Trader’s Playbook

January 24, 2019

Cosco Capital, Inc.
Bloomberg: COSCO PM / Reuters: COSCO.PS

COSCO: PCC clears COSCO’s sale of Liquigaz BUY

• The Philippine Competition Commission (PCC) has decided not to take Last T raded Price (23 J an 19) 7.42
further action into Cosco Capital, Inc.’s (COSCO) sale of local LPG
M k t . Cap (P bn) 54.07
distributor, Liquigaz Philippines Corp.
• Earnings stability, fresh contributions from its new malls to boost Consensus T arget Price 11.70
COSCO’s bottom line. Upside 57.68%
• Those looking to buy are recommended to enter at current prices to buy
the breakout.
What Happened: COSCO vs. PSEi year-on-year performance
The Philippine Competition Commission (PCC) has decided not to take
further action into Cosco Capital, Inc.’s (COSCO) sale of local LPG distributor,
5.0%
Liquigaz Philippines Corp. (Liquigaz). This enables the buyer, Fernwood
Holdings Inc., to acquire the 100% stake in Liquigaz. Recall that COSCO 0.0%

disclosed last Oct-18 that it will sell its entire stake in Liquigaz for a total cash
-5.0%
consideration amounting to less than 12% of its FY17 assets of P112bn to
maximize the shareholders’ value and achieve financial flexibility moving -10.0%

forward. -15.0%

Our View: -20.0%

This move by COSCO may be beneficial to the company in the long run given -25.0%
the competitive environment in the LPG distribution sector and declining 1/15/2018 4/15/2018 7/15/2018 10/15/2018 1/15/2019

market share (1H18: 22.8%; 2017:23.8%). Expectations of higher gas prices COSCO PSEi

may likewise further squeeze their margins. In 9M18, while Liquigaz’

revenues rose 37.6% y-o-y to P12.4bn, net income dropped 6.4% y-o-y to Consensus Corner
P366.1m due to higher gas market prices and additional depreciation
charges.
1 2 3 4 5
Besides the possible benefit from the sale of Liquigaz, COSCO may have S 1R H A B
further upside this year after its commercial real estate business opened three SELL REDUCE HOLD ADD BUY

new community malls in 1Q18. Note that the commercial real estate business
Thomson Reuters
Bloomberg Consensus
Consensus
accounted for 13.7% of the group’s 9M18 net income. Moreover, COSCO
seems undervalued with the stock trading below book value at 0.90x. 1 22 3 3 4 4 5 5

SELL REDUCE HOLD ADD BUY

Recommendation: SELL: 0 HOLD: 0 BUY: 2
Those looking to buy are recommended to enter at current prices to buy the SELL: 0
Thomson Reuters Consensus HOLD: 1 BUY: 1
Technistock
breakout. Earnings stability and fresh contributions from its new malls may
boost COSCO’s bottom line. Keep stops tight if price goes below P7.27 (S1). 1 2 3 4 5

SELL REDUCE HOLD ADD BUY

SELL: 0 HOLD: 0 BUY: 1

Equity Research Analysts

Paul Angelo
Royce Aguilar
+63 (2) 859-0600
 Trader’s Playbook

Technical Corner

Analysis: COSCO broke out of its short range early this week and respected its new support
level yesterday (P7.27). MACD confirms current uptrend and RSI not yet on overbought levels at
64.5.

Trading Plan: Those looking to buy are recommended to enter at current prices to buy the
breakout. Keep stops tight if price goes below P7.27 (S1). Watch its 50-day (P7.08) as it is also
acting as a support. Resistance is at P7.80 (R1).

Peer Table

EPS FY1 7 NI M a rg i n FY1 7 P/E T1 2 P/B V T1 2 R O E FY1 7 EPS 3 Y CAGR

AC 45.99 18.69% 19.38 1.98 12.42% 16.09%

AEV 3.84 19.46% 15.91 2.14 14.64% 4.97%
AGI 1.47 15.75% 8.44 0.82 9.64% 4.15%
CO SCO 0 .6 9 5 .3 7 % 9 .6 3 0 .9 0 9 .3 9 % 8 .5 1 %
DM C 1.11 25.92% 11.13 1.99 20.46% 11.07%
FDC 0.71 15.20% 12.06 1.35 8.45% 21.08%
GTCAP 70.30 9.28% 15.12 1.32 10.88% 11.44%
JGS 4.15 14.45% 20.88 1.72 11.58% 16.40%
LTG 1.00 22.86% 9.80 1.03 7.62% 34.61%
M PI 0.45 30.44% 10.57 0.90 8.40% 11.87%
SM 27.33 13.00% 33.30 3.44 10.47% 4.86%
SM C 8.77 6.64% 20.26 1.30 9.73% 32.20%
Ave ra g e 1 3 .8 2 1 6 .4 2 % 1 5 .5 4 1 .5 7 1 1 .1 4 % 1 4 .7 7 %
 Trader’s Playbook

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