Alerts

   Justin Richmond Cheng, CFA

October 19, 2020. We are reducing our estimates to factor in management’s weaker outlook in 2H20 relative to our forecast. In particular, we are decreasing our sales forecast by 11% and 8% in 2020 and 2021, respectively. This reduced our earnings estimate by 15% in 2020 and 13% in 2021. We now expect flattish (+1%) earnings in 2020, followed by a moderate 8% growth in 2021. Note that we also factored in a higher interest expense forecast, taking into account the significant debt PGOLD obtained recently. These changes reduced our FV estimate by 11% to Php48.5/sh.

   George Ching

October 15, 2020. Due to the increase in our LME nickel price estimate, we are increasing our 2020E earnings forecast by 28% to Php3.6Bil, and our 2021E earnings forecast by 45% to Php4.9Bil. We are also raising our FV estimate by 29% to Php3.95/sh. Despite the increase in our estimates, we are downgrading our rating on NIKL to HOLD from BUY. We continue to like NIKL given that near term prices for nickel will continue to be supported by the Indonesian nickel ore export ban. Furthermore, we remain positive on the long term outlook for nickel due to the rising EV battery demand. However, NIKL’s stock price has increased by 5% YTD, outperforming the PSEi’s 24% decline during the same period. At its current price of Php3.56/sh, upside to our FV estimate is limited at 11%.

   Frances Rolfa Nicolas

In a disclosure to the PSE, CEB announced that it is looking to raise funds amounting to approximately US$500Mil involving 1) a convertible preferred shares rights issue for an aggregate proceeds of about US$250Mil and 2) a private placement of convertible bonds with aggregate subscription price of up to US$250Mil. The proceeds from these shall be used to strengthen the balance sheet of the company and for general corporate purposes. In line with this, the Board of Directors of CEB is seeking to increase the company’s authorized capital stock from Php1.34Bil to 1.74Bil and create a new class of convertible preferred shares with a par value of Php1.00 per share. The final terms and conditions of the convertible preferred shares rights issue and the convertible bonds private placement are yet to be finalized but are expected to be set within Php38-45 range, representing 2- 21% conversion premium over CEB’s 30-day volume weighted-average price from August 26 to October 7, 2020. The additional capital from the offering would improve the company’s capital structure and provide much needed additional cash to maintain operations. Note that the CEB’s current fixed cost cash burn is at US$40Mil / month while cash position as of 1H20 is at Php9.7Bil. Moreover, CEB currently has Php76.6Bil in total debt (net debt to equity ratio of 1.9X). The additional proceeds of US$500Mil should allow the company to end the year at a net debt to equity ratio of ~1.5X, significantly lower than our original assumption of ~2.4X. We currently have a HOLD rating and FV estimate of Php42/sh on CEB.

   Richard Lañeda, CFA

October 7, 2020. We adjusted our fair value estimate on SM from Php881 to Php827 after factoring in lower earnings and valuation estimates for both SMPH and SM Retail. Given the reduction in our fair value estimate, we believe that SM’s current price already fairly values the company. Upside risk to earnings and fair value depends on the further relaxation of quarantine restrictions in NCR and other major areas in the Philippines, and the speed at which sales and earnings of Department Stores and Specialty Stores recover.

   George Ching

October 06, 2020. As a result of increasing our 2020E earnings estimate for ACEN, we are raising our FV estimate on ACEN by 8.8% to Php3.2/ sh. Despite the increase in our earnings estimates, we are downgrading our rating on ACEN from BUY to HOLD. We continue to like ACEN given it is in an excellent position to expand its power generation portfolio following parent firm AC Energy’s injection into ACEN all of its domestic power assets. Furthermore, AC Energy subsequently announced it will inject all of its international renewable energy assets into ACEN. The combined attributable capacity of these assets could boost ACEN’s capacity by 2,780MW, representing more than five times ACEN’s existing capacity. However, ACEN’s stock price has increased by 39% YTD, outperforming the PSEI’s 24% decline for the period. At Php3.09/sh, upside to our FV estimate is limited at 3.6%.

   Richard Lañeda, CFA

We are lowering our FV estimate from Php31.40 to Php31.00 after factoring in the downward adjustment in our net income estimates. We are also maintaining our HOLD rating as valuations remain unattractive. Upside risk to our estimate would come from further relaxation of quarantine restrictions which would translate to higher foot traffic and sales in malls.

   Justin Richmond Cheng, CFA

September 28, 2020. Adjusting buy below level, but maintaining BUY rating We are lowering our buy below level to Php67/sh from previously Php70/sh as we take into account management’s more cautious outlook and the more tempered expansion plan. Nevertheless, we are maintaining our BUY rating on RRHI with a FV estimate of Php84/ sh. Although the company is facing some short-term challenges due to the impact of the pandemic, this is only expected to last in the near-term. We continue to like RRHI given its well-diversified portfolio of retail formats and positive long-term growth prospects. We think its recovery initiatives, especially the strengthening of its e-commerce platform, makes RRHI well-positioned to capitalize on future growth opportunities amid increasing digital trends.

   Kerwin Malcolm Chan

Accordingly, we are reducing our FV estimate on CEB to Php42.0/sh. We expect demand for travelling to remain bleak in the near term due to the COVID-19 pandemic. Moreover, at its current price of Php35.75/sh, upside to our new FV estimate remains limited at 17%. As such, we are maintaining our HOLD rating on CEB.

   Adrian Alexander Yu

Sept. 11, 2020. During a Special Meeting held on September 9, the Board of Directors of Pepsi-Cola Products Philippines, Inc. (PIP) authorized the voluntary delisting of its common shares from the Philippine Stock Exchange (PSE). The company disclosed that its public ownership level dropped to 2.11% after Lotte Chilsung acquired 30.7% of the company’s total issued and outstanding shares through a tender offer last June, which is below PSE’s minimum public ownership requirement of 10%. Although PIP has until December 18 to comply with the 10% minimum public float requirement, the Board of Directors already approved the voluntary listing as the company will not be able to comply with the requirement considering its level of public ownership and prevailing market conditions. In accordance with the delisting rules of the PSE, Lotte Chilsung shall conduct a tender offer to acquire up to 77,858,236 common shares or the 2.11% of total issued and outstanding shares owned by the public. More details on the tender offer will be disclosed once Lotte Chilsung files the Tender Offer Report with the SEC and PSE on September 16. The company has also yet to announce the proposed date of delisting.

   Adrian Alexander Yu

September 09, 2020. We reiterate our BUY rating on GLO with an FV estimate of Php2,390/sh. We continue to like GLO because of its a) dominant position in the wireless business; b) strong growth of its fixed line business; c) resiliency of demand for data despite the COVID-19 pandemic; and d) strong GCash presence. At its current price of Php2,120/sh, capital appreciation potential is attractive at 12.7% while dividend yield is 4.9%. GLO is trading at a 2020E EV/ EBITDA of 5.3x.