Philippines Market Insights 2017.3.15


News Highlights: Jollibee Foods Corp. (JFC) is looking to increase their presence in the US by increasing its stake in Smashburger. San Miguel Corporation (SMC) will issue another P15bn 5-year bonds as part of its P60bn debt program with SEC's shelf registration. The initial offering will consist of P10bn bonds due 2020, with an oversubscription option of up to P5bn.





Mart up on selective buying, PSEi @7,261: Local mart climbed as investors bought select large-cap stocks ahead of US Fed meeting. PSEi rose 28 points to close at 7,261 (+0.4% day-on-day), with sectors ending mixed. Actively-traded shares were ICT (+P3.80 at P79.20); PGOLD (+P0.50 at P45.50); and MPI (+P0.06 at P6.71), on P7.05bn turnover. Market breadth was still negative at 105-86, with net foreign buying of P10.35mn.

Might continue to trade sideways: We might see the local market trading on a sideways trend with a downward bias today as renewed concerns on crude linger. Trading is also expected to be muted and although widely anticipated, we expect investors to continue waiting on the sidelines ahead of the US Federal Reserve’s interest rate decision. Immediate support 7,200, resistance 7,300.


Bourses mixed ahead of Fed meeting: Marts were mixed as investors continued to wait on the sidelines ahead of the US Federal Reserve meeting.


Equities declined on oil prices slump: Shares ended lower as investors’ sentiment was dragged down by persistent slump in oil prices. Meanwhile, some players opted to wait on the sidelines ahead of the Fed meeting.


Crude down amid Saudi Arabia’s higher output: Oil prices fell after monthly data from OPEC showed Saudi Arabia’s output climbed back above 10mn barrels of oil per day in February, up from 9.75mn in the previous month. Wes Texas Intermediate for April declined $0.68 to close at $47.72/barrel.


JFC to increase stake in US-based Smashburger: Jollibee Foods Corp. (JFC) is looking to increase their presence in the US by increasing its stake in Smashburger. JFC's wholly owned subsidiary Bee Good! Inc. (BGI) and Smashburger Master LLC has amended the terms of agreement for the option to add stake on Smashburger. The new agreement will allow BGI to acquire additional 45% of Smashburger from 2018 to 2021, and another option to increase 15% from 2019 to 2026.

SMC to issue P15bn bonds: San Miguel Corporation (SMC) will issue another P15bn 5-year bonds as part of its P60bn debt program with SEC's shelf registration. The initial offering will consist of P10bn bonds due 2020, with an oversubscription option of up to P5bn. Proceeds from the issuance will be used to refinance dollar-denominated loans.

MAXS reported net income +12% to P561.74mn in 2016: Max’s Group (MAXS) recorded net income growth of 12% to P561.74mn, with systemwide sales increasing 12% at P15.34bn in 2016 from P13.72bn in the previous year. Meanwhile, restaurant sales grew 10% to P9.42bn on the back of 77 new stores and steady same store sales performance. MAXS total network count reached to 623 branches with 49 situated abroad, in line with its objective of establishing 1,000 outlets including 200 international by 2020.

PNB recorded P7.2bn (+14%) net income in 2016: Philippine National Bank (PNB) posted 14% increase in net income to P7.2bn, mainly due to the increase in its core revenues. Net interest income was 11% higher YoY at P19.6bn, maintaining its interest margin at 3.2%. Trading and foreign exchange gains were 61% higher on the back of higher volumes and more favorable market condition. Loans and receivables stood at P428bn (+17%), while deposits expanded also by 17% to P570.5bn.

PCOR net income soars to P10.8bn for 2016: Petron Corporation (PCOR) recorded 73% increase in consolidated net income to P10.8bn, on the back of record volume in sales. Philippine and Malaysian operations of PCOR reached 104.3mn barrels, 6% higher from the 98mn barrels in 2015. Growth was seen across all its business segments. Operating income rose by 31% to P23.8bn.


BSP sees volatility in the forex market: The Bangko Sentral ng Pilipinas (BSP) is expecting to see more volatility in financial markets in the near term, particularly forex, while the Federal Reserve is in the process of normalization. The Fed is poised to raise interest rates by 25 basis points this week, as widely anticipated. First step done for the Fed, basically. Nevertheless, the BSP reiterates that it does not have to be promptly in sync with the Fed as their decisions on monetary policy will remain ‘data dependent’. It assures, however, that it will step in currency trading, when necessary. The BSP will hold its own policy review on March 23.

January unemployment rose to 6.6%: Unemployment rate in January grew 6.6%, higher than prior year’s 5.7% due to job loss caused mainly by natural calamities. Employment losses in the agricultural sector were greatly affected by typhoons Nina and Auring, shedding more than 800,000 workers (two-thirds of the employment losses). National Economic and Development Authority (NEDA) added that the increase in unemployment rate was partly due to temporary election-related jobs as seen in the year following the 2010 elections. Meanwhile, employment rate declined to 93.4% in January, translating into 39.3mn employed Filipinos, 3.3% lower than recorded in January 2016. Moreover, prospects for job creation may be enhanced through the implementation of infrastructure projects on a 24/7 work mode basis under the current administration.

Possible Shell-PNOC team-up for LNG: Shell Philippines Exploration B.V. initiated talks with Phil. National Oil Co. (PNOC) for a possible partnership on the planned liquefied natural gas (LNG) project in Batangas. Despite no formal offer, Shell group wants the government to come out with an LNG policy to guide them in their final investment decision as they look for possible partners. Shell operates the Malampaya gas project in northwest Palawan with a 45% stake, while PNOC Exploration Corp. holds 10%. The rest is owned by Chevron Malampaya via service contract 38 consortium.

CAMPI and AVID seek lower excise taxes on autos: Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) and Association of Vehicle Importers and Distributors (AVID) suggest to the Congress that excise taxes that will be imposed on automobiles should be lower and expand the price brackets on the proposed new tax rate. CAMPI and AVID cited the higher excise tax would cause slowdown in car sales and translate into economic losses. The group also suggested a six-month moratorium before the implementation of tax hike. Lastly, they want electric and hybrid vehicles to be excluded under the definition of automobiles.









Philippines Market Insights 2017.3.14


Philippines Market Insights 2017.3.17