Download to read offline
![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
Appendix 1
Important Disclosures
*Other information available upon request
Disclosure Checklist
Company Ticker Price Disclosure
1. Within the past year, Deutsche Bank and/or its affiliate(s) has managed or co-managed a public or private offering for this company, for which it
received fees.
2. Deutsche Bank and/or its affiliate(s) makes a market in equity securities issued by this company.
3. Deutsche Bank and/or its affiliate(s) acts as a corporate broker or sponsor to this company.
4. The research analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest in the
securities, or derivatives thereof, issued by this company or sovereign. Please contact us if you are interested in further information.
5. The research analyst (s) or an individual who assisted in the preparation of this report (or a member of his/her household) is [an officer, director or
advisory board member] of this company.
6. Deutsche Bank and/or its affiliate(s) owns one percent or more of a class of common equity securities of this company calculated under computational
methods required by US law.
7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services
within the past year.
8. Deutsche Bank and/or its affiliate(s) expects to receive, or intends to seek, compensation for investment banking services from this company in the next
three months.
9. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under
computational methods required by India law.
10. Deutsche Bank and/or its affiliate(s) holds more than five per cent of the share capital of the company whose securities are subject of the research,
calculated under computational methods required by EU MAR.
11. Please see special disclosure text.
12. Deutsche Bank and/or its affiliate(s) owns more than half a percent long or short of the total issued share capital of the issuer, calculated in accordance
with the EU Short Selling Regulation (SSR).
14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year.
15. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received non-investment banking securities-
related services.
16. A draft of this report was previously shown to the issuer (for fact checking purposes) and changes were made to the report before publication.
Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters,
Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures
pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently
published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr.
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](https://image.slidesharecdn.com/201911dbphilsstrategy-fmapyearend-230308180110-0b24793c/85/201911-DB-Phils-Strategy-FMAP-yearend-ppt-44-320.jpg)
201911 DB Phils Strategy - FMAP yearend.ppt
- 1. Philippine Strategy November 2019 DeutscheBank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment 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
- 2. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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
- 3. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 4. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 – Outperforming, by virtue of standing still Looks like we’re underperforming… 3 Source: Bloomberg Finance LP • as of 20 Nov 2019 Safe haven from trade war?
- 5. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Source: Bloomberg Finance LP 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%
- 6. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Source: Bloomberg Finance LP 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%
- 7. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Source: Bloomberg Finance LP 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%
- 8. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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?
- 9. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 10. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 11. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 12. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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%
- 13. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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%
- 14. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 15. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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)
- 16. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 17. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 18. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Source: Philippine Statistics Authority 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)
- 19. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 20. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Source: Bangko Sentral ng Pilipinas 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
- 21. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 22. Identifier Deutsche Bank November 2019 RafaelGarchitorena | rafael.garchitorena@db.com | +632 8894 6644 Gio dela Rosa, CFA | giovanni.dela-rosa@db.com | +632 8894 6642 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
- 23. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 24. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Source: Philippine Stock Exchange, Deutsche Bank 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
- 25. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 26. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 27. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Source: Philippine Stock Exchange, Deutsche Bank 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
- 28. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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%
- 29. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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.
- 30. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 31. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 32. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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)
- 33. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Source: company data, Deutsche Bank estimates 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?
- 34. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 35. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 36. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Source: company data, Deutsche Bank estimates 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
- 37. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Source: company data, Deutsche Bank estimates 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?
- 38. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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) Source: Bangko Sentral ng Pilipinas …as inflation slows from the peak -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% CPI Inflation Food inflation Source: Philippine Statistics Authority Positive for top line growth and margins across sector, but watch out for near term headwinds (competition, price shocks)
- 39. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 40. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 41. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Source: company data, Deutsche Bank estimates 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
- 42. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Source: company data, Deutsche Bank estimates 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
- 43. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 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
- 44. Identifier Deutsche Bank November 2019 RafaelGarchitorena | 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 Appendix 1 Important Disclosures *Other information available upon request Disclosure Checklist Company Ticker Price Disclosure 1. Within the past year, Deutsche Bank and/or its affiliate(s) has managed or co-managed a public or private offering for this company, for which it received fees. 2. Deutsche Bank and/or its affiliate(s) makes a market in equity securities issued by this company. 3. Deutsche Bank and/or its affiliate(s) acts as a corporate broker or sponsor to this company. 4. The research analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest in the securities, or derivatives thereof, issued by this company or sovereign. Please contact us if you are interested in further information. 5. The research analyst (s) or an individual who assisted in the preparation of this report (or a member of his/her household) is [an officer, director or advisory board member] of this company. 6. Deutsche Bank and/or its affiliate(s) owns one percent or more of a class of common equity securities of this company calculated under computational methods required by US law. 7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services within the past year. 8. Deutsche Bank and/or its affiliate(s) expects to receive, or intends to seek, compensation for investment banking services from this company in the next three months. 9. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by India law. 10. Deutsche Bank and/or its affiliate(s) holds more than five per cent of the share capital of the company whose securities are subject of the research, calculated under computational methods required by EU MAR. 11. Please see special disclosure text. 12. Deutsche Bank and/or its affiliate(s) owns more than half a percent long or short of the total issued share capital of the issuer, calculated in accordance with the EU Short Selling Regulation (SSR). 14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year. 15. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received non-investment banking securities- related services. 16. A draft of this report was previously shown to the issuer (for fact checking purposes) and changes were made to the report before publication. Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr. 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
- 45. Identifier Deutsche Bank November 2019 RafaelGarchitorena | rafael.garchitorena@db.com | +632 8894 6644 Gio dela Rosa, CFA | giovanni.dela-rosa@db.com | +632 8894 6642 44 Analyst Certification Content of Analyst Certification
- 46. Identifier Deutsche Bank November 2019 RafaelGarchitorena | rafael.garchitorena@db.com | +632 8894 6644 Gio dela Rosa, CFA | giovanni.dela-rosa@db.com | +632 8894 6642 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
- 47. Identifier Deutsche Bank November 2019 RafaelGarchitorena | rafael.garchitorena@db.com | +632 8894 6644 Gio dela Rosa, CFA | giovanni.dela-rosa@db.com | +632 8894 6642 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. 3. Country-Specific Disclosures Australia & New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively. Brazil: The views expressed above accurately reflect personal views of the authors about the subject company(ies) and its(their) securities, including in relation to Deutsche Bank. The compensation of the equity research analyst(s) is indirectly affected by revenues deriving from the business and financial transactions of Deutsche Bank. In cases where at least one Brazil based analyst (identified by a phone number starting with +55 country code) has taken part in the preparation of this research report, the Brazil based analyst whose name appears first assumes primary responsibility for its content from a Brazilian regulatory perspective and for its compliance with CVM Instruction # 483. EU countries: Disclosures relating to our obligations under MiFiD can be found at http://www.globalmarkets.db.com/riskdisclosures. Japan: Disclosures under the Financial Instruments and Exchange Law: Company name - Deutsche Securities Inc. Registration number - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, Type II Financial Instruments Firms Association, The Financial Futures Association of Japan, Japan Securities Investment Advisers Association. Commissions and risks involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless “Japan” is specifically designated in the name of the entity. Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no. 00032) is regulated by the Qatar Financial Centre Regulatory Authority. Deutsche Bank AG - QFC Branch may only undertake the financial services activities that fall within the scope of its existing QFCRA license. Principal place of business in the QFC: Qatar Financial Centre, Tower, West Bay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Business Customers, as defined by the Qatar Financial Centre Regulatory Authority. Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation. Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company, (registered no. 07073-37) is regulated by the Capital Market Authority. Deutsche Securities Saudi Arabia may only undertake the financial services activities that fall within the scope of its existing CMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al Olaya District, P.O. Box 301809, Faisaliah Tower - 17th Floor, 11372 Riyadh, Saudi Arabia. United Arab Emirates: Deutsche Bank AG in the Dubai International Financial Centre (registered no. 00045) is regulated by the Dubai Financial Services Authority. Deutsche Bank AG - DIFC Branch may only undertake the financial services activities that fall within the scope of its existing DFSA license. Principal place of business in the DIFC: Dubai International Financial Centre, The Gate Village, Building 5, PO Box 504902, Dubai, U.A.E. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Professional Clients, as defined by the Dubai Financial Services Authority. 46
- 48. Identifier Deutsche Bank November 2019 RafaelGarchitorena | rafael.garchitorena@db.com | +632 8894 6644 Gio dela Rosa, CFA | giovanni.dela-rosa@db.com | +632 8894 6642 Global Disclaimer The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Deutsche Bank makes no representation as to the accuracy or completeness of such information. Deutsche Bank may engage in securities transactions, on a proprietary basis or otherwise, in a manner inconsistent with the view taken in this research report. In addition, others within Deutsche Bank, including strategists and sales staff, may take a view that is inconsistent with that taken in this research report. Opinions, estimates and projections in this report constitute the current judgement of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Prices and availability of financial instruments are subject to change without notice. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. Target prices are inherently imprecise and a product of the analyst judgement. In August 2009, Deutsche Bank instituted a new policy whereby analysts may choose not to set or maintain a target price of certain issuers under coverage with a Hold rating. In particular, this will typically occur for "Hold" rated stocks having a market cap smaller than most other companies in its sector or region. We believe that such policy will allow us to make best use of our resources. Please visit our website at http://gm.db.com to determine the target price of any stock. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Stock transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is not necessarily indicative of future results. Deutsche Bank may with respect to securities covered by this report, sell to or buy from customers on a principal basis, and consider this report in deciding to trade on a proprietary basis. Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor's home jurisdiction. In the U.S. this report is approved and/or distributed by Deutsche Bank Securities Inc., a member of the NYSE, the NASD, NFA and SIPC. In Germany this report is approved and/or communicated by Deutsche Bank AG Frankfurt authorized by the BaFin. In the United Kingdom this report is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange and regulated by the Financial Conduct Authority for the conduct of investment business in the UK and authorized by the BaFin. This report is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. This report is distributed in Singapore by Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch (One Raffles Quay #18-00 South Tower Singapore 048583, +65 6423 8001), and recipients in Singapore of this report are to contact Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch in respect of any matters arising from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and regulations), Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch accepts legal responsibility to such person for the contents of this report. In Japan this report is approved and/or distributed by Deutsche Securities Inc. The information contained in this report does not constitute the provision of investment advice. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register Number in South Africa: 1998/003298/10). Additional information relative to securities, other financial products or issuers discussed in this report is available upon request. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche Bank's prior written consent. Please cite source when quoting. Copyright © 2014 Deutsche Bank AG 47
Editor's Notes
- #2 Good morning everyone, and thank you for having me for your mid-year briefing. I was actually thinking to myself – why does AC want to hear from me, a low-life stockbroker? I guess everyone else you guys called are still on summer holday! Before I begin, I’d like to make a few qualifications (disclaimers kaagad). My audience typically are foreign and local institutional fund managers, who typically have a 1-year, 3-month, or even shorter time horizon. I think the Ayala Group has a liiiiitle bit longer view on things. I’ve made some adjustments to my usual spiel. But it just means kailangan ko ng panibagong pambobola. Within the broking community though, Deutsche Regis has – or we like to think we have – taken a much broader view of the markets and stocks we cover. We have Anton Periquet to thank for that! Anyway, without further ado…
- #3 But first, since I’m a career stockbroker, I’d need to spend some time talking about the market. It also helps to ease my jitters, since I can’t be wrong talking about the past. After a long bull run – where the market returned some 20% pa fro 2012 to 2015 – the index has had a bit of a roller coaster ride. After two soft years, the PSEi has roared back and is now flirting with its all-time high.
- #4 As we’ve shown earlier, the index has come roaring back, up 17%ytd, and among the Top 3 markets in the region. But let me throw some cold water on y’all for a moment. Because of the Peso’s weakness, the PSEi is actually under-performing the region in USD terms, and is in the bottom half of the pack so far this year.
- #5 But first, since I’m a career stockbroker, I’d need to spend some time talking about the market. It also helps to ease my jitters, since I can’t be wrong talking about the past. After a long bull run – where the market returned some 20% pa fro 2012 to 2015 – the index has had a bit of a roller coaster ride. After two soft years, the PSEi has roared back and is now flirting with its all-time high.
- #6 As we’ve shown earlier, the index has come roaring back, up 17%ytd, and among the Top 3 markets in the region. But let me throw some cold water on y’all for a moment. Because of the Peso’s weakness, the PSEi is actually under-performing the region in USD terms, and is in the bottom half of the pack so far this year.
- #7 As we’ve shown earlier, the index has come roaring back, up 17%ytd, and among the Top 3 markets in the region. But let me throw some cold water on y’all for a moment. Because of the Peso’s weakness, the PSEi is actually under-performing the region in USD terms, and is in the bottom half of the pack so far this year.
- #8 As we’ve shown earlier, the index has come roaring back, up 17%ytd, and among the Top 3 markets in the region. But let me throw some cold water on y’all for a moment. Because of the Peso’s weakness, the PSEi is actually under-performing the region in USD terms, and is in the bottom half of the pack so far this year.
- #9 Longest run of re-rating in at least 20 years.
- #10 This clearly has implication on imported inflation. While the CPI numbers don’t yet show it, the 1H17 results of the F&B companies (URC, Century, Jollibee, etc) are definitely showing the pinch in margins. They’re taking their time passing on the raw material costs to the consumer. It might just be a matter of time before it shows up in the CPI data.
- #11 This clearly has implication on imported inflation. While the CPI numbers don’t yet show it, the 1H17 results of the F&B companies (URC, Century, Jollibee, etc) are definitely showing the pinch in margins. They’re taking their time passing on the raw material costs to the consumer. It might just be a matter of time before it shows up in the CPI data.
- #12 This clearly has implication on imported inflation. While the CPI numbers don’t yet show it, the 1H17 results of the F&B companies (URC, Century, Jollibee, etc) are definitely showing the pinch in margins. They’re taking their time passing on the raw material costs to the consumer. It might just be a matter of time before it shows up in the CPI data.
- #13 This clearly has implication on imported inflation. While the CPI numbers don’t yet show it, the 1H17 results of the F&B companies (URC, Century, Jollibee, etc) are definitely showing the pinch in margins. They’re taking their time passing on the raw material costs to the consumer. It might just be a matter of time before it shows up in the CPI data.
- #14 First, the good news. The Philippines will likely continue to be among the fastest growing economies in Asia. In fact, our 6.2% growth forecast for 2017 already looks to be on the conservative side.
- #15 The GDP data is consistent with industry trends. We like to follow high-frequency data such as car, electricity and cement sales, to back-check consumption, investment and infrastructure trends. True enough, growth is slowing due to the high 2016 base. Loan growth has surprisingly stayed strong.
- #16 First, the good news. The Philippines will likely continue to be among the fastest growing economies in Asia. In fact, our 6.2% growth forecast for 2017 already looks to be on the conservative side.
- #17 First, the good news. The Philippines will likely continue to be among the fastest growing economies in Asia. In fact, our 6.2% growth forecast for 2017 already looks to be on the conservative side.
- #18 .
- #19 .
- #20 As a result, we expect the Current Account to slip into a full-year deficit in 2017 (or at least officially). If we’re right, then we will have twin-deficit (CA and fiscal) for the first time in 15 years. We cannot stress enough how important the CA surplus was – obviously for the Peso’s strength – but more broadly to the resilience of the economy from external shocks.
- #21 This idea was supported by the BSP’s FX reserves data. The period from 2002 to 2012 showed a massive build-up in the GIR, which was consistent with CA/BOP surpluses. But the GIR stopped growing, and even contracted in 2013 and 2014, despite the BSP’s reporting CA and BOP surpluses. That said, the GIR is extremely healthy. At $81bn it is larger than our FX debt, for the combined public and private sectors. It also represents a solid 9 months of imports. However, with the growth in imports, that cover figure has steadily come down from a peak of nearly 12 months in 2012/13.
- #22 This clearly has implication on imported inflation. While the CPI numbers don’t yet show it, the 1H17 results of the F&B companies (URC, Century, Jollibee, etc) are definitely showing the pinch in margins. They’re taking their time passing on the raw material costs to the consumer. It might just be a matter of time before it shows up in the CPI data.
- #23 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #24 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #25 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #26 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #27 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #28 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #29 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #30 Longest run of re-rating in at least 20 years.
- #31 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #32 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #33 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #34 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #35 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #36 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #37 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #38 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #39 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #40 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #41 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #42 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #43 We forecast high-teens earnings growth in 2015 and low-teens in 2016. Earnings HAVE to come through to justify the premium valuations.
- #44 Longest run of re-rating in at least 20 years.