November 18, 2019

Trade concerns eclipse solid 3Q earnings Calendar of Events

Week in review Date Event
 The PCOMP closed lower at 7,932.96 last Friday (-1.6% w-w) after five Nov 18 Special analysts’ briefing: AC
consecutive weeks of gains. Investor sentiment cooled on doubts over a US-China
trade deal, which overshadowed the Philippines’ solid 3Q results season. Foreign Cash dividends ex-date: FB
net selling for the week was USD47.92mn.
 The BSP maintained policy rates at 4.0% after a total 75bps of rate cuts this year. Nov 19 Overall BOP Position, final GIR, NIR
Likewise, the RRR remained at 14%, with 400bps reduction to date. The Nomura
Nov 21 Cash dividends ex-date: JFC
Economics team expects policy rates will stay at 4% through FY19-20 as inflation
normalizes toward BSP’s 2-4% target range. RRR cuts meanwhile, are expected Dec 7 November inflation data (CPI)
to resume next year, in line with Gov. Diokno’s goal of single-digit RRR by 2023.
Market analysis
 3Q19 results season concluded last week with encouraging results. Out of the 44 Best Performers w-w %
names we cover, 29% have beat, 48% were in-line, and 23% missed expectations.
9M19 core earnings growth averaged 17%, better than our 13% estimate, and was WLCON PM 7.0%
led by the performance of the banks, property and related conglomerate sectors.
BLOOM PM 5.2%
Stocks to watch
 We reiterate our Buy rating on BLOOM (+5.2% w-w) following strong 9M19 results. DNL PM 3.8%
Overall GGRs rose 21% y-y buoyed by higher VIP revenues and robust growth in
its mass and slots segment. Our new TP of PHP15.40, implies a hefty 36% upside. SSI PM 3.7%
 MAC continues to be our preferred name for Philippine tourism exposure. The
company posted 12% y-y earnings for 3Q19 and we expect double-digit earnings EMP PM 3.4%
growth through to FY21F as tourist arrivals continue to grow (~14% YTD).
Source: Bloomberg
 DNL suffered from lower commodity volumes YTD, but 3Q19 showed sequential
growth (+15% q-q) for its HMSP. We think this trend will sustain into next year and
led to our recent upgrade to Buy, especially as valuations have become attractive. Worst Performers w-w %
 We continue to forecast healthy 2019/20F EPS growth of +17.1%/14.1% for
WLCON on the back of the healthy residential property market, an optimized JFC PM -10.6%
product mix and its growing scale. However, its recent share price run up has left
little upside to our TP. LTG PM -9.9%
 Retailer SSI posted better-than-expected 9M19 earnings results last week. The
company posted strong SSSG of 6.8% and OPM expansion of 90bps y-y from a
DMC PM -5.7%
leaner store network. Maintain Buy.
MAC PM -5.6%
 JFC slid 11% w-w as 9M19 profits declined 26% y-y due to escalating
Smashburger losses in the US. Nevertheless, we upgrade JFC from Reduce to AP PM -4.8%
Neutral as the stock's 31% YTD share price correction already seems to discount
near-term headwinds from post-merger integration risks. JFC now looks fairly Source: Bloomberg
valued with the stock trading at a narrow discount to our PHP223 DCF-based TP.
 AP declined -4.8% w-w after reporting another set of weak results (core earnings Blo Actively Traded (PHPbn)
Most
down -26% y-y in 9M19, worsening from -16% y-y in 1H19). We have recently
downgraded the stock to Neutral given: 1) concerns over plant availability; 2)
execution bottlenecks; and 3) normalization in spot market prices next year. Among AC PM 2.08
gencos, we prefer SCC which is a better dividend play (6.6% vs AP's 4%) at more
attractive valuations (8.4x FY20F P/E vs AP's 12.9x). ALI PM 1.41
 We reiterated our Buy on LTG last week as the company delivered strong earnings JFC PM 1.17
growth of 17% y-y for 9M19. We expect this performance should continue into
FY20F as tobacco selling price increases instituted last August should be able to BDO PM 1.14
cover for the step up in excise taxes, which we think is overlooked by the market.
 We expect earnings growth to return for DMC next year as its construction SMPH PM 1.13
business benefits from higher public spending and as DMCI Homes launches more
projects. The stock also trades at undemanding FY20F P/E of 7.5x vs 12.9x peer Source: Bloomberg
average, while also offering healthy dividend yield past 6%. Reiterate Buy.
Visit https://www.bdo.com.ph/bdonomura/home to access Nomura Philippine Research.
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Disclaimer: The information, opinions and analysis contained herein are based on sources and data believed to be reliable but no representation,
expressed or implied, is made as to its accuracy, completeness or correctness. This material is only for the general information of the authorized
recipients. In no event shall BDO or its officers and employees, including the author(s), be liable for any loss/damage resulting from reliance, directly
or indirectly, or information found within this report.
November 18, 2019

Stock Coverage

Mkt Cap Last Price Target Upside/ P/E (x) EPS Grow th Div Yield P/B (x) ROE
Company Ticker (USD mn) Rating 15/11/2019 Price Dow nside FY19F FY20F FY19F FY20F FY19F FY19F FY19F
Aboitiz Equity Ventures AEV 5,906 Neutral 53.00 61.00 15.1% 14.2 13.2 -9.2% 7.8% 2.5% 1.6 11.6%
Aboitiz Pow er Corporation AP 5,378 Neutral 36.95 40.00 8.3% 14.4 12.9 -20.4% 11.2% 4.0% 2.0 14.4%
Alliance Global Group, Inc. AGI 2,254 Buy 11.54 17.00 47.3% 6.8 6.0 13.4% 13.6% 0.9% 0.6 9.6%
Ayala Corporation AC 10,299 Buy 830.00 1,090.00 31.3% 14.9 13.1 14.7% 14.0% 0.7% 1.5 18.6%
Ayala Land ALI 13,391 Buy 45.95 57.00 24.0% 20.2 16.9 14.3% 19.7% 1.3% 3.2 16.7%
Bank of the Philippine Islands BPI 8,557 Buy 96.00 115.00 19.8% 14.5 11.7 21.4% 23.3% 1.9% 1.5 11.1%
BDO Unibank BDO 13,504 No rating 156.00
Bloomberry Resorts Corporation BLOOM 2,454 Buy 11.28 15.00 33.0% 14.5 12.0 25.6% 20.2% 1.3% 2.9 21.4%
Cebu Air CEB 1,093 Buy 91.95 148.00 61.0% 5.0 4.7 149.5% 7.3% 7.6% 1.2 25.4%
Cemex Holdings Philippines CHP 262 Neutral 2.55 2.80 9.8% NM NM NM NM NA 0.5 1.3%
Century Pacific Food CNPF 1,059 Buy 15.12 18.70 23.7% 17.5 15.9 10.4% 10.2% 1.6% 2.8 17.2%
Chelsea Logistics Holdings Corp. C 234 Neutral 6.50 7.50 15.4% 21.7 18.9 21.9% 14.9% NA 0.7 3.9%
D&L Industries DNL 1,243 Buy 8.80 9.50 8.0% 22.2 20.2 -11.3% 9.8% 2.5% 3.5 16.5%
DMC Holdings DMC 1,993 Buy 7.59 11.50 51.5% 8.2 7.5 -11.2% 8.4% 6.1% 1.2 15.1%
Emperador Inc. EMP 2,265 Neutral 7.24 8.00 10.5% 16.8 15.8 4.2% 6.2% 2.3% 1.8 11.1%
Filinvest Land Inc. FLI 748 Buy 1.56 2.00 28.2% 5.5 4.9 17.6% 13.4% 4.0% 0.5 10.0%
Globe Telecom GLO 5,051 Buy 1,917.00 2,330.00 21.5% 11.7 10.9 17.9% 6.9% 4.7% 3.1 28.3%
GT Capital Holdings, Inc. GTCAP 3,832 Buy 900.00 990.00 10.0% 12.4 10.8 8.2% 14.7% 0.6% 1.1 8.9%
Intl Container Terminal Services ICT 4,835 Neutral 122.20 125.00 2.3% 24.3 21.2 22.0% 15.8% 4.1% 4.6 20.5%
JG Summit Holdings, Inc. JGS 11,022 Reduce 77.80 66.00 -15.2% 20.1 14.0 20.5% 43.5% 0.6% 1.8 10.2%
Jollibee Foods Corp JFC 4,369 Reduce 202.00 230.50 14.1% 37.7 34.9 -30.2% 8.1% 1.4% 4.3 11.7%
LT Group, Inc. LTG 2,564 Buy 11.98 20.00 66.9% 7.4 6.6 40.7% 12.6% 2.5% 0.7 10.4%
MacroAsia Corporation MAC 582 Buy 18.60 26.00 39.8% 21.3 18.7 32.9% 13.4% 0.6% 4.5 23.2%
Manila Electric Company MER 7,535 Neutral 338.00 400.00 18.3% 16.5 17.3 3.1% -4.7% 3.9% 4.2 26.7%
Manila Water Company, Inc. MWC 787 Buy 19.26 25.00 29.8% 8.9 8.3 -17.8% 6.9% 4.7% 0.7 10.0%
Megaw ide Construction Corp. MWIDE 698 Buy 17.00 23.00 35.3% 33.6 24.9 2.3% 34.9% 0.3% 2.1 9.6%
Megaw orld MEG 3,048 Buy 4.78 6.50 36.0% 9.1 8.2 11.2% 10.7% 1.2% 0.9 10.0%
Metro Pacific Investments MPI 2,901 Buy 4.65 7.50 61.3% 9.0 9.0 15.1% -0.1% 1.6% 0.8 9.0%
Metropolitan Bank & Trust Company MBT 6,040 Buy 67.90 81.00 19.3% 10.3 9.4 29.5% 9.7% 1.5% 1.0 10.0%
Petron Corporation PCOR 910 Buy 4.91 6.50 32.4% 27.9 17.2 -36.6% 62.6% 3.1% 0.7 3.7%
PLDT Inc. TEL 4,718 Buy 1,104.00 1,420.00 28.6% 9.1 8.8 7.1% 4.0% 6.5% 1.9 22.3%
Puregold Price Club PGOLD 2,282 Buy 40.00 57.75 44.4% 16.8 15.2 7.0% 10.6% 0.8% 1.8 11.4%
Robinsons Land RLC 2,727 Buy 26.55 31.00 16.8% 14.3 12.2 17.5% 17.9% 1.4% 1.3 9.8%
Robinsons Retail Holdings, Inc. RRHI 2,353 Buy 75.45 95.00 25.9% 25.2 22.3 -16.9% 12.6% 1.0% 1.6 6.7%
San Miguel Corporation SMC 7,645 Neutral 162.50 190.00 16.9% 19.2 18.1 -4.5% 5.7% 2.4% 1.1 6.0%
San Miguel Food and Beverage Inc. FB 10,636 Neutral 91.00 103.00 13.2% 33.7 31.1 -9.8% 8.4% 3.6% 5.7 21.0%
Security Bank Corporation SECB 2,981 Neutral 200.00 203.00 1.5% 14.7 12.6 18.8% 17.2% 1.5% 1.3 9.0%
Semirara Mining and Pow er Corporation SCC 2,009 Buy 23.90 28.00 17.2% 9.5 8.4 -11.1% 13.7% 6.8% 2.3 25.6%
Shakey's Pizza Asia Ventures PIZZA 349 Buy 11.52 16.10 39.8% 19.6 17.7 7.2% 10.4% 1.4% 3.4 18.4%
SM Investments Corporation SM 25,254 Neutral 1,060.00 1,080.00 1.9% 27.9 25.2 23.4% 10.7% 0.9% 3.4 12.5%
SM Prime Holdings SMPH 22,790 Buy 39.90 46.60 16.8% 34.3 28.9 19.3% 19.0% 1.0% 3.8 13.4%
SSI Group, Inc. SSI 183 Buy 2.80 3.90 39.3% 10.9 9.7 17.0% 12.8% 0.5% 0.8 7.6%
Universal Robina Corporation URC 6,587 Neutral 151.10 171.50 13.5% 29.9 28.3 12.8% 5.9% 1.4% 3.7 12.5%
Vista Land & Lifescapes VLL 1,931 Neutral 7.69 7.80 1.4% 8.6 7.5 15.0% 14.0% 2.1% 1.0 12.5%
Wilcon Depot, Inc. WLCON 1,484 Buy 18.30 19.30 5.5% 39.0 34.2 17.1% 14.1% 0.6% 5.1 14.2%

Source: BDO-Nomura estimates, share prices as of November 15, 2019

Disclaimer: The BDO Nomura rating system is a relative system indicating expected performance against the PSEi (PCOMP:IND) benchmark. "Buy”
indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months, “Neutral” in line with the Benchmark, “Reduce” to
underperform the Benchmark, and “Suspended” for a halt on company coverage to comply with applicable regulations and/or firm policies. An analyst’s
Target Price (TP), is an assessment of the current intrinsic fair value of the stock based on an appropriate valuation methodology determined by the
analyst. The achievement of any target price may be impeded by general market and macroeconomic trends, and by other risks related to the company
or the market.