Stocks in Focus: TUE 06 JUL 2021

GLO: Increasing digital services

continues to unlock value of GCash
Upside risk present in GCash valuation. During its last funding raising exercise last (AS OF JUL 05, 2020)
January, GCash was able to raise US$175Mil from New York-based Bow Wave Capital INDICES
management, which brought the valuation of the company close to US$1Bil. Mynt CEO Close Points % YTD%
Martha Sazon at the time noted that the successful fund-raising exercise is a validation PSEi 7,036.38 34.12 0.49 -1.45
of what GCash has accomplished and the potential of the company in unlocking All Shares 4,315.61 20.64 0.48 1.01
digital services in the Philippines. Recall that GCash was able to book US$21Bil in gross Financials 1,515.93 -2.56 -0.17 4.72
transactions in 2020, ending the year with 33 million users. Since then, GCash’s popularity Holding Firms 7,062.31 35.73 0.51 -3.97
has continued to grow with subscribers now reaching 40 million users and value of Industrial 9,786.63 85.15 0.88 4.19
transactions still increasing on a sequential basis. Mining & Oil 9,877.32 38.76 0.39 3.66
Property 3,403.40 28.26 0.84 -7.12
Services 1,620.04 5.23 0.32 7.00
At is current share price of Php1,920/sh, GLO has a market capitalization of around
Php250Bil. With GCash currently valued at US$1Bil, GLO’s stake in the app is worth
Dow Jones 34,786.35 153 0.44 13.66
approximately Php20Bil, or around 8% of GLO’s current market cap. Nevertheless, as the S&P 500 4,352.34 32.40 0.75 15.87
number of GCash users and use cases continues to increase, we believe there is significant Nasdaq 14,639.33 116.95 0.81 13.59
upside risk to the app’s valuations. Assuming a conservative valuation of US$1.5Bil to
US$2Bil once GCash finally lists in the stock market, GLO’s stake in GCash would be worth
Php30-40Bil by then, representing approximately 15% of GLO’s current market cap. INDEX GAINERS
Ticker Company Price %
Reiterate BUY rating. We are reiterating our BUY rating on GLO with an FV estimate of DMC DMCI Holdings Inc 6.85 2.24
Php2,480/sh. We continue to like GLO because of its a) strong position in the wireless JGS JG Summit Hldgs Inc 64.20 1.90
business; b) strong growth of its fixed line business; and c) upside risk to GCash. At its MEG Megaworld Corporation 3.26 1.87
current price of Php1,920/sh, capital appreciation potential is attractive at 29.2% while GLO Globe Telecom Inc 1920.00 1.86
AP Aboitiz Power Corp 25.25 1.81
providing a dividend yield of 5.5%.

INDEX LOSERS
Other News: Ticker Company Price %
BDO BDO Unibank Inc 114.30 -0.95
ICT Intl Container Term 164.00 -0.79
CLI: CLI generates Php5.2Bil sales in 2Q21 AEV Aboitiz Equity Ventures 42.30 -0.59
PCOR: PCOR to raise Php50Bil from bond market EMP Emperador Inc 12.16 -0.33
BPI Bank of the Phil Islands 89.40 -0.28

COVID-19 Update: TOP 5 MOST ACTIVE STOCKS

Ticker Company Turnover
Total Cases Total Deaths Total Recoveries BDO BDO Unibank Inc 176,229,400
ICT Intl Container Term 167,865,200
Philippines 1,441,746 (+5,392) 25,192 (+43) 1,364,690 (+6,477) SM SM Investments Corp 130,543,300
GLO Globe Telecom Inc 128,896,500
USA 34,598,307 (+4,351) 621,335 (+23) 29,111,580 (+14,764)
JFC Jollibee Foods Corp 120,436,600

Worldwide 184,909,195 (+332,794) 4,000,157 (+5,888) 169,275,594 (+367,805)

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside of the
COL Financial website as these may be subject to tampering or unauthorized alterations.
 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

TUE 06 JUL 2021

Market Summary:

The local stock market climbed on Monday ahead of the release of the Philippines’ June
inflation data.

The PSEi rose by 34.12 points or 0.48% to close at 7,036.38. The top movers were DMC
(+2.24%), JGS (+1.90%), MEG (+1.87%), GLO (+1.86%), and AP (+1.81%). On the other
hand, the main drags were BDO (-0.95%), ICT (-0.79%), AEV (-0.59%), EMP (-0.33%), and
BPI (-0.28%).

Value turnover decreased to Php4.3Bil from the Php5.9Bil seen in the previous session.
Meanwhile, foreigners turned net seller, disposing Php82.1Mil worth of shares vs the
Php754.0Mil in net purchases seen on Friday.
 

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

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Stocks in Focus:

Adrian Alexander Yu GLO: Increasing digital services continues to unlock

Senior Research Analyst
value of GCash
Kerwin Malcolm Chan
Upside risk present in GCash valuation. During its last funding raising exercise last
Research Analyst
January, GCash was able to raise US$175Mil from New York-based Bow Wave Capital
management, which brought the valuation of the company close to US$1Bil. Mynt CEO
Globe Telecom Inc. Martha Sazon at the time noted that the successful fund-raising exercise is a validation
BUY of what GCash has accomplished and the potential of the company in unlocking
Php2,480 digital services in the Philippines. Recall that GCash was able to book US$21Bil in gross
transactions in 2020, ending the year with 33 million users. Since then, GCash’s popularity
has continued to grow with subscribers now reaching 40 million users and value of
transactions still increasing on a sequential basis.

At is current share price of Php1,920/sh, GLO has a market capitalization of around

Php250Bil. With GCash currently valued at US$1Bil, GLO’s stake in the app is worth
approximately Php20Bil, or around 8% of GLO’s current market cap. Nevertheless, as the
number of GCash users and use cases continues to increase, we believe there is significant
upside risk to the app’s valuations. Assuming a conservative valuation of US$1.5Bil to
US$2Bil once GCash finally lists in the stock market, GLO’s stake in GCash would be worth
Php30-40Bil by then, representing approximately 15% of GLO’s current market cap.

Increase in use cases to spur GCash revenue growth. During the pandemic, Mynt
(the company behind GCash) implemented various strategies to attract more users and
merchants into GCash’s ecosystem. GCash has since added a number of financial services
to widen its portfolio such as GInvest, GLife, GInsure, and others. Despite the significant
increase in use cases, management noted that bulk of revenues still come from traditional
use cases such as bank transfers, P2P, and purchasing load.

GCash also recently began to monetize some of its cash-in services, which led to a year-
on-year revenue growth of around 5x in 1Q21. The significant growth in revenues is
also attributable to the low base in 1Q20 when monetization efforts were minimal and
the user base acquisition was just starting to pick up. Despite the significant increase in
revenues, management cautioned that the losses of Mynt may temporarily widen should
it decide to implement more marketing strategies to expand its user base. Management
said that although profitability is important, the priority as of the moment is to expand
user base and portfolio of financial products and services.

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

TUE 06 JUL 2021

Network rollout accelerated to support higher data traffic. During 1Q21, GLO’s data-
related revenues increased by 8.2% y/y to Php29.9Bil from Php27.6Bil during the same
period last year. This is attributable to the continued recovery of its mobile data segment
and robust growth in home broadband revenues. According to management, mobile
data traffic in 1Q21 increased by 60% y/y while home prepaid wi-fi data traffic grew
by 6x on a year-on-year basis. To account for the growing demand for strong internet
connection and surge in data traffic, GLO has earmarked Php70.0Bil for capex this year to
accelerate its tower builds and fiber rollout.

As of end 2020, GLO has over 10,300 cell towers and is aiming to build 2,000 towers this
year, much more than the 1,300 sites built last year. GLO is also maintaining its year-end
target of deploying 1 million new fiber broadband lines, which is greater than the 600,000
lines installed in 2020. Moreover, GLO will continue to convert its copper lines into fiber
lines. Note that approximately 70% of its broadband network is still using copper-based
technology. While they rollout their fiber lines, GLO will continue to push its in-demand
fixed wireless products. In 1Q21, fixed wireless subscribers increased by 104.7% y/y and
8.0% q/q to 3.3 million users. GLO’s fixed wireless modems remain popular in areas with
little to no fiber broadband connections and in data hotspots where people consume
high amounts of prepaid data.

Maintaining guidance for 2021. For FY21, GLO is maintaining its guidance of low-to-
mid single digit service revenue growth, which will be mainly driven by the higher data-
related revenues. Despite 1Q21 EBITDA margin falling to 48.4% on the back of higher
marketing and subsidy costs and provisions, GLO is expecting FY21 EBITDA margin to
improve to low-50s levels. Also, management is maintaining its 60-75% dividend payout
policy for the year. Recall that GLO declared a 74% payout for 1Q21 and 2Q21 cash
dividends.

Reiterate BUY rating. We are reiterating our BUY rating on GLO with an FV estimate of
Php2,480/sh. We continue to like GLO because of its a) strong position in the wireless
business; b) strong growth of its fixed line business; and c) upside risk to GCash. At its
current price of Php1,920/sh, capital appreciation potential is attractive at 29.2% while
providing a dividend yield of 5.5%.

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

TUE 06 JUL 2021

Other News:

Research Analysts CLI: CLI generates Php5.2Bil sales in 2Q21

John Martin Luciano, CFA
CLI recorded a 13% y/y growth in reservation sales to Php5.2Bil in 2Q21. This brought
Frances Rolfa Nicolas
its reservation sales for the first six months of the year to Php8.5Bil, up 14% y/y. Its
Justin Richmond Cheng
projects in Cebu, Iloilo, and Cagayan de Oro accounted for 29%, 27%, 20% of the sales,
Adrian Alexander Yu
respectively. Meanwhile, sustained sales from Davao, Bacolod, Dumaguete, Bohol, and a
Kerwin Malcolm Chan
new expansion area in Ormoc accounted for the balance. CLI launched six projects during
the first six months across different segments in Cebu, Iloilo and Ormoc. Its Velmiro
Heights project in Cagayan de Oro is now 83% sold, while its Mandtra Residences in Cebu
is 82% sold out. In Iloilo City, Terranza Residences sold out 81% of its inventory in three
months from April. Overall, the company noted that it is on track to meet its targeted
15-20% growth for 2021. (Source: Businessworld, CLI)

PCOR: PCOR to raise Php50Bil from bond market

PCOR will be filing a registration statement with the Securities and Exchange Commission
(SEC) for the shelf registration of up to Php50Bil fixed rate bonds. PCOR President Ramon
Ang said that the proceeds from the offer will be used for refinancing maturing debts.
The company intends to appoint BDO Capital & Investment Corp. as sole issue manager
as well as the group of BDO-CIC, China Bank Capital Corp., Philippine Commercial Capital
Inc., PNB Capital and Investment Corp. and SB Capital Investment Corp. as joint lead
bookrunners and joint lead underwriters. (source: Businessworld, Inquirer)

Changes in Shareholdings
Date of Acquired or Price per
Stock Volume Person (Designation)
Disclosure Disposed share
Necisto Y. Sytengco, II
05-Jul SBS 80,000 A 4.21 (Vice Chairman, SVP Marketing
Operations, & Assistant Treasurer)
Necisto Y. Sytengco, II
06-Jul SBS 15,000 A 4.21 (Vice Chairman, SVP Marketing
Operations, & Assistant Treasurer)
Source: PSE

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I M P O R TA N T R AT ING DEFINITIONS
BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the
next six to 12 months.

HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might
be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the
next six to twelve months.

SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.

I M P O R TA N T DISC L AIM ER
Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount invested.
Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said information may
be incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the report and are
subject to change without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of
a security. COL Financial and/or its employees not involved in the preparation of this report may have investments in securities of derivatives of the companies
mentioned in this report and may trade them in ways different from those discussed in this report.

CO L R E S EAR C H T EAM

APRIL LYNN TAN, CFA

CHIEF EQUITY STRATEGIST
april.tan@colfinancial.com

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA

HEAD OF RESEARCH SENIOR RESEARCH MANAGER SENIOR RESEARCH MANAGER
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com

JOHN MARTIN LUCIANO, CFA FRANCES ROLFA NICOLAS JUSTIN RICHMOND CHENG, CFA
SENIOR RESEARCH ANALYST RESEARCH ANALYST SENIOR RESEARCH ANALYST
john.luciano@colfinancial.com rolfa.nicolas@colfinancial.com justin.cheng@colfinancial.com

ADRIAN ALEXANDER YU KERWIN MALCOLM CHAN

SENIOR RESEARCH ANALYST RESEARCH ANALYST
adrian.yu@colfinancial.com kerwin.chan@colfinancial.com

CO L F IN ANC IAL G R O UP, IN C.

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WEBSITE: www.colfinancial.com

COL Financial Group, Inc. 7