WED 05 OCT 2022

Top Stories:
(AS OF OCT 04, 2022)
SMC, EAGLE: SMC eyeing to acquire EAGLE INDICES
COLing the Shots: What to do since the worst is not yet over? Close Points % YTD%
PSEi 5,987.72 204.57 3.54 -15.93
All Shares 3,210.48 96.35 3.09 -15.91
Financials 1,496.21 21.24 1.44 -6.85
Other News: Holding Firms 5,820.44 262.82 4.73 -14.50
Industrial 8,897.31 311.83 3.63 -14.48
JFC: JFC debuts two new Tim Ho Wan stores in China Mining & Oil 10,699.39 386.99 3.75 11.43
Property 2,573.52 103.55 4.19 -20.07
Services 1,522.86 22.09 1.47 -23.33

Market Summary: Dow Jones 29,490.89 765 2.66 -18.84

S&P 500 3,678.43 92.81 2.59 -22.82
Nasdaq 10,815.43 239.81 2.27 -30.87
The local bourse tracked the rebound in US markets overnight, boosted by the release of
upbeat local manufacturing data for August.
INDEX GAINERS
Ticker Company Price %
The PSEi surged 204.57 points or 3.53% to close at 5,987.72. The top gainers were GLO GLO Globe Telecom Inc 2150.00 7.61
(+7.61%), AEV (+7.31%), AP (+7.10%), AGI (+6.78%), and JGS (+6.55%). On the other AEV Aboitiz Equity Ventures 55.80 7.31
hand, the top decliners were WLCON (-5.88%), CNVRG (-2.10%), PGOLD (-1.44%), GTCAP AP Aboitiz Power Corp 32.45 7.10
AGI Alliance Global Inc 8.50 6.78
(-1.44%), and SMC (-0.15%).
JGS JG Summit Hldgs Inc 43.90 6.55

Value turnover rose to Php4.6Bil from Php3.9Bil traded in the previous session. Meanwhile,
INDEX LOSERS
net foreign selling eased to Php96Mil from Php692Mil on Monday.
Ticker Company Price %
WLCON Wilcon Depot Inc 27.20 -5.88
CNVRG Converge ICT Solutions 13.04 -2.10
PGOLD Puregold Price Club 27.30 -1.44
GTCAP GT Capital Hldgs Inc 410.00 -1.44
SMC San Miguel Corp 96.65 -0.15

TOP 5 MOST ACTIVE STOCKS

Ticker Company Turnover
ICT Intl Container Term 398,615,000
BDO BDO Unibank Inc 318,286,800
SM SM Investments Corp 309,740,900
ALI Ayala Land Inc 282,702,200
SMC San Miguel Corp 259,185,100

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

WED 05 OCT 2022

Top Stories:

Frances Rolfa Nicolas SMC, EAGLE: SMC eyeing to acquire EAGLE

Research Analyst
In a disclosure to the PSE, SMC said that they are looking to acquire 88.5% of the
San Miguel Corporation
outstanding stock of EAGLE at Php22.02/sh or Php97.4Bil. SMC said that they are
N/A
N/A currently in discussions with the controlling shareholders of EAGLE, namely Mr. Ramon
Ang, Mr. John Paul Ang, Ms. Monica Ang, and Far East Holdings, Inc. (FEHI), which is also
majority owned by Mr. Ramon Ang. The proposed transaction will require clearance with
Eagle Cement Corporation
HOLD the Philippine Competition Commission, and a tender offer of the shares held by the
FV: Php15.20 minority shareholders of EAGLE.

The proposed price per share of Php22.02 is 43% higher than yesterday’s closing price
of Php15.4/sh and 45% higher than our current FV estimate of Php15.2/sh. Given the
huge premium, we think that a lot of minority shareholders might be enticed to sell their
holdings during the tender offer. Hence, assuming the deal pushes through, there is a
huge chance that EAGLE’s free float will fall below the minimum required, which could
lead to its subsequent delisting. Note that currently the minimum public float is 10% and
EAGLE’s free float is just at 11.5%.

Aprill Tan, CFA COLing the Shots: What to do since the worst is not
Chief Equity Strategist yet over?
In our webinar last week, I said I didn’t think the worst was over because despite more
signs pointing to the peaking of inflation, the Fed remains unconvinced and continues
to tighten aggressively. This could lead to a policy mistake and a hard landing of the U.S.
economy which in turn could lead to a global recession. When this happens, corporate
earnings will suffer.

Unfortunately, when the U.S. sneezes, everyone catches a cold. For example, the Fed’s
decision to keep raising interest rates to make sure that inflation would no longer be a
problem triggered the further appreciation of the dollar. Global central banks including
our very own BSP were forced to raise rates to maintain a comfortable interest rate
differential with the U.S. and to prevent their own currencies from depreciating even
more substantially. Despite the gloomy near-term outlook, I don’t think panic selling is
the right strategy. If you are an investor with a long-term investment time horizon, you
should stay invested and even continue buying Philippine stocks.

COL Financial Group, Inc. 2

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

WED 05 OCT 2022

The main reason why I think investors should remain optimistic is valuations. Although
Philippine stocks were already cheap prior to the latest Fed rate hike, they are much
cheaper now, with the PSEi index trading at only 12X 2023 P/E. This is significantly
below the index’s 10-year historical average P/E of 17X. In fact, because of local stocks’
cheap valuation, many companies and their insiders are buying back shares of their own
companies.

The Fed also has a track record of changing its mind quickly. For example, in December
of 2018, the Fed said that it would raise interest rate by another two times in 2019.
However, it ended up cutting rates thrice. Because of this, I won’t be surprised if the Fed
doesn’t push through with plans to raise the Fed fund rate to 4.6% and to keep it steady
at such a high level next year, especially if economic conditions in the U.S. deteriorate
substantially leading to a steep decline in inflation.

The Philippines is also in a better position compared to the U.S. since not a lot of
companies and consumers benefited from the steep drop in interest rates during the
pandemic. Moreover, because local bank lending rates are higher compared to the U.S.,
even if the BSP raises rates by the same magnitude as the Fed, the percentage increase
in financing cost is much less compared to the U.S.

Finally, although the local stocks won’t be spared by the steep drop in the U.S. market,
the country’s better fundamentals can allow it to outperform the U.S. once conditions
normalize. Note that the Philippine market outperformed the U.S. market consistently
for four years after the global financial crisis in 2008 because Philippine banks were
stronger, and the country didn’t have a housing bubble. This could happen again in the
next few years.

Although stocks are cheap, the caveat is that the market might still go down first since
the worst is not yet over. As such, manage your risk by accumulating stocks slowly as this
would allow you to improve your average cost. Also, limit the size of your investment
to an amount that you can afford to keep for a long period of time. This will improve
your ability to withstand any volatility and allow you to earn significant profits once
conditions normalize and the market turns around in the future.

We are removing property stocks and office related REITs from our COLing the Shots
stock picks list since the property sector is facing more uncertainties which could lead
to its underperformance. Aside from rising rates, there is a possibility that POGOs will
be permanently banned from the country. Demand for highly resilient PEZA accredited
offices could also weaken because the BoI is now offering the same tax incentives as
PEZA with the added flexibility of allowing employees to work from home. Investors who
own property stocks and office related REITs may switch to more resilient bets such as
power and consumer companies and buy back property stocks in the future once there
is more clarity on the said issues.

COL Financial Group, Inc. 3

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

WED 05 OCT 2022

Other News:

Research Analysts JFC: JFC debuts two new Tim Ho Wan stores in China
Frances Rolfa Nicolas
JFC said that it had opened two new Tim Ho Wan stores in Beijing, bringing the brand’s
Denise Joaquin
store count to 11 in mainland China. The group is eyeing to increase its store count in
Carlos Matthew De Leon
mainland China, which stood at 475 as of end-August across the Tim Ho Wan, Yonghe
Charmaine Co
King, and Hong Zhuang Yuan brands. JFC plans to open 100 Tim Ho Wan stores in China
within the next few years on the back of fresh funding for Titan Dining LP, the private
equity firm which owns the Tim Ho Wan brand. (Source: BusinessWorld)

Changes in Shareholdings

Date of Acquired or Price per

Stock Volume Person (Designation)
Disclosure Disposed share
Alexander C. Yu
04-Oct COL 1,000 A 3.23
(Vice Chairman)
Mary Rose L. Dela Paz
04-Oct TEL 250 A 1490.00 (Senior Vice President & Chief
Procurement Officer)
So urce: P SE

COL Financial Group, Inc. 4

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

WED 05 OCT 2022

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

FIRST VICE PRESIDENT & 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

FRANCES ROLFA NICOLAS DENISE JOAQUIN CARLOS MATTHEW DE LEON

RESEARCH ANALYST RESEARCH ANALYST RESEARCH ANALYST
rolfa.nicolas@colfinancial.com denise.joaquin@colfinancial.com matthew.deleon@colfinancial.com

CHARMAINE CO
RESEARCH ANALYST
charmaine.co@colfinancial.com

C OL F INANC IAL G R O UP, IN C.

24/F EAST TOWER, TEKTITE TOWERS,
EXCHANGE ROAD, ORTIGAS CENTER, PASIG CITY
PHILIPPINES 1605
TEL NO. +632 636-5411
FAX NO. +632 635-4632
WEBSITE: www.colfinancial.com

COL Financial Group, Inc. 6