201911 DB Phils Strategy - FMAP yearend.ppt

Philippine Strategy
November 2019
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decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI(P) 057/04/2016
FMAP 2019 Yearend briefing
Deutsche Bank
Rafael Garchitorena | (+63) 2 894 6644 | rafael.garchitorena@db.com
Gio dela Rosa, CFA | (+63) 2 894 6642 | giovanni.dela-rosa@db.com

Identifier
Deutsche Bank
November 2019
Rafael Garchitorena | rafael.garchitorena@db.com | +632 8894 6644
Gio dela Rosa, CFA | giovanni.dela-rosa@db.com | +632 8894 6642
08/03/2023 18:01:13 2010 DB Blue template
PSEi – 2019 recovers from a rough 2018
Up 6% ytd; up 16% from Nov’18 low
1
Recovering from a rough 2018; at -13%, the worst since 2008
Despite the rebound, still 12% off the Jan 2018 high
Source: Philippine Stock Exchange, Deutsche Bank
PSEi – weekly
• as of 20 Nov 2019
7,900
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
+42% +21% -48% +62% +37% +4% +33% +1%
8,127
Apr2015
+22% -4% -2%
9,058 high
Jan 2018
+25% -13% +5.9%
ytd

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Bloomberg Finance LP
2019: Range-bound
Between fears of 2018 déjà vu, and new bull-run hopes
2
Pulled back from bull market territory by POGO fears
PSEi – hopefully not déjà vu
• as of 20 Nov 2019
8,144
9,041
6,969
8,144
7,642 7,584
8,270
7,796
7,705
8,066
6000
6500
7000
7500
8000
8500
9000
9500 +11%
from
01Dec to
26Jan
-23% to year lows
+19% from
15 Nov to 1 Feb
2017 2018 2019 ytd
POGO
statement
by China
embassy
policy rate
and RRR
cuts begin

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
PSEi – Outperforming, by virtue of standing still
Looks like we’re underperforming…
3
• as of 20 Nov 2019
Safe haven from trade war?

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
PSEi – Outperforming, by virtue of standing still
… but actually in top half of regional peers
4
Main indexes 2019 ytd* –
in USD as of 10 Jan…
7.7%
4.4% 4.3%
2.9%
2.5% 2.4%
0.4%
-0.3%
-0.8%
-1.5%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Main indexes 2019 ytd* –
in USD as of 23 April
From top, to bottom, to the middle, and climbing up again
31.2%
15.8%
12.2%
9.8%
8.0% 7.1% 6.6% 5.9% 5.8%
-3.6%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Main indexes 2019 ytd*
in USD as of 20 Nov
19.8%
14.2%
9.6% 9.3%
7.3%
5.4%
4.2%
1.3%
-1.1%
-5.8%
-10%
-5%
0%
5%
10%
15%
20%

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
PHP – big rebound from bottom
2018 middle of the pack among major Asian currencies ytd
5
Bounced 4% from the lows of P54.35:$1, while TWD, KRW, CNY fall 1-2%
2017 yoy vs USD 2018 yoy vs USD
12.6%
10.9%
9.9%
8.3% 8.2%
6.7% 6.3%
-0.7% -0.7% -0.8%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
0.0% 0.1%
-2.0% -2.1%
-2.7%
-4.1%
-5.1%
-5.4%
-5.7%
-8.5%
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
PHP – safe haven?
Among best-performing currencies in the region
6
Export-dependent currencies hit hard
2019 ytd vs USD
6.7%
3.3%
2.1%
0.7%
0.1%
-0.1%
-0.7%
-2.2%
-2.9%
-4.6%
-6%
-4%
-2%
0%
2%
4%
6%
8%

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
2020 Outlook – staying tactically bullish
7
“Break in the clouds” thesis remains intact
• Monetary policy to stay accommodative
• 50bps more rate cuts
• More RRR cuts
• Fiscal / Infra spending accelerates
• 2019 budget delayed; kick starting in September (+60% yoy)
• President/Congress allow spending to carry into 2020…
• … on top of a larger 2020 budget
• PHP is a key risk
• Trade improved in 2019 on lower imports; exports still soft
• CAD to re-widen as Build Build Build re-starts
• What will happen to POGOs?

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Bangko Sentral ng Pilipinas, Bloomberg LP, Deutsche Bank
Monetary loosening cycle begins
Policy rate cut 75bps, RRR cut 400bps, more to come
8
DB expects 50bps cuts in 1H19 and more RRR cuts
But inflation to normalize, back to 2-4% BSP target range by 2Q2020
Inflation vs interest rates
4.72
3.00
4.75
4.00
6.7
0.8
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
Sep-20
Dec-20
10yr Treasury
BSP o/nite
DB F o/nite
Inflation
DB F inflation
8.3

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Deutsche Bank, Bangko Sentral ng Pilipinas
Why is M3 not expanding faster?
Despite aggressive RRR cuts
9
M3 growth still below nominal GDP growth
M3 growth, yoy
14.4%
7.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0% Sep-14
Dec-14
M
ar-15
Jun-15
Sep-15
Dec-15
M
ar-16
Jun-16
Sep-16
Dec-16
M
ar-17
Jun-17
Sep-17
Dec-17
M
ar-18
Jun-18
Sep-18
Dec-18
M
ar-19
Jun-19
Sep-19

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Deutsche Bank, Bangko Sentral ng Pilipinas
Why is M3 not expanding faster?
BSP mopping up liquidity as fast as it releases is
10
Preparing for Fiscal spending / borrowing?
Meanwhile – Free money for banks!
TDF outstanding balance (PHP bn)
0
50
100
150
200
250
300
Jan-18
Jan-18
Feb-18
M
ar-18
Apr-18
M
ay-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Jan-19
Feb-19
M
ar-19
Apr-19
M
ay-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
RRR cuts
RRR cut

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Deutsche Bank, company data
Banks benefiting most from RRR cuts
Paying down expensive TDs
11
But loan growth stubbornly low, still sub-10%
1.86%
2.22%
1.68%
1.90%
1.35%
1.22%
0.50%
0.75%
1.00%
1.25%
1.50%
1.75%
2.00%
2.25%
2.50%
2.75%
3.00%
Deposit cost
EW
RCB
SECB
PNB
BPI *
MBT
BDO
2.22%

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Deutsche Bank
GDP growth bouncing back in 3Q19
1H19 was the weakest in 4 years
12
“Domestic demand” dragged by budget delays
Already seeing recovery in 3Q
GDP growth, real
By Expenditure 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 % of GDP
Personal cons 6.2% 5.6% 6.0% 5.3% 5.3% 6.1% 5.5% 5.9% 67%
Government cons 11.4% 13.6% 11.9% 14.3% 12.6% 7.4% 7.3% 9.6% 12%
Capital Formation 9.1% 10.3% 20.0% 19.6% 4.9% 8.0% -8.5% -2.1% 30%
"Domestic demand" 7.4% 7.7% 10.1% 10.0% 6.4% 7.7% 2.1% 4.3% 108%
Exports 20.8% 10.3% 14.7% 14.2% 14.4% 5.7% 4.8% 0.2% 67%
Imports 18.3% 11.3% 21.0% 19.1% 12.4% 8.6% -0.1% 0.0% 76%
Net exports 9.3% 16.4% 108.5% 79.8% 4.6% 22.6% -37.2% -1.5% -8%
GDP, as reported 6.6% 6.5% 6.2% 6.0% 6.3% 5.6% 5.5% 6.2% 100%

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: BSP, CAMPI/TMA/AVID, CEMAP, Meralco, *Deutsche Bank estimates for cement demand from 1Q17
Indicators slow in 2H18/1H19; set to rebound in 2020?
13
Car sales (in units, %YoY) Electricity (in kWh, %YoY)
Loan growth (%YoY) Cement* (in MT, %YoY)
21.8%
10.1%
14.1%
24.7%
-7.6%
-16.3%
-15.5%
-20.7%
0.0%
3.9%
1.2%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
2.3%
3.1%
5.6%
6.3%
8.9%
4.5%
1.8%
6.5%
2.3%
8.0%8.2%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
19.7%
19.0%
21.0%
19.0%
18.3%
19.1%
17.4%
15.6%
12.9%
10.5%
10.5%
5.0%
7.5%
10.0%
12.5%
15.0%
17.5%
20.0%
22.5%
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
2% 2%
5%
12%
10%
12%
5%
7%
2%
-4%
-1%
-5.0%
0.0%
5.0%
10.0%
15.0%
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Government data, Deutsche Bank
Build, Build, Build gets a reboot
After delays to budget in 2019; September +60% yoy
14
2020 could even get double boost, as un-spent infra budget in 2019
can be spent into 2020
Gov’t infrastructure spend
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
0
20
40
60
80
100
120
Jan-18
M
ar-18
M
ay-18
Jul-18
Sep-18
Nov-18
Jan-19
M
ar-19
M
ay-19
Jul-19
Sep-19
Infra spend in Pbn (LHS) % YoY (RHS)

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Deutsche Bank
Phils GDP growth f’cast amongst the fastest in EM Asia
DB 2020F upped slightly to 6.1%
15
Double-barrel Fiscal + Monetary stimulus should provide
nice boost to economy (and markets?) for next 12 months
GDP growth, YoY (%)
6.7
6.2 5.9 6.1
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2017 2018 2019F 2020F
India China PHILIPPINES Indo Malaysia Thai Korea Taiwan Singapore HK

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Philippine Statistics Authority
Trade deficit (goods) improves, -9% in 9M19
Boosting PHP, lower GDP drag
16
Temporary reprieve from slow infra spend, lower oil prices (-10% yoy)
Trade balance (goods), in US$mn
-4,710-4,673-3,412
-12,099
-10,028
-5,713
-3,296
-12,240
-26,702-27,380
-41,440
-28,013
-50,000
-45,000
-40,000
-35,000
-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0
+51% yoy
-9%
yoy

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Trade deficit gets temporary reprieve
Imports slowing sharply (-11% Sept); exports remain weak
17
9M19 imports – Capital goods +3%, Fuels -7%, Consumer goods +5%
Exports of non-electronics -4% yoy
Import vs export growth (%yoy), goods only
0.5
4.8
8.7
18.3
14.2 13.4
-3.4
8.8
9.5
-5.3
-2.4
19.7
-1.8
0.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
2013 2014 2015 2016 2017 2018 9M2019
Imports (yoy) Exports (yoy)

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Bangko Sentral ng Pilipinas
Current Account Deficit widening
Twin deficits (fiscal + CA) are back
18
CA to improve slightly in 2019F on delayed budget / spending
But set to widen again in 2020F
Current Account balance as % of GDP
-3.5
-2.7
-2.3
-0.3
0.3
1.8 1.9
5.7
5.4
0.1
5.0
3.6
2.5
2.8
4.2
3.8
2.5
-0.4
-0.8
-2.4
-2.0
-3.2
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
FX reserves still high
GIR still exceeds total FX debt (public + private)
19
Import cover high(ish) at 7.5 mos, but much lower vs peak (11.9 in 1Q2013)
GIR jumped more than $11bn from Oct 2018 lows
Despite CAD… BSP explanations lacking
GIR down in Sept/Oct; import cover falling sharply
83.8
78.5
85.6
11.6
7.0
7.5
0
2
4
6
8
10
12
14
0
10
20
30
40
50
60
70
80
90
months
US$
bn
GIR (LHS) Import cover (RHS)
$85.6bn FX reserves
vs
$80.4bn external debt

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Deutsche Bank, Department of Finance
Fiscal discipline under “Build, build, build”?
2018 exceeded DOF targets at 3.0% of GDP
20
Social spending (free tuition, gov’t salaries + 14th month, PhilHealth, etc)
Proposed new taxes on cigarettes, alcohol to plug the gap?
Fiscal deficit as a % of GDP
-5.1
-4.4
-3.6
-2.6
-1.0
-0.2
-0.9
-3.7
-3.5
-2.0
-2.3
-1.4
-0.6
-0.9
-2.4
-2.2
-3.2 -3.1
-3.2
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
DB forecast
vs
DOF targets

Identifier
Deutsche Bank
November 2019
278 354
720
1,354
(1,135)
420
1,2241,329
2,548
687
1,266
(1,193)
85
480
(1,992)
137
(2,500)
(2,000)
(1,500)
(1,000)
(500)
0
500
1,000
1,500
2,000
2,500
3,000
08/03/2023 18:01:13 2010 DB Blue template
Source: Deutsche Bank, PSE
Foreigners headed for the exits for most of 2018
Record $2bn outflow, excluding consumer placements
21
Foreigners back as buyers in Oct
After c$500mn outflow in 2Q/3Q (in line with EM)
Net foreign buying/(selling) in $mn
* 2018 excluding FB deal and RRHI cross

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Deutsche Bank, PSE
EM flows turned positive in late October
Strong equity inflows; Record fixed income inflows
22
Philippines seeing some of the inflows, but countered by MSCI rebals

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Foreigner ownership still near record-lows
23
But ytd inflows mostly focused on large caps SM, ALI, BPI
Foreign ownership of PSE-listed stocks
25.1%
27.6% 27.7%
24.2%
25.8%
24.6%
23.3% 23.3%
21%
22%
23%
24%
25%
26%
27%
28%
29%
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
10M
19

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Fund fact sheets of individual funds, Deutsche Bank estimates
And what about LOCAL flows?
Close to fully invested
24
Locals held back for most of 1H, wary of repeat of 2018
As interest rates fell, local funds deployed back into equities

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Deutsche Bank – Asia Local Markets Weekly – Sell the fact?
Are we there yet?
What is “normal”
25
PSEi valuations have already de-rated, trading at or below
long-term (15-year ++) average
PSEi – 12-month forward PER PSEi – Trailing PER
5
10
15
20
25
30
-1 SD
avg
15x
+1 SD
9
11
13
15
17
19
21
23
25
-1 SD
avg=16.5x
+1 SD

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Not all PERs are created equal
Will value investing ever make a comeback?
26
Lots of stocks are sub-10x PE, some even at sub 5x PE
Value plays or value traps?
31.3
17.7
10.5
4.8
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
W
LCON
FB
URC
SM
PH
SM
JFC
RRHI
ALI
JGS*
EM
P
ICT
PIZZA
M
AXS
M
W
IDE
DNL
M
ER
CNPF
BDO
CHP
PGOLD
RLC
BLOOM
AEV*
BPI
GTCAP
SECB
AC
AP
GLO
M
PI
M
BT
TEL
SCC
M
EG
VLL
SHLPH
COSCO
FGEN
AGI
LTG
M
W
C
DM
C
BEL
FLI
CEB
2020F PER - Regis Coverage
* Bloomberg Finance LP consensus
PSEi stock
Non-PSEi stock

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Philippine Stock Exchange, company data, Deutsche Bank estimates
And what about earnings?
Earnings finally break double-digit growth in 2019
27
Banks surged 35% on trading gains. Consumers still feeling pinch from 2018
“Beats” from BDO, BLOOM, CEB; “Misses” from JFC, DNL, MWIDE
Acceleration in 2020 on falling rates, government spending?
PSEi earnings growth, yoy
* Excluding
AC/JGS
one-offs
Ex-banks:
9M19 +10%
3Q19 +8%
7%
8%
1%
3%
8%
10%
7%
5%
12%
0%
2%
4%
6%
8%
10%
12%
14%
2011 2012 2013 2014 2015 2016 2017 2018 2019F
9M19
+12%
3Q19
+15%

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Sector 9M19 review and 2020 outlook
Can earnings finally break double-digit growth in 2019?
28
Banks: 9M loan growth slows to +10.5%, NIMs up; Earnings driven by monster trading gains
Outlook: NIMs could stay high on RRR cuts. But watch out for competition, credit costs
Property: Robust resi and office demand, thanks to foreigners (China/POGO).
Outlook: Demand remains robust. REITs upside. POGOs key risk. Construction constraints?
Consumer/Retail: Consumers still hesitant in 3Q. Election spending very weak in 1H.
Outlook: Sentiment improving in 3/4Q. Easing inflation, gov’t spending +ve for demand.
Gaming: GGR +23% in 9M19. Solaire taking share; Okada / RWM ramp-up hurting CODM
Outlook: GGR to moderate (+12%) in 2020F, but competition could ease.
Telecom: Revenues surprising to the upside, +10% in 3Q. Competition easing… for now.
Outlook: Data usage growth likely to continue, boosting revenues. All eyes on 3rd player.
Power/Utils: Electricity demand remained strong across segments. NPAT hurt by outages, opex.
Outlook: Power supply shortage looms with little capacity adds post-2020.
Infra: Demand recovering qoq, from 2Q19 lows. Infra spend picking up in September
Outlook: Infra spending pick-up in 2020. Cement sector benefiting from tariffs.

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Bangko Sentral ng Pilipinas, company data, Deutsche Bank estimates
Banks – regulatory relief (1)
NIMs rising, as deposit costs plunge
29
Combination of rapid RRR cuts, and slow reduction in policy rates
Will competition re-intensify?
Banks’ quarterly NIMs
2.50%
2.70%
2.90%
3.10%
3.30%
3.50%
3.70%
3.90%
4.10%
4.30%
4.50%
BDO
MBT
BPI
SECB

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Bangko Sentral ng Pilipinas, company data, Deutsche Bank estimates
Banks – regulatory relief (2)
Minimum CET-1 reduced for largest D-SIBs from 11.0% to 10.5%
30
Gives banks (esp BDO) more breathing room
before requiring capital calls
Solo CET-1 ratios
11.65
12.59
9.00
10.00
11.00
12.00
13.00
14.00
15.00
16.00
17.00
18.00
2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
SECB
BPI
MBT
BDO
Min
CET-1

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: company data, Deutsche Bank estimates
Property – Demand remains robust
POGOs a key driver… and risk
31
New supply is scheduled to drop but demand remains at all time highs
Construction constraints a longer-term issue?
50,000
60,000
70,000
80,000
90,000
100,000
110,000
120,000
130,000
140,000
Developer reservation sales (PHPmn)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E2020E2021E
Metro Manila condo completions (units)

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Property – Demand remains robust
POGOs a key driver… and risk
32
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
Metro Manila office completions
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 9M19
Metro Manila net office take-up
New supply is scheduled to drop but demand remains at all time highs
Construction constraints a longer-term issue?

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Government data, Deutsche Bank estimates
Infrastructure – playing catch-up
From the delays in 2019
33
251 262 276
345
493
569
804
258
303
365
432
533
549
775 859
943
2.4%
2.3% 2.2%
2.6%
3.4%
3.6%
4.6%
4.5%
4.6%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
-
100
200
300
400
500
600
700
800
900
1,000
2012
2013
2014
2015
2016
2017
2018
2019E
2020E
Pbn Target infra cash disbursements (Pbn, LHS)
Actual infra cash disbursements (Pbn, LHS)
Infra spend-to-GDP (RHS)
9M19:
P546bn
Rapid acceleration in government spending
Carry-over from 2019 could be double-boost for 2020

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: Government data, Deutsche Bank estimates
Infrastructure – playing catch-up
From the delays in 2019
34
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
0
20
40
60
80
100
120 Jan-18
M
ar-18
M
ay-18
Jul-18
Sep-18
Nov-18
Jan-19
M
ar-19
M
ay-19
Jul-19
Sep-19
Infra spend in Pbn (LHS) % YoY (RHS)
Rapid acceleration in government spending
Carry-over from 2019 could be double-boost for 2020

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Telcos – making hay while the sun shines
… will the 3rd player cast shade?
35
Mobile data traffic is now just about
even between carriers
Yields on data have fallen sharply
but likely to stabilize

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
36
Industry revenues rising, at double-
digit pace in 3Q
PLDT’s market share is off its lows
Telcos – making hay while the sun shines
… will the 3rd player cast shade?

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Consumer / Retail
Sentiment recovering, slowly…
37
Consumer sentiment improves…
0%
5%
10%
15%
20%
25%
30%
35%
4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
Consumer expectations survey (12-month)
…as inflation slows from the peak
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
CPI Inflation
Food inflation
Positive for top line growth and margins across sector,
but watch out for near term headwinds (competition, price shocks)

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: DOE, company data, Deutsche Bank estimates
Power – pricing power to shift to gencos
Supply precarious, situation to worsen 2021 onwards
38
No new capacity after 2020

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Source: DOE, company data, Deutsche Bank estimates
Power – pricing power to shift to gencos
Supply precarious, situation to worsen 2021 onwards
39
Lower reserves = higher WESM prices

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Gaming – healthy growth in GGRs +23% in 3Q19
Boosted by strong VIP win rate
40
Solaire took share in 4Q; Okada / RWM ramp-up at expense of CODM
GGRs to remain in high teens in 4Q19; to moderate to c12% in 2020F

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Gaming – healthy growth in GGRs +23% in 3Q19
Boosted by strong VIP win rate
41
Solaire took share in 4Q; Okada / RWM ramp-up at expense of CODM
GGRs to remain in high teens in 4Q19; to moderate to c12% in 2020F

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
POGOs – by the numbers
42
• # of Chinese employees
• 140,000 gov’t estimate; 300,000 DB est (Metro Manila only); 500,000 high est
• As much as US$8.5bn in annual salaries (assuming $1,000-1,500/month)
• Office space
• 1mn sqm in Metro Manila (DB estimate); 9% of total MM office stock
• Current vacancy c5% in MM
• Another 150,000 - 200,000 sqm outside MM
• $200-300mn in annual rent
• Residential
• 20-30% of new condo sales were to Chinese nationals (not counting sales to
Filipinos, for rent to POGO employees)
• Assuming 4-6 per room, that’s probably 50,000-100,000 rooms
• $650mn in annual rent (Leechiu estimate)
As much as $10bn worth of (quantifiable) flows into the economy
including utilities, telecoms…
China concerns – Money laundering, worker conditions, gambling in China

Identifier
Deutsche Bank
November 2019
08/03/2023 18:01:13 2010 DB Blue template
Appendix 1
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Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters,
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Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the “Disclosures Lookup” and
“Legal” tabs. Investors are strongly encouraged to review this information before investing.
43

Identifier
Deutsche Bank
November 2019
Gio dela Rosa, CFA | giovanni.dela-rosa@db.com | +632 8894 6642 44
Analyst Certification
Content of Analyst Certification

Identifier
Deutsche Bank
November 2019
Buy: Based on a current 12-month view of total shareholder return
(TSR = percentage change in share price from current price to
projected target price plus projected dividend yield), we recommend
that investors buy the stock.
Sell: Based on a current 12-month view of total shareholder return,
we recommend that investors sell the stock.
Hold: We take a neutral view on the stock 12 months out and, based
on this time horizon, do not recommend either a Buy or Sell.
Newly issued research recommendations and target prices supersede
previously published research.
Equity Rating Key Equity Rating Dispersion and Banking
Relationships
45

Identifier
Deutsche Bank
November 2019
Regulatory Disclosures
1. Important Additional Conflict Disclosures
Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the “Disclosures Lookup” and “Legal” tabs.
Investors are strongly encouraged to review this information before investing.
2. Short-Term Trade Ideas
Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche
Bank’s existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.
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and for its compliance with CVM Instruction # 483.
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46

Identifier
Deutsche Bank
November 2019
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