WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) closed lower by 2.02% (-134.35 points) week-on-week to 6,530.20 as market sentiment remained cautious due to prolonged discussions on the US debt ceiling.

Adding to investor concerns, Fitch Ratings put the United States’ debt on negative watch last Thursday, highlighting the lack of progress in debt limit discussions. On the domestic front, investors digested the April 2023 Balance of Payments (BoP) report, which revealed a swing from a surplus of USD 1.267 billion in March 2023 to a deficit of USD 148 million. However, the January-April BoP still showed a surplus of USD 3.31 billion compared to a surplus of USD 79 million during the same period last year.

The top index performer was San Miguel Corporation (SMC) (+2.2%), while index laggards were Converge (CNVRG) (-6.2%), LTG Group (LTG) (-6.0%), and PLDT (TEL) (-5.7%). The index breadth was negative with 1 gainer versus 27 losers. The average daily turnover value was PHP 4.0 billion. Foreigners were net buyers by PHP 2.4 billion.

WHAT TO EXPECT THIS WEEK

We anticipate the market to rebound following the agreement in principle made between the White House and House Republicans to raise the US debt ceiling, thereby averting a default and mitigating the risk of a global economic crisis.

Key details of the deal include a two-year debt limit increase and a two-year appropriations agreement that maintains non-defense spending at approximately current levels. Additionally, we expect increased trading activity mid-week as the MSCI semi-annual rebalancing changes take effect as of the close of May 31, 2023 (Wednesday).

PSEi TECHNICAL ANALYSIS AND TRADNG PLAN

Resistance: 6,800

Support: 6,600 / 6,400

After failing to break above the 100-day moving average (MA) (~6,689), the PSEi pulled back and is now hovering below its 200-day MA (~6,542) as well. The market must break back above the 200-day MA to prevent the bears from further taking over. We believe that only once the PSEi breaks above 100-day MA/6,740/6,800, will a reversal of the market’s short-term downtrend occur.

Gradually accumulate once the PSEi trades back above 6,800.

STOCK CALLS FOR THE WEEK

BDO Unibank, Inc. (BDO) — BUY ON PULLBACKS

Currently, BDO is trading within the PHP 135.00 – PHP 145.00 range. With BDO trading near the lower end of the range, it is optimal to accumulate at or near PHP 135.00 for a better risk-to-reward trade.

BDO posted a 1st quarter 2023 net income of PHP 16.5 billion (+41% y-oy) – in line with consensus but ahead of our estimates. We have revised our forecasts to reflect the strong performance in full year 2022, and so far in the 1st quarter of 2023. Benefitting from higher net interest margin (NIM), strong expansion in fee-based services, and continued normalization of credit costs on stable non-performing loans, or NPLs, we now forecast BDO can deliver 13.7%/13.7% return on equity (ROE) in full year 2023 and 2024 – closer to management’s mid-teens target ROE.

However, we believe these positives are already in the price. As for price action, BDO is one of the few index names trading above its key moving averages (50-day, 100- day, and 200-day). After three successive rallies, BDO seems to be consolidating anew above its recent breakout point, suggesting that another rally could occur. Accumulating once BDO pulls back to PHP 135.00 is advisable. Set stop limit orders below PHP 125.00 and take profit at around

PHP 155.5.

Bank of the Philippine Islands (BPI) — BUY ON BREAKOUT

BPI reported 1st quarter 2023 net income of PHP 12.1 billion (+52% y-o-y) – in line with consensus and ahead of our estimates, attributable to average asset base expansion, margin growth, and lower provisions.

We raised our target price for BPI to PHP 123.00. We have factored in the strong showing in BPI’s earnings from recent quarters, driven largely by the positive transmission of policy rates on net interest margins, double-digit loan growth (led by credit cards), robust fee income, stable cost-to-income ratio, and lower provisions.

As a result, we now expect the bank’s return on equity to reach 13.9% this year – close to the high of 14% in full-year 2016. As for the merger of BPI and Robinsons Bank, we see merits to the pending merger of the two banks, in view of BPI’s growing assets, deposits, and client base, with RBank having delivered above-industry loans and deposits CAGR in the last five years.

We also see synergies between BPI and Gokongwei group’s (through Robinsons Retail) products and services platforms – strengthening both companies’ positioning across the financials and retailing industries. Accumulating once BPI breaks above PHP 110.00 is advisable. Set stop limit orders below PHP 101.20 and take profit at around PHP 126.5. For long-term investors, our fundamental target price for BPI is PHP 123.00.

DigiPlus Interactive Corp. (PLUS) — BUY ON PULLBACKS

PLUS posted a net income of PHP 436.8 million in the 1st quarter of 2023, a turnaround from the PHP 223.1 million in net losses incurred in 1st quarter 2022, driven by strong topline growth from its retail games business.

PLUS’ consolidated revenues surged to PHP 4.2 billion (1st quarter 2022: PHP 752 million), amid the solid performance of its online platform, BingoPlus. The recent earnings outperformance brought PLUS’ share price to its highest since August 2019. As for the company’s plans this year, under retail, PLUS targets to open more physical sites in different areas, especially in the provincial regions.

PLUS is also looking into additional game offerings and gaming machine acquisitions to support its growing operations. The company plans to add new online games to increase revenue and player retention. Accumulating once PLUS pulls back to PHP 3.15/PHP 3.10 is advisable. Set cut loss below PHP 2.90. Take profit at around PHP 3.62/PHP 3.70.

KEY DATA RELEASES

Thursday, June 1, 2023
– US Initial Jobless Claims as of May 27, 2023
– US S&P Global preliminary manufacturing PMI for May 2023 (consensus estimate: 48.5; April 2023: 48.5)
– PH S&P Global preliminary manufacturing PMI for May 2023 (April 2023: 51.4)

Friday, June 2, 2023
– US Change in Nonfarm Payrolls for May 2023 (consensus estimate: 188k; April 2023: 253k).
– US Unemployment rate for May 2023 (consensus estimate: 3.5%; April 2023: 3.4%).

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) rose by 1.31% (+86.40 points) week-on-week to close at 6,664.55. Investor sentiment improved following the Bangko Sentral ng Pilipinas’ (BSP) decision to pause rate hikes during its recent monetary board meeting, keeping interest rates steady at 6.25%.

The BSP also lowered its 2023 inflation forecast to 5.5% (from 6.0%). Moreover, BSP Governor Felipe Medalla signaled that the central bank would likely keep interest rates unchanged in the succeeding policy meetings. The positive news around the US debt ceiling negotiations also spilled over to the local market, which pulled the index higher.

Top index performers were GT Capital (GTCAP) (+8.4%), PLDT (TEL) (+4.7%), and Jollibee Foods Corp. (JFC) (+4.5%), while index laggards were Puregold (PGOLD) (-3.9%), LT Group Inc. (LTG) (-3.6%), and Universal Robina Corporation (URC) (-3.3%). The index breadth was positive with 24 gainers versus six losers. The average daily turnover value was PHP 4.1 billion. Foreigners were net buyers by PHP 230.8 million.

WHAT TO EXPECT THIS WEEK

We expect the market to trade sideways with a slight downward bias as investors await further news on the US debt ceiling negotiation and other key data releases. Local fuel prices are also expected to increase by about PHP 0.50 to PHP 0.70 per liter of diesel and PHP 0.70 to PHP 0.90 per liter of gasoline.

PSEi TECHNICAL ANALYSIS AND TRADNG PLAN

Resistance: 6,800

Support: 6,600 / 6,400

The PSEi rebounded last week and is back above the 6,600 level. It is worth taking note, though, that the 100-day moving average (MA) (~6,687) again acted as an immediate resistance level last week. We believe that only once the PSEi breaks above the 100-day MA or 6,800 will there be a reversal of the market’s short-term downtrend.

Gradually accumulate once the PSEi trades back above 6,800.

STOCK CALLS FOR THE WEEK

Ayala Corp. (AC) — BUY ON BREAKOUT

AC is showing signs of bullish recovery after the stock broke above the 50-day moving average (MA) price earlier this month (May 2023). AC’s share price has rallied by as much 9.7% month-to-date after the company’s reported income came in at PHP 10.2 billion (+31% year-on-year), driven by the strong growth from its banking and property segments.

Excluding the one-off items, AC’s core net income came in at PHP 9.4 billion (+61% y-o-y), in line with consensus estimates. AC’s share price also benefitted after the company had the top weight increase in the MSCI PH Standard Index Review last May 12, 2023 (effective June 1, 2023). Meanwhile, the technical indicator MACD confirms the bullish momentum. We think that a rally will occur should AC break above its 100-day and 200-day MAs (~PHP 680) as well as the PHP 710.00 resistance level.

Accumulating once AC breaks above PHP 710.00 is advisable. Set stop limit orders below PHP 653.00 and take profits at around PHP 817.00/PHP 840.00.

Megaworld Corp. (MEG) — BUY

The company’s strong 1st quarter 2023 earnings as well as the Bangko Sentral ng Pilipinas’ (BSP) pause in rate hike drove MEG’s share price to rise by as much as 5.5% last week, which resulted in the formation of a double bottom, an intermediate-term bullish pattern.

According to Technical Insight, our automated chart pattern recognition program, the measured price target after MEG broke out of its double bottom pattern is PHP 2.21 to PHP 2.25. As for management guidance, MEG plans to increase its project launches by 33% y-o-y to PHP 60 billion in 2023. The company aims to focus on its residential segment, projecting reservation sales of around PHP 130 billion for the year, compared to PHP 119 billion in pre-sales in the previous year.

In addition, MEG has allocated PHP 55 billion in capex, a nearly 20% increase from 2022’s budget. Accumulating MEG at the current levels is advisable. Set stop Limit order/s below PHP 1.92. Take profit at around PHP 2.30/PHP 2.40

Petron Corp. (PCOR) — BUY ON BREAKOUT

PCOR reported 1st quarter 2023 net income of PHP 3.4 billion (-6% y-o-y) amid the 16% y-o-y decline in crude prices and higher financing cost, ameliorated by the mark-to-market valuation of its commodity hedges.

PCOR registered fuel demand and sold consolidated volumes of 28.6 million barrels (+11% y-o-y). The lower net income has resulted in PCOR retesting its support level around PHP 3.25. PCOR is mostly trading between PHP 3.25 to PHP 3.70. With the stock coming from a short-term rally in March 2023, it is likely that the counter will resume its pace once PCOR breaks above PHP 3.70.

On the other hand, if PCOR breaks below PHP 3.25, the stock can retest the PHP 3.00 level. As for company guidance, despite the external challenges, PCOR remains confident in achieving full financial recovery this year driven by the consistent rise in fuel demand. Accumulating once PCOR breaks above PHP 3.70 is advisable. Set cut loss below PHP 3.40. Take profit at around PHP 4.25/PHP 4.50.

KEY DATA RELEASES

Tuesday, May 23, 2023
– US S&P Manufacturing Purchasing Manager’s Index (PMI) for May 2023 (consensus estimate: 50.0; actual for April 2023: 50.2)

Thursday, May 25, 2023
– US Initial Jobless Claims as of May 20, 2023
– PH Budget Balance for April 2023 (March 2023: -210.3 billion)

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) dropped by 1.61% (107.51 points) week-on-week to close at 6,578.15, snapping its three-week winning streak. The market started the week in the red as investors took some profits ahead of the local GDP data and MSCI rebalancing.

Subsequently, the local bourse managed to bounce back in the middle of the week due to the slower April 2023 US inflation at 4.9% year-on-year (consensus estimate: 5.0%) and the better-than-expected Philippine 1st quarter 2023 GDP of 6.4% (consensus estimate: 6.2%).

On Friday, the benchmark index traded lower as investors digested the results of the MSCI semi-annual rebalancing, where the Philippines got a slight downweight and Monde Nissin Corp. (MONDE) will be deleted from the MSCI index effective June 1, 2023.

Top index performers were Ayala Corp. (AC) (+3.6%), Universal Robina Corp. (URC) (+3.5%), and LT Group Inc. (LTG) (+1.2%), while index laggards were MONDE (-16.2%), Ayala Land Inc. (ALI) (-6.2%), and Wilcon Depot Inc. (WLCON) (-5.3%). The index breadth was negative with five gainers versus 23 losers. The average daily turnover value was PHP 4.7 billion. Foreigners were net sellers by PHP 691 million.

WHAT TO EXPECT THIS WEEK

We expect the market to trade sideways with an upward bias as investors closely monitor the tail end of the earnings season and await key data releases. The market will be on the lookout for cash remittances reports and the highly anticipated policy rate decision of the Bangko Sentral ng Pilipinas (BSP) which is expected to pause its rate hike.

Meanwhile, local fuel prices are forecasted to rise by as much as PHP 1.30 – PHP 1.50/liter on diesel and PHP 0.30 – PHP 0.50/liter on gasoline.

PSEI TECHNICAL ANALYSIS AND TRADNG PLAN

Resistance: 6,800

Support: 6,600 / 6,400

The bears were in control last week as the PSEi dropped below the 6,600 level. It is also worth noting that the index’s 100-day moving average price (~6,683) acted as a resistance level, with the market failing to break back above the said level. We think that only once the PSEi breaks above 6,740/6,800 will there be a reversal of the market’s short-term downtrend.

We suggest to gradually accumulate the First Metro Exchange Traded Fund (FMETF) or other index trackers once the PSEi trades back above 6,800.

STOCK CALLS FOR THE WEEK

PLDT, Inc. (TEL) — BUY ON BREAKOUT

TEL reported a 1st quarter 2023 net income of PHP 9.02 billion (-1.0% y-o-y). However, TEL’s core income reached PHP 8.64 billion (+5.0% y-o-y), excluding the impact of asset sales and Voyager Innovations, which is ahead of consensus and our estimates.

Despite the initial rally, TEL’s share price is still on a clear downtrend, trading below its key 50-, 100-, and 200-day moving averages (MAs). Meanwhile, technical indicator MACD confirms the bearish momentum. That said, we think that TEL must break above its 100-day MA (~P1,342) for a reversal to take place. Accumulating once TEL breaks above its 100-day MA is advisable. Set stop limit orders at 8% below average cost and take profits at 15% above average cost. For long-term investors, our fundamental target price for TEL is PHP 1,470.00

Cebu Air, Inc. (CEB) — BUY ON BREAKOUT

CEB posted a core income of PHP 1.3 billion (vs a net loss of PHP 5.1 billion in the 1st quarter of 2022), above consensus estimates. Revenues grew to PHP 20.9 billion (vs. PHP 6.7 billion in the 1st quarter of 2022), driven by higher passenger volume and average fares.

In the 2nd quarter of 2023, CEB expects to exceed its pre-pandemic capacity, supported by an optimistic outlook in the tourism industry as well as the strengthening of its Clark and Cebu hubs. Also, CEB expects to reach 2019 international capacity levels in the 2nd quarter of 2023, while domestic operations will continue to grow with additional flight frequencies to various destinations.

As for price action, CEB is showing signs of bullish recovery with the current share price hovering above its key 50-, 100-, and 200-day moving averages (MA). Meanwhile, the technical indicator MACD confirms the bullish momentum. We believe that a rally will occur once CEB breaks above PHP 44.00. Accumulating once CEB breaks above PHP 44.00 is advisable. Set stop limit orders below PHP 40.5. Take profit at around PHP 50.7.

DMCI Holdings, Inc. (DMC) — BUY ON BREAKOUT

DMC posted a 32% y-o-y decline in its 1st quarter 2023 consolidated net income to PHP 7.6 billion – in line with consensus estimates. The decline was attributed to lower commodity shipments, easing coal prices, reduced construction projects, fewer real estate accounts, and higher real estate sales cancellations.

For the remainder of 2023, DMC has a mixed outlook. For Semirara Mining and Power Corp. (SCC), while coal demand in China is picking up, the company expects the power segment to do relatively better amid high uncontracted capacity and elevated spot prices. As for the real estate business, DMC is seeing lesser cancellations as demand slowly returns and as its new product formats drive growth for the segment.

For the water business, the company expects growth to be sustained by the tariff adjustment and the economic reopening. However, these positives are dampened by challenging macroeconomic conditions, slowing global growth, and operating headwinds. Accumulating once DMC breaks above the 200-day MA (~PHP 10.53) is advisable. Set stop limit orders at 8% below average cost and take profits at 15% above average cost.

KEY DATA RELEASES

Monday, May 15, 2023
– Overseas Cash Remittances y-o-y for March 2023 (consensus estimate: 3.4%; actual for February 2023: 2.4%)
– Corporate Earnings: MONDE, San Miguel Corp. (SMC)

Tuesday, May 16, 2023
– US retail sales (ex auto) MoM for April 2023 (consensus estimate: 0.4%; actual for March 2023: -0.8%)
– Corporate Earnings: GT Capital (GTCAP), Alliance Global Group Inc. (AGI)

Thursday, May 18, 2023
– BSP interest rate decision (consensus estimate: no change in rates)
– US Initial Jobless Claims as of May 13, 2023
– US Existing Home Sales for April 2023 (consensus estimate: 4.28 million; actual for March 2023: 4.44 million).

Metropolitan Bank & Trust Co. (Metrobank) took home six accolades, including the prestigious Cesar E.A. Virata Award (Bank Category), at the recently held 2023 Philippine Dealing System (PDS) Awards Night.

This marks Metrobank’s 9th year of receiving this highest recognition given to the Top Bank in the country that has shown exceptional performance in the fixed-income securities business – a record for any bank in the Philippines.

Recognized for its outstanding performance, leadership, innovation, and overall contribution to the growth and development of the Philippine financial markets, Metrobank was also named as: Top RTS Participant; Top Dealing Participant for Corporate Securities; Top Fixed Income Dealing Participant; Top 5 Fixed-Income Cash Settlement Bank (2nd Place); and Top 5 Corporate Securities Market Maker (2nd Place).

Representatives from Metrobank’s Financial Markets Sector received the accolades – including the Cesar E.A Virata Award. In the photo are, from left: Bernice Joyce E. Nobleza, Trader; John Christopher C. Lu, Head of Trading; Kathryn Francis B. Abes, Head of Rates and Credits Division; Fernand Antonio A. Tansingco, Head of Financial Markets Sector; Rommel Enrico C. Dionisio, Head of Treasury Group; and Cynthia C. Resurreccion, Head of Treasury Operations & Support Division.

These awards cement Metrobank’s position as one of the country’s top performers for fixed-income securities for 2022, according to the PDS Group.

“We are honored to receive all these recognitions from the PDS Group and to be recognized for our efforts in bolstering the growth of the Philippine financial markets. This is in line with our mission of supporting the government on nation-building through meaningful financial products and services offerings,” said Fernand Antonio A. Tansingco, Metrobank SEVP and Head of the Financial Markets Sector.

Metrobank has gained multiple recognitions from prestigious institutions for its exceptional performance in the past year. It was recently awarded by Asiamoney as the Best Bank for ultra-high-net-worth clients, the Best Domestic Private Bank in the Philippines, and the Best Service in the Philippines according to the Asiamoney Trade Finance Survey. Last year, Metrobank also brought home major awards from top global financial publications. Euromoney and the Banker named it as the Best Bank in the Philippines for 2022. It was also recognized as the Strongest Bank in the Philippines by The Asian Banker for 2021 and 2022.

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) rose by 0.91% (+60.58 points) week-on-week to close at 6,685.66 due to a less hawkish US central bank. The market started the week on a positive note on catch-up trades after the long weekend.

However, the benchmark index fell on Wednesday, tracking weaker global equities ahead of the US Fed’s policy rate decision. The market subsequently rose on Thursday as the Fed signaled a possible pause in rate hikes. On Friday, the PSEi stayed flattish despite the deceleration in local inflation.

Top index performers were Monde Nissin (MONDE) (+9.1%), Ayala Land Inc. (ALI) (+6.0%), and Semirara Mining and Power Corp. (SCC) (+5.2%), while index laggards were BDO Unibank (BDO) (-4.9%), Wilcon Depot, Inc. (WLCON) (-2.9%), and Meralco (MER) (-2.7%). The index breadth was positive with 19 gainers versus 11 losers. The average daily turnover value was PHP 4.0 billion. Foreigners were net sellers by PHP 2.4 billion.

WHAT TO EXPECT THIS WEEK

We expect the market to trade sideways with a slight downward bias ahead of major earnings and data releases and the MSCI Quarterly Index Review. Investors are expecting a further decline in external trade value (exports and imports) and a deceleration in the highly anticipated 1st quarter 2023 GDP growth at 6.2% year-on-year (4th quarter 2022: 7.1%). On the international front, the market is also anticipating a steady US inflation print for April 2023 at 5.0% (March 2023: 5.0%).

PSEi TECHNICAL ANALYSIS AND TRADNG PLAN

Resistance: 6,800

Support: 6,600 / 6,400

The PSEi rallied anew last week with the 6,600 level acting as a support. The technical indicator MACD confirms the bullish momentum. A break above the index’s 100-day moving average price (~6,680) will likely result in a retest of the 6,800 resistance level. We think that only once the PSEi breaks above 6,740/6,800 will there be a reversal of the market’s short-term downtrend.

We suggest gradually accumulating the FMETF (exchange-traded fund of First Metro Asset Management Inc.) or other index trackers once the PSEi trades back above 6,800.

STOCK CALLS FOR THE WEEK

Manila Electric Company (MER) — BUY ON PULLBACKS

MER posted a 1st quarter 2023 consolidated reported net income of PHP 8.1 billion (+26% y-o-y) and consolidated core net income of PHP 9.0 billion (+40% y-o-y) — ahead of consensus estimates — driven primarily by the increase in contribution of the power generation segment, specifically from Pacific Light, the company’s gas plant investment in Singapore.

MER’s energy sales growth target for the year is 4.0%-4.2%, higher than the 2% it posted in the 1st quarter of 2023. Also, the seasonal warmer temperature and the onset of El Niño in the 2nd quarter should be a catalyst for MER. Accumulating once MER pulls back to PHP 320.00 is advisable. Set stop limit orders below PHP 300.00. Take profit at around PHP 360.00/PHP 380.00.

Jollibee Foods Corp. (JFC) — BUY ON BREAKOUT

JFC announced its core earnings at PHP 3.89 billion (-31.7% y-o-y) – below consensus and our estimates. The company recognized a PHP 463.11-million impairment loss for the Pho24 trademark as the business announced plans to discontinue and close its stores locally.

Meanwhile, JFC’s revenues rose by 38% y-o-y amid the resurgence in dine-in sales, 40.2% y-o-y growth in system-wide sales (SWS), and 27% same-store sales growth (SSSG). Moving forward, the company plans 550 to 600 global gross store openings this year, faster than the 542 organic gross store openings in 2022.

They are expecting a 15-20% increase in systemwide sales (SWS) from 7-10% same store sales growth. At the same time, they’re also projecting a 20-25% surge in operating income buoyed by the expected rebound in China, which previously dragged JFC’s performance in 2022. Accumulating once JFC breaks above PHP 226.0 is advisable. Set stop limit order/s below PHP 207.0. Take profit at around PHP 260.0.

Robinsons Land Corp. (RLC) — BUY ON BREAKOUT

Since bottoming out at PHP 13.62 last April 17, 2023, RLC’s share price has since rallied by 6.5% after the company reported a 90% y-o-y jump in its 1st quarter 2023 net income attributable to the parent company at PHP 2.66 billion – in line with our estimate and consensus expectations. Accumulating once RLC breaks above PHP 15.00 is advisable. Set stop limit orders below PHP 13.80 and take profits at around PHP 17.30/PHP 17.50.

KEY DATA RELEASES

Monday, May 8, 2023
– Philippine unemployment rate for March 2023 (February 2023: 4.8%)
– Corporate earnings: International Container Terminal Services Inc. (ICT)

Tuesday, May 9, 2023
– Philippine exports YoY for March 2023 (consensus estimate: -18.8%; actual for February 2023: -18.1%);
– Philippine imports YoY for March 2023 (consensus estimate: -10.4%; actual for February 2023: -12.1%)
– Corporate earnings: JGS

Wednesday, May 10, 2023
– US Consumer Price Index (CPI) YoY for April 2023 (consensus estimate: 5.0%; actual for March 2023: 5.0%)
– Corporate earnings: SM Investments Corp. (SM), Ayala Corporation (AC), DMCI Holdings Inc. (DMC)

Thursday, May 11, 2023
– Philippine GDP YoY for 1st quarter 2023 (consensus estimate: 6.2%; 4th quarter 2022: 7.1%);
– US Initial Jobless Claims as of May 6, 2023
– Corporate earnings: CNVRG

Friday, May 12, 2023
– MSCI Quarterly Index Review
– Corporate earnings: LT Group Inc. (LTG)

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) rose 1.6% (105.04 points) week-on-week to close at 6,625.08. The market was fueled by the strength of the banking sector’s 1st quarter 2023 earnings results and positive comments from the International Monetary Fund on Philippine banks’ resilience.

Investors also welcomed the BSP’s lower April year-on-year inflation forecast of 6.3% to 7.1% (actual for March 2023: 7.6%). The market pulled back mid-week amid renewed concerns over a US banking crisis and comments from BSP Governor Felipe Medalla suggesting a potential slower pace of easing.

Towards the end of the week, the market bounced back, fueled by stronger Asian peers, bargain hunting, and a positive sentiment in global markets.

As for notable corporate actions, a consortium consisting of Metro Pacific Holdings, Inc., GT Capital Holdings, Inc. (GTCAP), Mit-Pacific Infrastructure Holdings, Inc., and MIG Holdings Incorporated intends to make a tender offer on all outstanding common shares of Metro Pacific Investments Corp. (MPI) with a view to taking MPI private through a voluntary delisting process. Based on the Tender Offer Notice, the bidders will offer to acquire the Tender Offer Shares at PHP 4.63 per share.

Top index performers were Metro Pacific Investments Corp. (MPI) (+14.8%), Alliance Global Group Inc. (AGI) (+14.1%), and BDO Unibank (BDO) (+6.7%), while index laggards were DMCI Holdings Inc. (DMC) (-8.2%), PLDT (TEL) (-5.1%), and Converge (CNVRG) (-4.8%). The index breadth was positive with 19 gainers versus 11 losers. The average daily turnover value was PHP 5.0 billion. Foreigners were net buyers by PHP 919.6 million.

WHAT TO EXPECT THIS WEEK

We expect the market to trade sideways with an upward bias amid the expected possible US Fed rate hike announcement on Thursday, and major earnings and data releases.

The Fed is anticipated to raise its benchmark lending rate by 25 basis points during the upcoming Federal Open Market Committee (FOMC) meeting on May 4, 2023, marking the 10th and potentially final increase. Investors will also be closely monitoring the release of US Bureau of Labor Statistics’ data on nonfarm payrolls, and the latest unemployment numbers.

On the domestic front, the market will be on the lookout for the release of the April 2023 Philippine Consumer Price Index (CPI) (consensus estimate: 7% y-o-y). However, investors are closely watching Metro Manila’s weekly COVID positivity rate, which rose to 14.3%, and the possibility of reintroducing mandatory face mask use in the Philippines, as mentioned by Pres. Ferdinand “Bongbong” Marcos Jr.

STOCK CALLS FOR THE WEEK

Bloomberry Resorts Corp. (BLOOM) — BUY ON PULLBACKS

BLOOM may benefit from MPI’s plan to voluntary delist. Based on our estimates, we see a high likelihood for BLOOM to potentially replace MPI in the PSEi. Currently, BLOOM is trading at overbought conditions after shooting past PHP 9.00, PHP 10.0, and PHP 11.0 over the last four months. Accumulating on pullbacks for a more favorable risk-to-reward trade would be a better entry strategy. Those looking to accumulate can buy BLOOM once the stock pulls back to PHP 10.00. Set stop limit orders below PHP 9.20 and take profits at around PHP 11.50/PHP 12.00.

Shakey’s Pizza Ventures, Inc. (PIZZA) — BUY ON BREAKOUT

PIZZA’s management sees growth momentum to be sustained this year given optimistic numbers and despite the elevated cost environment and its impact on consumer sentiment.

PIZZA’s 2022 net income surged to PHP 874.4 million, exceeding pre-pandemic levels, and up from PHP 122.98 million in 2021. In terms of revenues, PIZZA similarly booked an 85% y-o-y growth to PHP 10.14 billion amid the 37% same-store sales growth (SSSG) as well as the PHP 14.1 billion systemwide sales (SWS) on the back of the resurgence in dine-in sales, the company’s store network expansion, and the acquisition of Potato Corner (PC).

As for price action, a break above the PHP 8.70 resistance level will likely result in the stock sustaining its bullish price action. Accumulating PIZZA once it breaks above PHP 8.70 is advisable. Set stop limit orders below PHP 8.00. Take profit at around PHP 10.00/PHP 10.50.

Converge Solutions, Inc. (CNVRG) — BUY ON BREAKOUT

CNVRG’s price weakness may be close to bottoming out. Following the disappointing full-year 2022 earnings, Converge ICT Solutions, Inc.’s (CNVRG) price has fallen by 25.06% year-to-date, significantly underperforming the PSEI.

The stock continues to trade at oversold levels as foreigners continue to sell. That said, conservative investors can wait for a bullish reversal and a retracement to higher levels before accumulating.

From a fundamental standpoint, we think that the slowdown in subscriber growth in the broadband segment is likewise close to bottoming out, with average revenues per user (ARPU) expected to stabilize in the next 6-12 months.

Competition is expected to be pre-occupied with the mobile segment where CNVRG has no exposure. At our trimmed down PHP 13.8 target price, CNVRG now offers undemanding valuations relative to the normalizing growth delivered in recent quarters, in line with broader telco peers in the emerging markets. Accumulating CNVRG after it breaks above its 50-day moving average price (~PHP 14.0) is advisable. Set stop limit orders 8% below average cost. Take profit at around PHP 16 or higher.

PSEi TECHNICAL ANALYSIS

Resistance: 6,600 / 6,800

Support: 6,400

The PSEi sustained its rebound last week above its 200-day moving average price (~6,511) on higher value turnover and net foreign buying. The market managed to break above the 6,600-resistance level as well.

Meanwhile, the technical indicator MACD is showing signs of the bulls taking control. Nevertheless, we believe that only once the PSEi breaks above 6,800 will the reversal of the market’s short-term downtrend take hold.

TRADING PLAN

Gradually accumulate once the PSEi trades back above 6,800.

KEY DATA RELEASES

Tuesday, May 2, 2023
– Corporate earnings: Union Bank of the Philippines (UBP), Aboitiz Power (AP), Aboitiz Equity Ventures (AEV)

Wednesday, May 3, 2023
– Corporate earnings: Metro Pacific Investments Corpo. (MPI), Bank of the Philippine Islands (BPI)

Thursday, May 4, 2023
– US Federal Open Market Committee (FOMC) interest rate decision (consensus estimate: 25-bp rate increase)
– Corporate earnings: Semirara Mining and Power Corporation (SCC), AC Energy (ACEN), PLDT (TEL)

Frifay, May 5, 2023
– US change in nonfarm payrolls for April 2023 (consensus estimate: 175k; actual for March 2023: 236k)
– US unemployment rate for April 2023 (consensus estimate: 3.6%; actual for March 2023: 3.5%)
– Philippine Consumer Price Index (CPI) YoY for April 2023 (consensus estimate: 7%; actual for March 2023: 7.6%)
– Corporate earnings: Ayala Land Inc. (ALI)

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) marginally inched by +0.59% (+38.53 points) week-on-week to 6,520.44. The benchmark index started the shortened trading week in the green, tracking stronger Asian peers.

The market fell on Tuesday and extended its decline midweek as investors digested lower-than-expected February OFW remittances (actual: 2.4% year-on-year; consensus estimate: 3.9% y-o-y) and as the peso continued to weaken against the greenback, breaching the PHP 56 level during the week.

The local bourse rebounded on Thursday following a wider balance of payments (BOP) surplus for March 2023 and as earnings season kicked in with BDO Unibank Inc. (BDO) and Bank of the Philippine Islands (BPI) reporting strong 1st quarter 2023 earnings results.

Top index performers were Wilcon Depot Inc. (WLCON) (+5.9%), Bank of the Philippine Islands (BPI) (+3.5%), and JG Summit (JGS) (+2.6%), while index laggards were GT Capital (GTCAP) (-4.0%), San Miguel Corporation (SMC) (-2.5%), and Semirara Mining and Power Corporation (SCC) (-2.1%).

The index breadth was positive with 18 gainers versus 12 losers. The average daily turnover value was PHP 3.4 billion. Foreigners were net buyers by PHP 275.3 million.

WHAT TO EXPECT THIS WEEK

We expect the market to trade sideways with a slight upward bias as investors await more corporate earnings releases and the oil price rollback by as much as PHP 0.60-PHP 0.70/liter on diesel and PHP 1.40-PHP 1.50/liter on gasoline.

However, gains may be capped by recent hawkish remarks by US Federal Reserve officials, bolstering bets for another rate hike in May. Investors will also be on the lookout for major data releases, including US initial jobless claims, Q1 advance estimates of US GDP, and Personal Consumption Expenditures (PCE).

STOCK CALLS FOR THE WEEK

The Keepers Holdings, Inc. (KEEPR) — BUY ON BREAKOUT

Year-to-date, KEEPR’s share price has risen by 21.2%, outperforming the Industrials index (-0.7% YTD) and the PSEi (-1.5% YTD). Despite the market trending downwards since mid-January 2023, KEEPR has managed to rally. Currently, the stock is mostly consolidating within PHP 1.45 to PHP 1.60, managing to stay above its key moving average prices (50-day, 100-day, and 200-day MA). We think that KEEPR can sustain its positive price trend if the stock breaks above PHP 1.60. Accumulating once KEEPR breaks above PHP 1.60 is advisable. Set cut loss below PHP 1.47. Take profit at around PHP 1.84/PHP 1.90.

Cebu Landmasters, Inc. (CLI) — BUY

CLI is now trading at near oversold levels, after dropping 5% following the recent dividend ex-date. It is worth noting that CLI usually bounces once trading at or near oversold levels. That said, aggressive short-term traders/bargain hunters can take advantage of the stock trading at oversold levels to ride the probable bounce.

CLI declared a regular and special cash dividend of PHP 0.15 and PHP 0.03 per share on March 20, 2023, with ex-date (ex-dividend date) last April 13, 2023, record date of April 18, 2023, and payment date set on April 28, 2023.

CLI reported core net income of PHP 3.17 billion (+32% y-o-y), driven by double-digit growth across its business segments. Consolidated revenues increased by 40% y-o-y to PHP 15.7 billion from PHP 11.2 billion in 2021. As for management guidance, CLI is set to expand further in 2023, banking on the positive economic growth and high demand for properties in the VisMin region.

The company has a pipeline of projects worth PHP 29.75 billion that are expected to boost reservation sales this year. Accumulating CLI at current levels is advisable. Set stop limit orders below PHP 2.26. Take profit at around PHP 2.80/PHP 2.85.

GMA Network, Inc. (GMA7) — BUY

GMA7 is now trading at oversold levels and due for a probable bounce. GMA7’s share price dropped 6% on the recent PHP 1.10 cash dividends per share announcement date (April 18, 2023) since it was lower than the PHP 1.45 dividends per share declared last year.

Aggressive short-term traders/bargain hunters may take advantage of the stock trading at oversold levels to ride the probable bounce. As for fundamentals, the company is well positioned to post stable earnings as it captures more ad placements for television and radio with GMA7 leading in the free-to-air space. Accumulating GMA7 at current levels is advisable. Set stop limit orders 8% below average cost. Take profit at least 16% above average cost.

PSEi TECHNICAL ANALYSIS

Resistance: 6,600 / 6,800

Support: 6,400

The PSEi rebounded last week despite value turnover averaging only at PHP 3.8 billion. On a positive note, the PSEi managed to break back above the 200-day MA. Nevertheless, we believe that only once the PSEi breaks above 6,740/6,800 will there be a reversal of the market’s short-term downtrend.

TRADING PLAN

Gradually accumulate once the PSEi trades back above 6,800.

KEY DATA RELEASES

Monday, April 24, 2023
– Corporate Earnings: Manila Electric Co. (MER)

Thursday, April 27, 2023
– US Initial Jobless Claims as of April 22, 2023
– US GDP annualized quarter-on-quarter for the 1st quarter of 2023 (consensus estimate: 2.0%; actual for 4th quarter of 2022: 2.6%)
– US Core Personal Consumption Expenditures (PCE) q-o-q for 1st quarter of 2023 (actual for 4th quarter of 2022: 4.4%).

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) slipped by 0.10% week-on-week and ended the week at 6,481.91 (-6.60 points). The market started on a bearish note amid holiday-thinned volumes, weighed down by lower Asian markets and cautious sentiment from global markets ahead of the US inflation for March 2023.

The market managed to bounce back at the latter part of the week, following improved sentiment from markets abroad, as investors speculated that interest rates have peaked after US jobless claims came in higher than expected, while inflation (actual: 5.0% year-on-year; consensus estimate: 5.2% y-o-y) and producer price index (actual: 2.7% y-o-y; consensus estimate: 3.0% y-o-y) were lower than expected.

Top index performers were BDO Unibank (BDO) (+6.3%), San Miguel Corporation (SMC) (+3.1%), and Metro Pacific Investments Inc. (MPI) (+2.7%), while index laggards were JG Summit (JGS) (-5.3%), DMCI Holdings Inc. (DMC) (-5.1%), and Ayala Land Inc. (ALI) (-4.3%). The index breadth was negative with 12 gainers versus 18 losers. The average daily turnover value was PHP 4.7 billion. Foreigners were net buyers by PHP 973.5 million.

WHAT TO EXPECT THIS WEEK

We expect the market to trade sideways with an upward bias as the index managed to find a support at the 6,400 level last week. The market sentiment may also be lifted by the optimistic consumer sentiment for the next 12 months as the consumer confidence index (CI) marginally increased to 22.7% in the 1st quarter of 2023 from 21.7 percent in the 4th quarter of 2022.

The year-ahead positive outlook of consumers was supported by their expectations of more available jobs, stable prices of goods, higher income, additional sources of income, and effective implementation of government policies and programs to ease inflation on basic commodities and to help low-income households cope with higher prices of goods.

Additionally, a report by the Board of Investments (BoI) showed a 155% increase in approved investments for the 1st quarter to PHP 463.3 billion, with 68 approved projects, primarily in the renewable energy sector. Internationally, investors will be on the lookout as US earnings season will be in full swing next week, as results may affect global market sentiment.

STOCK CALLS FOR THE WEEK

Robinsons Land Corp. (RLC) — BUY ON BREAKOUT

The outlook for RLC’s main business segments remains positive. We expect operational conditions should continue to improve amid further reopening and backed by full reinstatement of mall rental rates beginning the 2nd half of 2022, supported by the faster-than-expected recovery of tenant sales now hitting above pre-pandemic levels.

As for the office segment, RLC’s steady office leasing segment remains to be supported by its quality tenants (mostly BPOs) with high occupancy rates at 92% as of end September 2022.
Furthermore, Bridgetowne is an underappreciated source of value for RLC. With 19 hectares of land bank valued at PHP 66.8 billion (more than half of RLC’s current market cap) yet to be developed, we see that Bridgetowne can provide RLC with a visible earnings runway over the next decade. Accumulating once RLC breaks above PHP 15.00 is advisable. Set stop limit orders below PHP 14.00 and take profits at around PHP 16.80/PHP 17.50, and PHP 25 for long-term investors.

Apex Mining Co., Inc. (APX) — BUY ON PULLBACKS

APX’s positive performance this year tracked the price of gold, which has rallied by as much as 11% year-to-date. Gold has outperformed this year due to risk aversion on concerns over the global recession.

Note that for the past three years (full year 2020-FY2022), revenues from gold have accounted for 94.4% of APX’s total topline. As for price action, APX is now trading at PHP 2.65, the highest since February 2017. However, the stock is currently trading at extremely overbought levels, with the Relative Strength Index (RSI), a measure of momentum in price action, at 76.

It is optimal to wait for the pullback before accumulating. Meanwhile, those who bought from our buying level can take some profits. Assuming the stock continues to rally, the next level where profit-taking can occur is around the 1.618 level at PHP 3.43. Those planning to enter for the first time can accumulate once APX pulls back to PHP 2.30/PHP 2.25. Set stop limit orders below PHP 2.11 and take profits at around PHP 2.65/PHP 2.80.

SP New Energy Corp. (SPNEC) — BUY ON PULLBACKS

Since March 2023, SP New Energy Corp.’s (SPNEC) share price has rallied by as much as 18.5% after Metro Pacific Investments Corp. (MPI) announced that it has entered into a definitive agreement to invest PHP 2 billion to acquire 1.6 billion common shares of SPNEC from its parent Solar Philippines Power Project Holdings, Inc. (SPPPHI).

In our previous report on SPNEC entitled “On its way back to the PHP 1.80 level”, we mentioned that the stock formed a megaphone bottom pattern, a long-term bullish pattern. The measured price target after SPNEC broke out of its megaphone bottom pattern is PHP 1.81– PHP 1.89, according to Technical Insight, our automated chart pattern recognition program.

Those who bought it since our previous report can continue to hold the stock. Those looking to enter can accumulate once SPNEC pulls back to PHP 1.65. Set stop limit orders below PHP 1.55 and take profits at around PHP 1.85-PHP 1.90.

PSEi TECHNICAL ANALYSIS

Resistance: 6,600 / 6,800

Support: 6,400

The market continued to trade in a tight range last week, with the PSEi still below the 200-day moving average (MA). On a positive note, the 6,400 level proved to be a new support as the market managed to bounce from the said level.

Nevertheless, we think that once the PSEi breaks above 6,740/6,800, there will be a reversal of the market’s short-term downtrend.

TRADING PLAN

Gradually accumulate once the PSEi trades back above 6,800.

KEY DATA RELEASES

Monday, April 17, 2023
– Overseas Cash Remittances y-o-y for March 2023 (consensus estimate: 3.9% y-o-y; February 2023: 3.5% y-o-y)

Tuesday, April 18, 2023
– US Housing Starts for March 2023 (consensus estimate: 1,400k; previous: 1,450k)

Wednesday, April 19, 2023
– Overall Balance of Payments (BOP) Position and final GIR and NIR of the BSP for March 2023 (February 2023: USD 895 million);

Thursday, April 20, 2023
– US Initial Jobless Claims as of April 15, 2023 (consensus estimate: 238k; previous: 239k)

Friday, April 21, 2023
– US Preliminary S&P Global Manufacturing Purchasing Managers’ Index (PMI) (consensus estimate: 49.2)

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) had a three-day shortened trading week, closing lower by 0.17% week-on-week at 6,488.51 (-11.17 points). The market started the week in the green, tracking the increase in global markets as investors were optimistic over the US Fed’s rate decision following a slower-than-expected Personal Consumption Expenditures (PCE) index.

On the local front, investors positioned to reduce risk ahead of the Philippine CPI report and spike in oil prices, dragging the index. Meanwhile, losses were capped as the market cheered inflation slowing to 7.6% (consensus estimate: 8.0%; February 2023: 8.6%). Trade volume was thin ahead of the five-day-long weekend in observance of the Holy Week and the Day of Valor.

Top index performers were Aboitiz Equity Ventures (AEV) (+6.6%), JG Summit (JGS) (+5.9%), and Puregold (PGOLD) (+5.1%), while index laggards were PLDT (TEL) (-9.8%), Semirara Mining and Power Corp. (SCC) (-9.4%), and Monde Nissin (MONDE) (-6.0%).

The index breadth was negative with 11 gainers versus 18 losers. The average daily turnover value was PHP 3.6 billion. Foreigners were net sellers by PHP 262.9 million.

WHAT TO EXPECT THIS WEEK

We expect a volatile market with an upward bias as all eyes are on the following: (i) major earnings and data releases; (ii) the upcoming US Consumer Price Index (CPI) report on Tuesday, April 12, 2023 – which is projected to come in lower at 5.2%; and (iii) the cooler US change in nonfarm payrolls (consensus estimate: 240k; March 2023: 236k) data, which is considered one of the key factors in determining the US Fed’s next course of action.

Meanwhile, local fuel prices are also expected to increase by about PHP 1.50 to PHP 1.90 per liter of diesel, PHP 2.40 to PHP 2.80 per liter of gasoline, and PHP 1.75 to PHP 2.05 per liter of kerosene.

STOCK CALLS FOR THE WEEK

Security Bank Corp. (SECB) — BUY ON BREAKOUT

We believe SECB is on track to deliver 19.2% earnings compound annual growth rate (CAGR) in the next two years, allowing the bank to deliver Return On Equity at a multiyear high of 8.8% by next year. We also expect the impact of policy tightening to be more pronounced in the next 12-24 months, which will benefit SECB’s net interest margins, albeit tempered by slowing loan growth and competition.

We recommend to accumulate once price breaks above the PHP 95.00 to PHP 96.00 level. After which, set stop limit orders at PHP 87.40 and set profit levels at around PHP 109.25. For long-term investors, our target price for SECB is PHP 109.00.

San Miguel Food and Beverage, Inc. (FB) — BUY ON BREAKOUT

Year-to-date, San Miguel Food and Beverage, Inc.’s (FB) share price rose by as much as 41%, outperforming the PSE industrial sector, which rallied by only 2.4% in the same period. Our investment thesis on the counter remains intact: we like FB as a branded food & beverage (F&B) powerhouse – with its dominant market leadership across food, beer (>90% of market volume), and spirits (>40% of market volume) businesses.

FB is a major player in the Philippine consumption story. Accumulating FB once it breaks above PHP 55.00 is advisable. Set cut loss below PHP 52.00. Take profit at around PHP 61.00/PHP 63.00. For long-term investors, our target price for FB is PHP 70.00.

Philex Mining Corp. (PX) — BUY ON BREAKOUT

PX’s positive performance this year tracked the price of gold, which has rallied by 6.7% year-to-date (YTD). Gold has outperformed this year because of risk aversion on concerns over the global banking sector. For the past three years (fiscal years 2020 to 2022), revenues from gold have accounted for 51.3% of PX’s total topline.

PX also tracked the outperformance of copper, which surged by 6.6% YTD. Copper rallied amid the Chinese economic reopening and short-term supply issues brought about by the protests in Peru, which accounts for 10% of the world’s copper supply. Moving forward, copper prices are expected to be supported by the significant capital being invested in renewable energy.

As for price action, PX broke above the 200-day MA for the first time since April 2022. Now, PX is looking to break above its resistance level of PHP 3.30, which could propel the stock to retest PHP 3.60/PHP 4.20. Accumulating once PX breaks above PHP 3.30 is advisable. Set cut loss below PHP 3.03. Take profit at around PHP 3.80/PHP 4.20.

PSEi TECHNICAL ANALYSIS

Resistance: 6,600 / 6,800

Support: 6,400

The market traded in a tight range last week. However, the PSEi still closed below the 200-day MA. The market has to break back above the 200-day MA this week or else a further pullback is expected. A break above 6,740/6,800 will result in the reversal of the market’s short-term downtrend.

TRADING PLAN

Gradually accumulate once the PSEi trades back above 6,800.

KEY DATA RELEASES

Tuesday, April 11, 2023
– PH exports Year-on-Year for February 2023 (consensus estimate: -11.2%; January 2023: -13.5%)
– PH imports YoY for February 2023 (consensus estimate: -1.3%; January 2023: 3.9%)
– PH unemployment rate for February 2023 (January 2023: 4.8%)

Wednesday, April 12, 2023
– US CPI YoY for March 2023 (consensus estimate: 5.2%; March 2023: 6.0%);

Thursday, April 13, 2023
– Corporate Earnings: Emperador Inc. (EMI)
– Corporate Earnings: Alliance Global Group, Inc. (AGI)

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) ended 1.55% lower week-on-week to 6,499.68 (-102.49 points) on low volume for most of the week as investors looked for catalysts.

On Friday, it shed a hefty 145.07 points (-2.18% day-on-day) due to quarter-end rebalancing activities. Aboitiz Equity Ventures (AEV), JG Summit (JGS), and Ayala Land Inc. (ALI) closed near week-to-date lows. Monde Nissin’s (MONDE’s) share price also plummeted after announcing a core net income of PHP 6.6 billion (-19.6% y-o-y) – well below estimates – and a reported net loss of PHP 13.0 billion following the impairment of Marlow Food’s valuations. The company also disclosed that it would pursue an equity restructuring program to offset deficits.

Top index performers were Wilcon Depot Inc. (WLCON) (+9.9%), Semirara Mining and Power Corp. (SCC) (+6.9%), and PLDT (TEL) (+5.2%), while index laggards were Monde Nissin (MONDE) (-13.5%), JG Summit (JGS) (-8.7%), and Ayala Land Inc. (ALI) (-7.0%). The index breadth was positive with 15 gainers versus 14 losers. The average daily turnover value was PHP 4.3 billion. Foreigners were net buyers by PHP 2.3 billion.

WHAT TO EXPECT THIS WEEK

We expect the market to trade sideways with a slight upward bias on a shortened trading week amid the Holy Week holidays. Investors are anticipating a deceleration for the March 2023 inflation print at 8.0% (BSP’s forecast: 7.4% to 8.2%) compared to the prior month’s 8.6% y-o-y. This should guide the pace of policy rate decisions moving forward as BSP Governor Felipe Medalla earlier said that the central bank remains cautious and needs to see enough low month-on-month inflation.

STOCK CALLS FOR THE WEEK

MREIT, Inc. (MREIT) — BUY ON BREAKOUT

We see the REIT sector benefitting from a US Fed/BSP pivot or pause in the next six months, with MREIT among our preferred picks in the sector. We have a BUY call on the counter, with a target price of PHP 15.30, implying an attractive dividend yield of 7.1%/7.1% on our forecasted payout for 2023 and 2024.

However, we advocate patience in accumulating the stock at this time. We prefer to wait for better entry points – when the US Fed and BSP are close to a pause – to potentially lock in better yields and, at the same time, position to benefit from capital appreciation as interest rates peak and economic growth risks come to the fore.

Looking at the price action, MREIT is mostly trading between PHP 14.00 to PHP 15.00. With the stock coming from a short-term rally in December 2022, it is likely that the stock will resume its rally once MREIT breaks above PHP 15.00. Accumulating once MREIT breaks above PHP 15.00 is advisable. Set cut loss below PHP 13.85. Take profit at around PHP 17.30/PHP 18.00.

Puregold Price Club, Inc. (PGOLD) — BUY

PGOLD formed a head and shoulders bottom, an intermediate-term bullish pattern with a measure target price of PHP 35.2 to PHP 35.8 according to Technical Insight, our automated chart pattern recognition program.

The recent rebound in PGOLD’s share price can be attributed to the company posting a 13.5% y-o-y increase in 2022 net income to PHP 9.29 billion – ahead of consensus and our expectations – as the economy reopened and in-person activities normalized.

As for company guidance, we like PGOLD’s healthy balance sheet and strong free cash flow generation, and we believe the increased dividend payout is a step toward regaining investor confidence. Accumulating PGOLD at current levels is advisable. Set stop limit orders below PHP 30.30. Take profit at around PHP 37.80/PHP 38.00, PHP 40.00 for long-term investors.

Global Ferronickel Holdings, Inc. (FNI) — BUY ON BREAKOUT

FNI posted a net income of PHP 2.2 billion (+9% y-o-y) driven by the commercial operations of its Palawan mine and acquisition of 20% interest in Guangdong Century Tsingshan Nickel Industry Co. Ltd. (GCTN) in China.

However, revenues came in at PHP 6.7 billion (-13% y-o-y) driven by adverse

weather, ameliorated by the rise in medium-grade ore prices and favorable foreign exchange. As for company guidance, FNI expects to expand its nickel ore production by 20% amid the addition of its Palawan mine with an annual capacity of 1.5 million wet metric tons (WMT), complementing its Surigao mine with an existing annual capacity of 7.5 million WMT.

For the stock’s price action, we think that FNI must break above PHP 2.70 for a rebound to be sustained. Accumulating once FNI breaks above PHP 2.70 is advisable. Set cut loss below PHP 2.48. Take profit at around PHP 3.10/PHP 3.20.

PSEi TECHNICAL ANALYSIS

Resistance: 6,600 / 6,800

Support: 6,400

The market has mostly traded within 6,400-6,600 for the past two weeks, validating the two levels as its current support and resistance, respectively. The market must stay above the 200-day moving average (MA), or 6,492, or else the PSEi will likely further correct. A break above 6,740/6,800 will result in the reversal of the market’s short-term downtrend.

TRADING PLAN

Gradually accumulate once the PSEi trades back above 6,800.

KEY DATA RELEASES

Monday, April 3, 2023
– PH S&P Global Manufacturing Purchasing Managers’ Index (PMI) for March 2023 (February 2023: 52.7)
– US S&P Global Manufacturing Purchasing Managers’ Index (PMI) for March 2023 (preliminary: 49.3)

Wednesday, April 5, 2023
– PH Consumer Price Index (CPI) Year-on-Year for March 2023 (consensus estimate: 8.0%; February 2023: 8.6%)

Thursday, April 6, 2023
– US Initial Jobless Claims as of Aril 1, 2023 (prior: 198k)

Friday, April 7, 2023
– US change in nonfarm payrolls for March 2023 (consensus estimate: 240k; February 2023: 311k)
– US unemployment rate for March 2023 (consensus estimate: 3.6%; February 2023: 3.6%)