Stocks in Focus: THU 10 SEP 2020

MWIDE: Recovery of construction and

airport businesses to take time

Expecting slow ramp up for construction. Although the construction sector was hard hit (AS OF SEP 09, 2020)

by the pandemic, majority of MWIDE’s clients have decided to continue with their projects. INDICES

However, management mentioned that 12 out of their 29 on-going projects as of end June Close Points % YTD%
are undergoing renegotiations as MWIDE is trying to pass on higher expenses under the PSEi 5,932.84 -101.19 -1.68 -24.09
All Shares 3,562.56 -42.02 -1.17 -23.38
new normal. Contracts under negotiations are equivalent to 15-20% of their total order
Financials 1,149.00 -22.13 -1.89 -38.35
book worth Php48Bil. Recall that in 2Q20, MWIDE incurred extra costs after providing Holding Firms 6,172.60 -74.12 -1.19 -18.70
barracks and meals for its workers. Moving forward, management expects to incur higher Industrial 8,030.76 -62.21 -0.77 -16.65

labor costs and other expenses to comply with social distancing measures. On a positive Mining & Oil 5,999.80 -77.98 -1.28 -25.85
Property 2,709.49 -78.66 -2.82 -34.78
note, the company plans to partially offset the additional expenses under the new normal Services 1,478.72 -12.50 -0.84 -3.42
with streamlining initiatives, which began during the first quarter.
Dow Jones 27,500.89 -632 -2.25 -3.64
S&P 500 3,331.84 -95.12 -2.78 3.13
Top Stories: Nasdaq 10,847.69 -465.44 -4.11 20.90

FGEN: San Gabriel plant halts operation due to generator problem

INDEX GAINERS
CHP: Parent company acquires 170Mil shares of CHP in August
Ticker Company Price %
AGI Alliance Global Inc 6.85 6.70
GTCAP GT Capital Hldgs Inc 404.80 1.20
Other News: GLO Globe Telecom Inc 2132.00 0.57
DMC DMCI Hldgs Inc 4.06 0.50
RRHI Robinsons Retail Hldgs 68.15 0.07
Economy: Government sticks to 5.5% GDP drop this year

INDEX LOSERS
Ticker Company Price %
COVID-19 Update: ALI Ayala Land Inc 29.75 -3.72
SMPH SM Prime Hdgs Inc 28.30 -2.92
Total Cases Total Deaths Total Recoveries MER Manila Electric Co 265.00 -2.72
MBT Metrobank 34.55 -2.68
Philippines 245,143 (+3,176) 3,986 (+70) 185,543 (+376) SECB Security Bank Corp 93.20 -2.51

USA 6,548,343 (+35,596) 195,184 (+1,201) 3,840,086 (+49,950)

TOP 5 MOST ACTIVE STOCKS
Worldwide 27,998,405 (+278,950) 907,055 (+6,254) 20,082,044 (+275,799) Ticker Company Turnover
SM SM Investments Corp 729,042,600
ALI Ayala Land Inc 342,629,600
SMPH SM Prime Hldgs Inc 332,727,200
BDO BDO Unibank Inc 281,427,900
TEL PLDT Inc 199,634,900

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

THU 10 SEP 2020

Market Summary:

The local equities market retreated on Wednesday, tracking the overnight decline of Wall
Street, as investors took profits following the strong rally over the past few days.

The PSEi gave up 101.19 points or 1.67% to close at 5,932.84. The main drags were ALI
(-3.72%), SMPH (-2.92%), MER (-2.72%), MBT (-2.68%), and SECB (-2.51%). On the other
hand, the top movers were AGI (+6.70%), GTCAP (+1.20%), GLO (+0.57%), DMC (+0.50%),
and RRHI (+0.07%),

Value turnover increased to Php5.1Bil from Php4.6Bil in the previous session. Meanwhile,
foreigners remained net sellers, disposing Php543.0Mil worth of shares.

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

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Stocks in Focus:

Adrian Alexander Yu MWIDE: Recovery of construction and airport

Research Analyst businesses to take time
Kerwin Malcolm Chan
Expecting slow ramp up for construction. Although the construction sector was hard
Research Analyst
hit by the pandemic, majority of MWIDE’s clients have decided to continue with their
Megawide Construction Corp projects. However, management mentioned that 12 out of their 29 on-going projects
N/A
as of end June are undergoing renegotiations as MWIDE is trying to pass on higher
N/A
expenses under the new normal. Contracts under negotiations are equivalent to 15-20%
of their total order book worth Php48Bil. Recall that in 2Q20, MWIDE incurred extra costs
after providing barracks and meals for its workers. Moving forward, management expects
to incur higher labor costs and other expenses to comply with social distancing measures.
On a positive note, the company plans to partially offset the additional expenses under
the new normal with streamlining initiatives, which began during the first quarter.

The construction segment also faces a slowdown in 3Q20, which should result in a
slow ramp up of worker capacity. As such, management expects manpower capacity
to reach 50% by the end of the year. Nonetheless, MWIDE remains optimistic about
the construction segment as they continue to bag new projects especially with the
government’s “Build, Build, Build” program.

Air travel will take time to recovery. With respect to its airport business, MWIDE plans
to continue its cost-cutting measures as air travel braces for a slow recovery. Although
the company was unable to push through with its initial plan of closing down Mactan-
Cebu International Airport (MCIA)’s terminal 2, MWIDE is planning to restructure its loans
with creditors - pushing back interest and principal repayments. The deferred interest
payments should help the company preserve cash as it suffers from poor revenues due
to anemic flight activity. Despite the government’s attempt to slowly loosen air travel
restrictions, we expect airport traffic to remain depressed for the remainder of the year
given the continuous increase in the number of COVID19 infections. At this point, there
is minimal visibility as to when the airport segment will fully recover.

PITX operations partly offset drop in other segments. MWIDEs PITX or landport
operations booked Php599.3Mil in revenues during 1H20 despite low passenger traffic
and shortfalls in commercial leasing. This resulted in a better than expected Php255Mil
net profit for the segment. PITX’s revenues remained strong despite the challenges
in the second quarter as rental income from office leasing business remained strong.
Management said that its tenants (which include POGOs) continued to pay rent in the
second quarter despite the ECQ.

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

THU 10 SEP 2020

PITX’s performance should improve further in the second half of the year. Aside from the
resilience of its office leasing revenues, daily foot traffic and the number of trips in PITX
should gradually increase as most businesses resumed operations following the shift to
GCQ starting June. This should result in higher top-line and bottom-line figures as PITX’s
commercial leasing begins to recover with the increase in passenger foot traffic.

Despite the strong performance of PITX, the impact on MWIDE’s consolidated profits is
only minimal as the said business only accounted for around 18.0% of MWIDE’s EBITDA
during 1Q20. MWIDE also disclosed that the mobilization of Lot 2 will most likely be
pushed back early next year due to slower construction activities. MWIDE initially planned
on mobilizing the second lot by 3Q20. The second lot will be smaller than the first one
since there will be no terminal operations. Nonetheless, MWIDE said that demand for
office space in the area is very strong given its attractive location near the landport.

Possible debt restructuring to improve liquidity. Management mentioned that the

company is currently in discussion with creditors for possible debt restructuring. Recall
that MWIDE’s Mactan airport subsidiary GMCAC is scheduled to repay Php24.4Bil worth
of debts annually from 2019 until 2030. However, it can no longer meet its original debt
repayment schedule given the pandemic.

Under the proposed debt restructuring plan, GMCAC plans to spread its Php1Bil interest
payment for this year over the next five years from 2021 to 2025. It is also looking at
rescheduling four years-worth of principal payments (2020-2023) throughout 2026 to
2029. If the proposed debt restructuring plan is accepted, MWIDE estimates that it will
free up around Php1.5Bil in cash for 2020 giving GMCAC more breathing room in the
next few years.

MWIDE also plans to issue up to 50 million preferred shares at Php100/sh by the end
of the year. The Php5Bil raised from the issuance of preferred shares will be used to
refinance existing debt and fund the company’s various projects.

Valuations. Consensus currently has a HOLD rating on MWIDE with a FV estimate of

Php7.23/sh.

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

THU 10 SEP 2020

Top Stories:

George Ching FGEN: San Gabriel plant halts operation due to

Senior Research Manager
generator problem
First Gen Corporation
HOLD San Gabriel plant halts operation due to generator problem. FGEN announced that
Php25.30
it has stopped the operation of the 414MW San Gabriel plant. The company said that
based on its initial investigation, there is a fault in the plant’s generator. FGEN said it will
release a timetable for the expected return to service of the San Gabriel plant after the
investigation complete.

The impact of the San Gabriel outage will depend on the duration of the outage. Annual
earnings contribution from the San Gabriel accounts for 15% of FGEN’s net income.

Maintaining HOLD rating for FGEN. We have a HOLD rating on FGEN with a FV
estimate of Php25.3/sh. We continue like FGEN given its relatively stable cash flow since
bulk of its capacity is contracted. FGEN is also the only clean energy play in the PSE after
its subsidiary EDC was delisted. Finally, the projected power shortage in 2023 improves
the feasibility of its LNG regasification project which will enable its gas plants to remain
competitive after the depletion of the Malampaya gas field. However, based on FGEN’s
market price of Php25.5/sh., there is no more upside to upside to our FV estimate.

Frances Rolfa Nicolas CHP: Parent company acquires 170Mil shares of

Research Analyst CHP in August
Cemex Holdings Philippines, Inc.
HOLD In a disclosure to the PSE, CHP disclosed that its parent company, Cemex Asian South East
Php1.19
Corporation (CASE) acquired an additional 170Mil shares of CHP at an average price of
Php1.18/sh, worth ~Php200Mil, in August. This translates to 1.26% of CHP’s outstanding
shares, bringing CASE’s total holdings to 77.19% as of end August. We think this share
buyback could be a signal that the parent company sees CHP to be undervalued. Note
that CASE acquired CHP’s shares for Php0.87/sh to as high as Php1.50/sh in August.

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

THU 10 SEP 2020

Other News:

Research Analysts Economy: Government sticks to 5.5% GDP drop this year

John Martin Luciano, CFA Acting Socioeconomic Planning Secretary Karl Chua said that GDP growth this year
Frances Rolfa Nicolas is expected to be around -5%, a contraction with a band of -4.5% and -6.6%, before
Justin Richmond Cheng
recovering to around 6.5% to 7.5% in 2021 to 2022. Mr. Chua noted that the prolonged
Adrian Alexander Yu
lockdowns intended to control the spread of the virus would weigh heavily on economic
Kerwin Malcolm Chan
performance this year by way of subdued consumer and business confidence. Aside
from this, other internal risks remain such as weather disturbances and the possible
occurrence of La Niña in 4Q20, and the resurgence of animal diseases such as African
swine fever. Moreover, geopolitical tensions, particularly the trade war between US and
China, and lower remittances from overseas Filipino workers also pose serious threats to
the domestic economy. (source: Philstar)

Changes in Shareholdings

Date of Acquired or Price per

Stock Volume Person (Designation)
Disclosure Disposed share
20 1,436.00
110 1,438.00
Ray C. Espinosa
09-Sep TEL 100 A 1,440.00
(Director)
275 1,441.00
1,495 1,443.00
Juan Victor I. Hernandez
10-Sep TEL 100 A 1,447.00
(Senior Vice President)
Albert Mitchell L. Locsin
10-Sep TEL 175 A 1,447.00
(First Vice President)
Source: PSE

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

THU 10 SEP 2020

I M P O R TA N T R AT ING DEFINITIONS
BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the
next six to 12 months.

HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might
be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the
next six to twelve months.

SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.

I M P O R TA N T DISC L AIM ER
Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount invested.
Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said information may
be incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the report and are
subject to change without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of
a security. COL Financial and/or its employees not involved in the preparation of this report may have investments in securities of derivatives of the companies
mentioned in this report and may trade them in ways different from those discussed in this report.

CO L R E S EAR C H T EAM

APRIL LYNN TAN, CFA

VP & HEAD OF RESEARCH
april.tan@colfinancial.com

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA

DEPUTY HEAD OF RESEARCH SENIOR RESEARCH MANAGER SENIOR RESEARCH MANAGER
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com

JOHN MARTIN LUCIANO, CFA FRANCES ROLFA NICOLAS JUSTIN RICHMOND CHENG
SENIOR RESEARCH ANALYST RESEARCH ANALYST RESEARCH ANALYST
john.luciano@colfinancial.com rolfa.nicolas@colfinancial.com justin.cheng@colfinancial.com

ADRIAN ALEXANDER YU KERWIN MALCOLM CHAN

RESEARCH ANALYST RESEARCH ANALYST
adrian.yu@colfinancial.com kerwin.chan@colfinancial.com

C OL F INANC IAL G R O UP, IN C.

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EXCHANGE ROAD, ORTIGAS CENTER, PASIG CITY
PHILIPPINES 1605
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WEBSITE: www.colfinancial.com

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