Alerts

   John Martin Luciano, CFA

March 3, 2021. we will be maintaining our BUY rating on BDO with a FV estimate of Php158/sh based on a 1.65X 2021E P/BV. We continue to like BDO as we expect it to be one of the major beneficiaries of the recovery of economic growth as the government eases restrictions amidst the arrival of the vaccines. Moreover, while NPLs have not yet peaked, we believe that the uncertainty on asset quality caused by the loan moratoriums and lockdowns last year have gradually waned over the past several months. Although net interest margin is expected to be pressured as loans gradually re-price amid the low interest rate environment and excess liquidity in the system, we believe most of the negatives have already been priced in.

   John Martin Luciano, CFA

March 03, 2021. We currently have a BUY rating with a FV estimate of Php208/sh based on 1.20X 2021E P/BV. Although we remain cautious over the bank’s large exposure in consumer loans (25% of total loan portfolio), note that 45% of this segment are mortgage loans which are collateralized. In addition, the bank also has one of the highest CET1 ratio at 19.2%. This is substantially above regulatory minimum and can absorb potential losses.

   Richard Lañeda, CFA

March 3, 2021. We are reducing our FV estimate on RLC slightly from Php23.40 to Php22.68 to factor in the reduction in our earnings estimates. Nevertheless, we still believe the recovery is underway and should accelerate once mobility restrictions are eased, which in turn hinges on the success of the government’s vaccination program. Despite the downward adjustment in our FV estimate, we are upgrading our recommendation from HOLD to BUY as the negatives are priced in. After hitting a high or Php23.35 in January, RLC’s share price has corrected by 15.7%. At its current price of Php19.68, there is still a 15.2% upside based on our revised fair value estimate.

   Frances Rolfa Nicolas

March 02, 2021. We currently have a HOLD rating and FV estimate of Php22.7/sh on MWC. We believe that there are still a lot of uncertainties surrounding the details of the new concession agreement (CA) for the East Zone. Note that the new CA has been recently approved but the specific details of which are still unknown. As the East Zone accounts for majority the company, revisions on the new CA will greatly impact the value of MWC.

   Adrian Alexander Yu

March 02, 2021. We currently have a HOLD recommendation on WLCON with a FV estimate of Php18.3/sh. We will release a more detailed report following WLCON’s FY20 analyst briefing later.

   George Ching

March 02, 2021. We have a BUY rating on MER with a FV estimate of Php369/sh. We continue to like MER despite the decline in its FY20 earnings primarily brought about by the Covid pandemic. MER’s share price has increased by 2% in the past 12 months, outperforming the PSEI’s 1.4% increase, mainly due to the relatively defensive nature of MER’s distribution business compared to the overall market. MER’s valuation has also become increasingly attractive with the stock trading at 14.8X 2021 P/E, below its 10-year historical average of 17.5X. Based on MER’s current market price of Php274/sh, upside to our FV estimate is at 34.7%.

   Justin Richmond Cheng, CFA

March 02, 2021. We currently have a BUY rating on URC with a FV estimate of Php186/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%.

   John Martin Luciano, CFA

March 01, 2021. We currently have a BUY rating with a FV estimate of Php37.7/sh based on a 0.9X 2021 P/BV. We expect its lending business and fees to pick up in 2021 as economic growth rebounds. Although net interest margin is expected to be pressured as loans gradually re-price amid the low interest rate environment, we believe most of the negatives have already been priced in. At its current price, the bank is only trading at 0.6X 2021E P/BV.

   Richard Lañeda, CFA

March 01, 2021. We believe the Philippines’ economic recovery is underway as consumer spending is slowly picking up. Aside from the improving economic backdrop, SM is making full use of digital channels to serve its customers and boost sales. The availability of vaccines should also improve SM’s growth outlook going forward. Despite SM’s improving earnings growth outlook, we reiterate our HOLD rating on SM as the stock is already fairly valued, trading only slightly below our fair value estimate of Php1,029.00.

   George Ching

Reducing estimates on GNPower Mariveles outage AP announced today the unplanned outage of 247MW GNPower Mariveles unit 1. The company said that the outage is due to a damage found in the boiler of the unit. AP estimated that the unit will likely return to service from 3Q21 to 4Q21. AP added that it has filed insurance claims against the ongoing unplanned outage of the unit. The unit 1 of GNPower Mariveles accounts for 7% of AP’s attributable power generation capacity. Assuming that repairs will last until the end of 2021, we estimate that this will reduce our earnings forecast for AP by 18% to Php14.4Bil. Reducing estimates, maintaining BUY rating In light of the GNPower Mariveles unit 1’s outage, we are reducing our FV estimate on AP by 0.6% to Php40.14/sh. Despite the poorer earnings outlook for 2021, we believe that bulk of the negatives have been priced in. AP’s share price has declined by 16.7% in the past 12 months, underperforming the PSEI’s 7.5% decline. AP’s valuation has also become increasingly attractive with the stock trading at 13X 2021 P/E, at par with its 10- year historical average of 12.7X. Based on AP’s current market price of Php25.4/sh, upside to our FV estimate is at 58%.