麦格里集团菲律宾策略PhilippinesStrategyHowaweakerpesoimpacts

Pleaserefertopage2forimportantdisclosuresandanalystcertification,oronourwebsite(%)(x)(x)(%)(%)Banks20.013.81.512.01.5Consumer10.724.73.615.41.6Conglomerate12.618.32.213.41.4Property11.325.03.012.51.5Telecoms5.915.73.221.83.8Utilities3,214.92.518.13.8Philippines13.816.12.514.11.8Pricesasof12July2017.Source:Bloomberg,MacquarieResearch,July2017PhilippinetoppicksMktPricePTcapTSRCoRec(P)(P)US$bn(%)VolMBTO95.151036.09.5LBDOO124.20132.5010.78.3LPGOLDO45.90492.57.5L/MACO8761,07510.723.2LURCO162.601907.118.8LBPIO103.101218.019.0LGTCAPO1,2001,5804.633.6L/MALIO41.5544.0012.17.0L/MPricesasof12July2017.Source:Bloomberg,MacquarieResearch,July2017Toppicksvaluation2018E2018E2018E2018E2018EEPSgrPERP/BROEDivYldCo(%)(x)(x)(%)(%)MBT21.811.81.211.11.1BDO25.015.11.711.61.6PGOLD12.418.52.313.40.7AC15.315.72.113.80.5URC10.826.33.915.41.9BPI18.513.81.915.21.8GTCAP4.814.61.510.92.0ALI14.122.23.315.71.1Pricesasof12July2017.Source:Bloomberg,MacquarieResearch,July2017Analyst(s)[e-mail][e-mail],[e-mail]13July2017MacquarieCapitalSecurities(Philippines)Inc.PhilippinesStrategyHowaweakerpesoimpactsourtoppicksConclusionWehaveanOVERWEIGHTstanceonthePhilippines,notwithstandingtherecentweaknessinthepeso.Therevivalofthisnegativefactoronceagainsince1Q17compelsustohighlighthowitimpactsourbeststockideas.ImpactAyalaLand(ALIPM)–Higherdemandforresiandoffice.AweakerpesocanpotentiallyhaveapositiveeffectonALI,asOFWsandforeignerswillhavehigherpurchasingpoweroverresidential.Inaddition,thecompany’sofficesegmentwillalsobenefit,assettinguporexpandingBPOoperationsinthePhilippineswillbecheaper.Ontheotherhand,ALI’sdollar-denominateddebtisjustlessthan1%oftotalloans.UniversalRobina(URCPM)–Mitigantsinplace.OfURC’srawmaterials,60%isUSD-denominated.Basedonoursensitivities,weestimatea~4.5%dropinprofitforeveryP1.00depreciationvstheUSD,assumingURCdoesnotpassthison.URC,however,raisedprices2–3%inDecember2016and2.5–3.0%inFeb/Mar2017,whichshouldhelptempertheadverseimpactofaweakerPHP.WebelieveURChaspricingpower,especiallyincategoriesinwhichitdominates–itisnumberoneinsnacks,candies,chocolates,cupnoodlesandRTDtea.AweakerPHPalsostrengthensthepurchasingpowerofOFWmoney(akeydriverofdomesticconsumption),whichcouldenableconsumerstoabsorbsuchpricehikes.URCalsocontinuestopushitshigher-marginproducts(asittapstheaffordablepremiumsegment)andisrationalizingitsSKUs,whichshouldfreeupsomecosts.GTCapital(GTCAPPM)–Autobusiness’forexriskoverstated.WeestimatethatforeveryP1.00depreciationvstheUSdollar,EPSforGTCAPisreducedby2.1%,assumingpricesareunchanged.Wefindthistobeafairlymanageableimpact,consideringhowGTCAPhasseenitssharepriceweakeninthelastyearduringboutsofpesoweakness.GTCAP’sautounitshouldhaveabuilt-inadvantagetoadjustpricesgivenitsindustry-leadingmarketshareofc43%thatismorethandoubleitsclosestcompetitor.UpcomingquarterlyearningsforGTCAPshouldalsoexhibitthecompany’shighdiversification,whichwebelieveisfurtherproofofbeingundulypunishedwhenthepesoweakens.Puregold(PGOLDPM)–Uniquepositioninggivesitpricingpower.Around60%ofgoodssoldinthecompany’sS&Rsegment(~20%and~36%ofPGOLD’snetsalesandnetprofit,respectively)isimported,mostlyfromtheUS,exposingittoFXrisk.WeestimateaP1.00depreciationvstheUSDcouldleadtoa2.8%declineinearnings,assumingincrementalcostisnotpassedontotheconsumer.However,webelieveS&Rhastheflexibilitytoraisepricesgiven1)itsstrongbrandequity,2)ittargetstheless-pricesensitiveupperincomesegmentand3)anumberofitemssoldbyS&Raretypicallynotcarriedbyotherretailers.OurrecentS&RstorevisitshowsthatS&RhikedpricesforcertainSKUsinthepastyearwithoutreallydampeningvolume/traffic.OutlookWemaintainourtoppicksinthePhilippines,forwhichwehavebanksasthemostoverweightsector,especiallygivenitslackofdirectexposuretoaweakpeso.MacquarieResearchPhilippinesStrategy13July20172Importantdisclosures:RecommendationdefinitionsMacquarie-Australia/NewZealandOutperform–return3%inexcessofbenchmarkreturnNeutral–returnwithin3%ofbenchmarkreturnUnderperform–return3%belowbenchmarkreturnBenchmarkreturnisdeterminedbylongtermnominalGDPgrowthplus12monthforwardmarketdividendyieldMacquarie–Asia/EuropeOutperform–expectedreturn+10%Neutral–expectedreturnfrom-10%to+10%Underperform–expectedreturn-10%Macquarie–SouthAfricaOutperform–expectedreturn+10%Neutral–expectedreturnfrom-10%to+10%Underperform–expectedreturn-10%Macquarie-CanadaOutperform–return5%inexcessofbenchmarkreturnNeutral–returnwithin5%ofbenchmarkreturnUnderperform–return5%belowbenchmarkreturnMacquarie-USAOutperform(Buy)–return5%inexcessofRussell3000indexreturnNeutral(Hold)–returnwithin5%ofRussell3000indexreturnUnderperform(Sell)–return5%belowRussell3000indexreturnVolatilityindexdefinition*Thisiscalculatedfromthevolatilityofhistoricalpricemovements.Veryhigh–highestrisk–Stockshouldbeexpectedtomoveupordown60–100%inaye