Weekly Wrap

07 August 2023

Week in Review
 Global: Fitch Ratings cut its US credit rating to AA+ (from AAA previously), citing expected fiscal deterioration over the next three
years, erosion of governance amid repeated debt limit standoffs and last-minute resolutions that threatened the government’s
ability to pay its bills. Meanwhile, nonfarm payrolls were lower-than-expected at 187,000 in July (vs 200,000 estimate), but solid
wage gains (+4.4% y-y) and a decline in unemployment rate (to 3.5% from 3.6% in June) pointed to continued tightness in US
Macro

labor market conditions.

 Local: PH inflation cooled further for the sixth straight month to 4.7% in July (from 5.4% in June), better than the 4.9% consensus
estimate, due to slower price increases of food and non-alcoholic beverages, housing, electricity, gas and other fuels. Core inflation,
which excludes select food and energy items, likewise decelerated to 6.7% in July (from 7.4% in June). The average inflation rate
from January to July 2023 stood at 6.8%, still above the BSP target range of 2-4%.
 Global: UST bond yields (see Fig. 1) were mostly up last week following reports of the credit downgrade by Fitch and government
plans to raise borrowings in the coming months (amounting to around USD1tn in 3Q23). Meanwhile, the Federal Reserve may
Bonds

keep its tight monetary policy stance as the labor market continues to look resilient.
 Local: Domestic yields also rose on hawkish remarks from BSP Governor Remolona that the “Philippines is not out of the woods
yet when it comes to inflation, and the central bank is ready to raise the policy rate as soon as this month’s policy meeting if
needed.” The BSP chief also cited recent typhoon disruptions and escalating global rice prices as risks to the inflation outlook.
 Global: Global stock markets fell (see Fig. 5) as rising bond yields continue to put pressure on equities in the wake of the US credit
downgrade. Global growth worries also weighed on sentiment following reports of slowing manufacturing activity in the eurozone
and China. Meanwhile, oil prices continued to climb (Dubai crude +2.5% w-w and 11.3% YTD to USD86.87/bbl) on reports of
Equities

extended supply cuts from top producers Saudi Arabia and Russia through September.
 Local: The PCOMP also closed lower to 6,450.84 last Friday (-1.9% d-d and -2.6% w-w) tracking the decline of global markets,
despite improving manufacturing activity (manufacturing PMI up to 51.9 from 50.9 in June) and slowing inflation trends in the
country. The PHP also depreciated 1.5% w-w to 55.74 vs the USD, along with regional peers following the release of robust US
labor data as well as lingering concerns on the global economy after the US credit downgrade by Fitch. Foreigners remained net
buyers at PHP13.1bn (from PHP303mn the week prior).
 The PCOMP erased its 1.9% gain in July as it fell 2.1% so far in August (-1.8% YTD), and continues to trade at attractive valuations
Market Insights

(13.0x forward P/E vs 17.0x historical average). We expect investors to continue watching for cues on the health of economies
and businesses with the release of 2Q23 PH GDP, several regional trade data, and earnings reports this week. We continue to
recommend sectors and names that can sustain earnings growth in: 1) banks (BPI, MBT) on the back of healthy loan growth and
improving lending margins; 2) conglomerates with consumer-centric portfolios (SM, GTCAP, and AGI) that benefit from the
country’s economic resilience; and 3) power (AP, ACEN) with still tight power supply conditions likely to keep spot prices elevated.

 Eight of our covered names reported 2Q23 earnings last week, with 4 in-line (ACEN, ALI, TEL, FB), 2 beats (MBT, MER), and 2
Corporate Updates

misses (URC, NIKL), bringing our running earnings tally to 7 in-line, 4 beats, and 3 misses. Beats came from higher lending (MBT)
and power generation (MER) margins on favorable pricing, while the misses were due to still elevated prices of some input costs
(URC) and lower selling prices of mined commodities (NIKL).
 AEV and Coca-Cola Europacific Partners (CCEP) have signed a non-binding term sheet to acquire Coca-Cola Beverages
Philippines, Inc. (CCBPI) with enterprise value placed at USD1.8bn (~PHP99.3bn) and ownership structure at 60:40. AEV said the
transaction: 1) will expand its consumer portfolio and provide synergies with its other units; 2) will be funded through a combination
of cash and debt (parent net D/E at 0.2x as of 2Q23); and 3) will be completed by end-2023 subject to meeting necessary closing
conditions and regulatory approvals.
New Issue Monitor

Government Securities PH Corporate Bonds PH Equities

Date Security Tenor Amount Date Security Amount Tenor & Pricing Date Security Amount Tenor & Pricing
07 Aug T-bills 3M PHP5bn Series C: 5Y BVAL + Series A: 5Y BVAL +
T-bills 6M PHP5bn PHP10bn [25 to 60 bps] ACEN Perp. PHP12.5bn [75 to 115 bps]
07 Aug
21 Sep AEV Bonds + 01 Sep +
07 Aug T-bills 12M PHP5bn PHP7.45bn
Series D: 10Y BVAL + Prefs PHP12.5bn Series B: Dividend rate
08 Aug T-bonds 6Y 2M PHP30bn [40 to 85 bps] guidance within 8.00%

The Week Ahead

Date Event Period Estimate Prior
09 Aug PH Unemployment Rate Jun - 4.3%
10 Aug PH GDP y-y 2Q 6.0% 6.4%
10 Aug US CPI y-y Jul 3.3% 3.0%
11 Aug US PPI m-m Jul 0.7% 0.1%
11 Aug US Consumer Sentiment Aug 71.0 71.6

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.

PLEASE CONSIDER THE ENVIRONMENT BEFORE YOU PRINT

 Weekly Wrap | 07 August 2023

Fig. 1: US Treasury (UST) yield curve Fig. 2: PH government securities (GS) yield curve

12/31/2022 7/28/2023 8/4/2023 12/31/2022 7/28/2023 8/4/2023

8.0% 8.0%
6.20%
6.0% 5.33% 6.0%
6.35% 6.56%
4.15% 4.05%
4.0% 4.0%

2.0% 2.0%

0.0% 0.0%
3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 20Y 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 20Y

Source: Bloomberg Source: Bloomberg

Fig. 3: PCOMP & net foreign buying (selling) trends Fig. 4: PCOMP top gainers and losers w-w
ALI 3.3%
Net foreign buying/selling - PHPmn (RHS)
7,500 2,000 ACEN 3.2%

Top 5
JFC 3.2%
7,000 1,000
BPI 1.7%
6,500 -
EMI 1.0%
6,000 (1,000) MONDE -9.6%

AEV -10.0%

Bottom 5
5,500 (2,000)
CNVRG -10.7%
5,000 (3,000)
SMC -11.0%

JGS -12.1%

Source: Bloomberg Source: Bloomberg

Fig. 5: Equity indices movements Fig. 6: Currency and commodity trends

Last price w -w MTD YTD Currencies Last price w -w MTD YTD
Philippines PCOMP Index 6,450.84 -2.6% -2.1% -1.8% USD/PHP 55.74 -1.5% -1.6% 0.03%
US (S&P 500) SPX Index 4,478.03 -2.3% -2.4% 16.3% EUR/USD 1.10 0.1% -0.1% -3.2%
US (Nasdaq) NDX Index 15,274.92 -3.0% -3.1% 39.5% USD/JPY 141.76 -0.4% 0.4% -6.6%
China (CSI 300) SHSZ300 Index 4,020.58 0.7% 0.1% 4.2% Commodities Last price w -w MTD YTD
China (Hang Seng) HSI Index 19,539.46 -1.9% -2.7% -1.0% Dubai crude USD/ bbl 86.87 2.5% 1.5% 11.3%
Japan NKY Index 32,192.75 -1.7% -3.0% 23.4% Natural gas USD/ MMBt u 2.58 -2.3% -2.2% -43.5%
Europe SX5E Index 4,332.91 -3.0% -3.1% 12.5% Coal USD/ mt 137.00 1.9% -0.2% -66.1%
UK UKX Index 7,564.37 -1.7% -1.8% 0.7% Gold USD/ t oz 1,942.91 -0.8% -1.1% 7.1%
MSCI World MXWO Index 2,986.54 -2.3% -2.5% 14.3% Copper USD/ mt 8,523.25 -1.2% -3.1% 1.4%
MSCI EM MXEF Index 1,018.02 -2.4% -2.8% 6.3% Nickel USD/ mt 21,082.00 -4.5% -4.5% -29.9%

Source: Bloomberg Source: Bloomberg

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.

PLEASE CONSIDER THE ENVIRONMENT BEFORE YOU PRINT

Stock Coverage

Mkt Cap Last Price Target Upside/ EPS Growth P/E (x) EV/EBITDA P/B (x) ROE Div Yield
Company Ticker Rating (USD mn) 4-Aug-2023 Price Downside FY23F FY24F FY23F FY24F FY23F FY24F FY23F FY23F FY23F
Banking
BDO Unibank BDO Not Rated 13,429 141.00
Bank of the Philippine Islands BPI Buy 10,462 117.00 138.00 17.9% 16.0% 14.6% 11.5 10.0 NA NA 1.6 14.8% 2.4%
Metropolitan Bank & Trust Company MBT Buy 4,473 55.00 81.00 47.3% 27.7% 12.1% 5.9 5.3 NA NA 0.7 12.6% 5.5%
Security Bank Corporation SECB Buy 1,123 82.45 118.00 43.1% 4.4% 12.0% 5.6 5.0 NA NA 0.5 8.5% 3.6%
Conglomerates
Aboitiz Equity Ventures AEV Neutral 5,065 49.75 55.00 10.6% 11.2% 14.8% 11.8 10.3 9.7 7.9 0.7 11.5% 3.0%
Alliance Global Group, Inc. AGI Buy 2,013 12.30 18.60 51.2% 20.3% 24.2% 5.8 4.7 4.2 3.7 0.3 7.7% 1.0%
Ayala Corporation AC Buy 6,803 607.00 950.00 56.5% 35.0% 21.6% 10.8 8.9 10.8 10.7 0.6 8.5% 1.1%
DMC Holdings DMC Buy 2,190 9.12 10.90 19.5% -27.0% -23.1% 5.3 6.9 3.1 3.6 0.9 26.1% 15.4%
GT Capital Holdings, Inc. GTCAP Buy 2,032 522.00 773.00 48.1% 39.3% 13.7% 4.5 4.0 9.0 6.3 0.5 14.2% 1.1%
JG Summit Holdings, Inc. JGS Neutral 5,304 39.00 54.00 38.5% 70.4% 119.1% 30.0 13.7 9.9 7.7 0.7 5.2% 1.0%
LT Group, Inc. LTG Buy 1,839 9.40 11.90 26.6% 3.2% 6.4% 4.1 3.8 - - 0.3 11.0% 13.6%
Metro Pacific Investments MPI Buy 2,517 4.85 5.60 15.5% 25.0% 6.0% 8.6 8.1 10.6 9.9 0.6 8.8% 2.3%
San Miguel Corporation SMC Neutral 4,172 97.00 109.00 12.4% NM 24.0% 14.1 11.4 6.4 5.8 0.4 7.9% 1.4%
SM Investments Corporation SM Buy 20,075 908.50 1,110.00 22.2% 15.2% 14.0% 15.4 13.5 15.7 13.4 1.4 13.4% 0.8%
Consumer
Century Pacific Food CNPF Buy 1,681 26.25 30.50 16.2% 9.7% 25.6% 17.0 13.5 11.3 9.3 2.8 16.7% 1.5%
D&L Industries DNL Buy 909 7.04 9.50 34.9% -3.2% 24.7% 15.7 12.6 10.3 8.6 2.3 14.5% 3.4%
Emperador Inc. EMI Neutral 6,047 21.25 22.00 3.5% 11.5% 14.7% 29.7 25.9 22.0 19.2 3.8 12.8% 1.5%
Jollibee Foods Corp JFC Buy 5,262 260.00 280.00 7.7% 57.7% 25.1% 43.5 34.7 10.6 9.2 3.5 8.1% 1.0%
Monde Nissin Corporation MONDE Buy 2,437 7.50 10.60 41.3% 9.9% 14.4% 18.6 16.2 10.3 9.1 2.3 12.3% -
Puregold Price Club PGOLD Buy 1,432 27.50 51.00 85.5% 7.8% 13.5% 7.9 7.0 2.4 2.1 0.9 11.1% 3.5%
Robinsons Retail Holdings, Inc. RRHI Buy 1,443 54.30 85.00 56.5% 7.9% 13.1% 14.1 12.4 5.5 4.7 1.1 8.3% 4.3%
San Miguel Food and Beverage Inc. FB Buy 5,396 50.50 70.00 38.6% 13.7% 11.2% 12.2 11.0 4.8 4.4 2.5 20.2% 3.2%
Shakey's Pizza Asia Ventures PIZZA Buy 286 9.40 10.60 12.8% 19.0% 14.9% 15.2 13.2 8.5 7.6 2.0 13.8% 0.3%
Universal Robina Corporation URC Buy 4,758 120.80 164.00 35.8% 16.3% 20.9% 20.0 16.5 10.7 9.2 2.2 10.9% 2.9%
Wilcon Depot, Inc. WLCON Buy 1,631 22.00 30.30 37.7% 1.6% 17.7% 23.2 19.7 10.6 9.2 3.9 18.1% 1.7%
Property
Ayala Land ALI Buy 7,681 28.40 35.00 23.2% 25.9% 26.2% 17.9 14.2 11.1 9.8 1.5 9.1% 1.3%
Filinvest Land Inc. FLI Neutral 298 0.68 0.90 32.4% 30.0% 15.3% 4.6 4.0 9.5 8.6 0.2 4.7% 5.1%
Megaworld MEG Buy 1,150 2.04 3.50 71.6% 13.8% 11.0% 4.2 3.7 4.6 4.4 0.2 7.0% 3.0%
Robinsons Land RLC Buy 1,358 15.40 26.00 68.8% 6.4% 15.5% 7.5 6.5 5.7 4.8 0.5 8.3% 3.2%
SM Prime Holdings SMPH Buy 17,754 34.00 42.00 23.5% 37.7% 10.8% 23.7 21.4 16.9 15.5 2.5 11.2% 0.8%
Vista Land & Lifescapes VLL Buy 365 1.59 3.00 88.7% 13.0% 14.4% 2.3 2.0 9.0 8.4 0.2 8.3% 2.3%
REITs
AREIT, Inc. AREIT Buy 1,089 34.20 41.00 19.9% 7.0% 7.4% 14.2 13.2 15.5 13.9 1.0 6.8% 6.9%
Citicore Energy REIT Corp. CREIT Buy 299 2.53 3.00 18.6% 5.5% 7.9% 13.7 12.7 13.0 12.1 3.8 29.2% 7.7%
MREIT, Inc. MREIT Buy 703 13.90 18.00 29.5% 11.3% 3.2% 12.7 12.3 13.7 13.0 0.7 5.2% 7.7%
RL Commercial REIT, Inc. RCR Buy 1,026 5.29 6.70 26.7% -2.1% 5.1% 12.3 11.7 12.6 12.0 0.9 6.7% 7.7%
Power & Industrials
Aboitiz Power Corporation AP Buy 4,657 35.00 47.00 34.3% 31.7% 13.5% 7.4 6.5 8.0 7.1 1.3 20.1% 5.3%
AC Energy Corporation ACEN Buy 3,946 5.50 7.00 27.3% 42.8% 16.8% 30.0 25.7 16.6 15.0 1.6 5.7% 0.8%
First Gen Corporation FGEN Buy 1,314 20.20 26.00 28.7% 31.0% 16.0% 4.1 3.5 2.1 1.6 0.4 15.2% 1.6%
Manila Electric Company MER Buy 6,624 325.00 438.00 34.8% 32.9% -2.9% 10.2 10.5 7.9 8.5 2.7 27.8% 6.8%
Manila Water Company, Inc. MWC Rating Suspended 955 18.32
Megawide Construction Corp. MWIDE Neutral 118 3.25 3.50 7.7% NM NM NM 24.7 12.9 6.9 0.4 1.5% 30.8%
Intl Container Terminal Services ICT Buy 7,422 202.00 258.00 27.7% 16.6% 18.5% 11.8 10.0 6.3 5.6 3.5 37.6% 5.2%
Mining
Nickel Asia Corporation NIKL Buy 1,481 5.90 8.30 40.7% 23.5% 1.8% 9.2 9.0 5.2 5.2 1.3 33.6% 7.3%
Semirara Mining and Power Corporation SCC Buy 2,244 29.20 37.00 26.7% -25.8% -18.3% 4.2 5.1 2.9 3.3 1.6 41.5% 12.0%
Telecom
Converge ICT Solutions, Inc. CNVRG Buy 1,183 9.00 17.40 93.3% 14.6% 13.5% 7.7 6.8 4.2 3.8 1.5 21.1% -
Globe Telecom GLO Buy 4,723 1,811.00 2,265.00 25.1% 2.0% 3.1% 13.3 13.0 5.7 5.3 1.5 23.4% 5.4%
PLDT Inc. TEL Buy 4,981 1,275.00 1,655.00 29.8% 1.4% 1.4% 8.2 8.1 4.9 4.8 2.2 29.2% 8.3%
Tourism
Bloomberry Resorts Corporation BLOOM Buy 2,261 11.50 14.50 26.1% 93.7% 37.7% 12.8 9.3 9.3 7.2 3.0 26.1% 1.1%
Cebu Air CEB Buy 403 35.90 54.00 50.4% NM 92.3% 5.3 2.8 1.5 1.1 NM NM -
MacroAsia Corporation MAC Buy 141 4.13 6.30 52.5% 133.4% 18.1% 9.9 8.4 13.5 11.7 1.3 16.0% 1.3%

Sources: BDO Securities estimates, Bloomberg

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.

For concerns, you may contact us thru the BDO Securities Hotline (02) 8840-7878 between 8:30AM to 5:30PM, Monday to Friday or email us at bdosec-
customercare@bdo.com.ph. BDO Securities is a PSE and PDex Trading Participant, an SCCP and SIPF Member, and is regulated by the CMIC with Telephone
No. (02) 8876-4580 and email address at info@cmic.com.ph, and SEC with Telephone No. 0916-383-8633 and (02) 8818-0921 and email address at
msrd_covid19@sec.gov.ph.

PLEASE CONSIDER THE ENVIRONMENT BEFORE YOU PRINT