6/sh based on a 0.60X 2021E P/BV primarily on valuation. We remain cautious over EW’s large exposure in credit cards and auto loans, which represent a total of 50% of its loan portfolio. We continue to believe that these segments are the most at risk in asset quality deterioration amidst the ongoing pandemic. At its current price, the bank is only trading at 0.35X 2021E P/BV.

   George Ching

We have a HOLD rating on FGEN with a FV estimate of Php32.3/sh. We continue like FGEN given its relatively stable cash flow since bulk of its capacity is contracted. FGEN is also the only clean energy play in the PSE after its subsidiary EDC was delisted. Furthermore, with the Department of Energy’s moratorium on new coal power plants, this could potentially push forward the projected power shortage beginning in 2024, increase in the competitiveness of FGEN’s gas and renewables plants, and improve the feasibility of FGEN’s LNG regasification project which will enable its gas plants to remain viable after the depletion of the Malampaya gas field. However, based on FGEN’s market price of Php30.8/sh., upside to our FV estimate is limited at 4.8%.

   George Ching

March 17, 2021. We are upgrading our rating on AEV from HOLD to BUY and maintaining our FV estimate of Php47.85/sh. We continue to like AEV given the expansion plans of its power subsidiary AP. AEV is also well positioned to benefit in the government’s infrastructure programs owing to its investment in republic cement as well as its strong balance sheet and excellent track record in acquiring businesses. The share price of AEV is also becoming increasingly attractive due to the recent decline. Due to the impact of the Covid-19 pandemic on the earnings of its various businesses, AEV’s share price has declined by 24.7% in the YTD period, underperforming the PSEI’s 8.1% decline. Based on its current market price of Php47.85/sh, upside our FV estimate is significant at 34.4%.

   Justin Richmond Cheng, CFA

C divests entire stake in 2GO In a press release, C disclosed that it has signed an agreement to sell its entire effective stake of ~31.7% in 2GO Group, Inc. at Php8.5/sh. Note that the sale will be executed through KGLI-NM Holdings, Inc that holds ~867Mil shares in 2GO or 35% of 2GO’s total outstanding shares. Recall that Chelsea Logistics and Infrastructure Corp has a 90% effective stake in KGLI-NM. The company said the sale conditions are expected to be completed within three months. While Chelsea did not disclose the buyer of its shares in 2GO, news sources have reported that C was in talks with the SM Group for this deal. The proceeds from the sale will be used to pay down Chelsea’s debt, which it obtained for the acquisition. Divestment to temper C’s losses, but profitability remains challenged The full divestment of C’s stake in 2GO should help temper the company’s ongoing losses due to the pandemic. As of 9M20, C booked Php2.6Bil in net losses with share in losses from its stake in 2GO amounting to Php367Mil. Nevertheless, the company’s revenues are still badly affected by the COVID-19 pandemic, down 35% y/y as of 9M20. C’s President and CEO, Chryss Alfonsus Damuy, said that the company is implementing group wide initiatives to better position itself in taking advantage of the overall economic recovery. This includes the 2GO divestment, which should help aid C’s return to profitability.

   Richard Lañeda, CFA

March 10, 2021. Despite the quarter-on-quarter improvement, the recovery of BLOOM is expected to fall behind expectations as restrictions remain in place. We were previously expecting travel and quarantine restrictions to ease at the start of this year as the number of infections remained low towards the end of 2020. However, given the government’s conservative stance and the slow pace of the vaccine rollout program, restrictions facing integrated resorts will most likely remain in place for the most part of the year. As such, we adjusted our 2021 revenue and net income forecasts to factor in limited operating capacity of BLOOM for most of the year. We reduced our 2021 net revenue forecast by 37.9% to Php21.71 Bil and now expect BLOOM to post a net loss of Php4.30 Bil from a net profit of Php2.86 Bil previously. We also reduced our FY22 revenue and net income forecast by 17.3% and 87.1% respectively. After factoring in our lower revenue and net income forecasts for 2021 and 2022, we reduced our fair value estimate to Php8.60 from Php9.20. We also downgraded our recommendation to HOLD from BUY as the implied upside to our new fair value estimate is limited to just 10.3%. Further upside to our fair value estimate would come from a successful vaccine rollout which would then result to the relaxation of quarantine and travel restrictions and higher operating capacity for integrated resorts.

   George Ching

March 05, 2021. We have a HOLD rating on ICT with a FV estimate of Php133.4/sh. We continue like ICT given the success of ICT’s greenfield ports in Australia, Congo, and Papua New Guinea as these ports will be the key earnings growth driver for the company in the next few years. Despite the negative impact brought about by the COVID-19 pandemic on 2020 earnings, we believe that the company’s earnings is set to rebound in FY21 following the recovery in global trade and the company’s cost reduction initiatives. However, ICT’s share price has increased by 12.4% in the past 12 months, outperforming the PSEi’s 0.2% increase during the period. Based on its current market price of Php118.8/sh, upside to our FV estimate is at 12.3%.

   Justin Richmond Cheng, CFA

March 05, 2021. We currently have a BUY rating on CIC with a FV estimate of Php33.40/sh. We continue to like CIC for its positive long-term growth prospects given its market leading position in the underpenetrated air-conditioning and refrigerator markets and increasing share in the fast-growing laundry market. Upside to our FV estimate is also significant at 53%.

   Justin Richmond Cheng, CFA

March 05, 2021. We currently have a BUY rating on URC with a FV estimate of Php188/sh. Despite the challenges brought about by the COVID-19 pandemic, URC managed to hold its ground with notable market share gains and effective cost control efforts. Furthermore, the continued reopening of the global economy bodes well for the company’s international business. At its current price of Php129/sh, URC is already trading at 25X 2021E P/E, which is below its historical average P/E of 28X. Upside to our FV estimate is also significant at 44%.

   George Ching

March 08, 2021. We have a BUY rating on AP with a FV estimate of Php40.14/ sh. Despite the uncertain earnings outlook for 2021 brought about by plant outages, we believe that bulk of the negatives have been priced in. AP’s share price has declined by 8.8% in the past 12 months, underperforming the PSEI’s 1.6% increase. AP’s valuation has also become increasingly attractive with the stock trading at 12.8X 2021 P/E, at par with its 10-year historical average of 12.7X. Based on AP’s current market price of Php25/ sh, upside to our FV estimate is at 60.6%.