Stocks in Focus: THU 15 OCT 2020

NIKL: Raising estimates as nickel price

continues to strengthen in 2H20

LME nickel price continues to strengthen in 2H20. Due to the impact of the Covid-19 (AS OF OCT 14, 2020)
pandemic, the price of nickel traded in the London Metal Exchange (LME) fell from US$6.40/ INDICES
lb during the beginning of the year to a low of US$5/lb in end-March. However, LME prices Close Points % YTD%
have recovered significantly since March and is currently at US$6.8/lb. This was primarily PSEi 5,925.30 2.07 0.03 -24.18
due to the loosening of monetary policy by the US Fed and other central banks, which All Shares 3,580.09 10.95 0.31 -23.00
led to the decline in interest rates and ignited a rally in commodity prices. Furthermore, Financials 1,175.22 14.51 1.25 -36.94
Holding Firms 6,093.67 -23.07 -0.38 -19.74
despite the impact on Covid-19 on Indonesia’s economy, its government maintained the
Industrial 7,979.58 5.26 0.07 -17.18
nickel ore export ban (which is needed to encourage investments in the downstream nickel Mining & Oil 6,570.78 6.34 0.10 -18.80
processing sector), which help support the prices of LME and nickel ore prices. As a Property 2,766.21 9.43 0.34 -33.42
result of the Indonesia nickel ore export ban, the contract price (for 1.5% Ni ore) for NIKL Services 1,456.48 -12.57 -0.86 -4.87
ore exports is currently above US$50/WMT, up more than 100% y/y. More importantly,
Dow Jones -158 -0.55 0.50
NIKL is now able to sell even low grade ore (1.3% NI ore) at attractive prices. Due to the 28,679.81
S&P 500 3,511.93 -22.29 -0.63 8.70
strengthening of LME nickel price, we are increasing our 2020E LME average selling price Nasdaq 11,863.90 -12.36 -0.10 32.22
(ASP) forecast by 11% to US$6.3/lb, and our 2021E forecast by 11.2% to US$6.8/lb.

Despite the disruption caused by the Covid-19 on NIKL’s production, the company is INDEX GAINERS

confident of maintaining its production target of ~18Mil MT of nickel ore this year, a slight Ticker Company Price %
LTG LT Group Inc 9.90 8.08
decline from its production level in 2019. While the Rio Tuba’s production was not affected
MPI Metro Pacific Inv Corp 3.95 5.05
by the Covid-19 pandemic, the production of NIKL’s mines in Mindanao (Taganito, HInatuan, FGEN First Gen Corporation 24.35 2.74
Cagdianao, accounting for 60% of NIKL’s production) was affected by the pandemic in BPI Bank of the Phil Islands 66.50 2.47
April. Weather disturbances also affected the NIKL’s production during May. Nevertheless, AEV Aboitiz Equity Ventures 44.95 2.16
management believes that NIKL will be able to ramp up production in 2H20 and bring total
production this year close to its 2019 level. INDEX LOSERS
Ticker Company Price %
RLC Robinsons Land Corp 14.26 -2.60
Top Story: ICT Int'l Container Term 116.90 -2.34
SM SM Investments Corp 864.00 -2.26
PGOLD Puregold Price Club Inc 44.90 -2.18
LTG: Asia Brewery drafts new ties with Heineken DMC DMCI Hldgs Inc 4.20 -1.18

TOP 5 MOST ACTIVE STOCKS

COVID-19 Update
Ticker Company Turnover
TEL PLDT Inc 255,961,700
Total Cases Total Deaths Total Recoveries ALI Ayala Land Inc 231,433,700
MPI Metro Pacific Inv Corp 224,980,100
Philippines 346,463 (+1,910) 6,449 (+78) 293,860 (+579) BPI Bank of the Phil Islands 207,444,100
MBT Metrobank 199,284,300
USA 8,148,926 (+61,061) 221,840 (+1,038) 5,269,982 (+48,926)

Worldwide 38,729,168 (+384,064) 1,096,320 (+6,172) 29,111,241 (+276,877)

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside of the
COL Financial website as these may be subject to tampering or unauthorized alterations.
 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

THU 15 OCT 2020

Market Summary:

The local equities market closed nearly flat as investors stayed on the sidelines amid the
absence of a positive catalyst.

The PSEi inched up 2.07 points or 0.03% to close at 5,925.30. The top movers were LTG
(+8.08%), MPI (+5.05%), FGEN (+2.74%), BPI (+2.47%), and AEV (+2.16%). On the other
hand, the main drags were RLC (-2.60%), ICT (-2.34%), SM (-2.26%), PGOLD (-2.18%), and
DMC (-1.18%).

Value turnover rose to Php6.0Bil from Php5.0Bil in the previous session. Meanwhile,
foreigners remained net sellers, disposing Php619.2Mil worth of shares. 

COL Financial Group, Inc. 2

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

THU 15 OCT 2020

Stocks in Focus:

George Ching NIKL: Raising estimates as nickel price continues to

Senior Research Manager
strengthen in 2H20
Nickel Asia Corporation
HOLD LME nickel price continues to strengthen in 2H20. Due to the impact of the Covid-19
Php3.95
pandemic, the price of nickel traded in the London Metal Exchange (LME) fell from
US$6.40/lb during the beginning of the year to a low of US$5/lb in end-March. However,
LME prices have recovered significantly since March and is currently at US$6.8/lb. This
was primarily due to the loosening of monetary policy by the US Fed and other central
banks, which led to the decline in interest rates and ignited a rally in commodity prices.
Furthermore, despite the impact on Covid-19 on Indonesia’s economy, its government
maintained the nickel ore export ban (which is needed to encourage investments in the
downstream nickel processing sector), which help support the prices of LME and nickel
ore prices. As a result of the Indonesia nickel ore export ban, the contract price (for 1.5%
Ni ore) for NIKL ore exports is currently above US$50/WMT, up more than 100% y/y.
More importantly, NIKL is now able to sell even low grade ore (1.3% NI ore) at attractive
prices. Due to the strengthening of LME nickel price, we are increasing our 2020E LME
average selling price (ASP) forecast by 11% to US$6.3/lb, and our 2021E forecast by
11.2% to US$6.8/lb.

Despite the disruption caused by the Covid-19 on NIKL’s production, the company is
confident of maintaining its production target of ~18Mil MT of nickel ore this year, a
slight decline from its production level in 2019. While the Rio Tuba’s production was
not affected by the Covid-19 pandemic, the production of NIKL’s mines in Mindanao
(Taganito, HInatuan, Cagdianao, accounting for 60% of NIKL’s production) was affected
by the pandemic in April. Weather disturbances also affected the NIKL’s production
during May. Nevertheless, management believes that NIKL will be able to ramp up
production in 2H20 and bring total production this year close to its 2019 level.

COL Financial Group, Inc. 3

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

THU 15 OCT 2020

Exhibit 1: LME nickel (US$/lb)

Source: Kitco.com

Government’s plan to revive mining industry improves NIKL’s outlook. The

Department of Finance secretary Carlos Dominguez III said in early October that the
government plans to revive the mining industry in the country in order to create more
rural jobs to mitigate the impact on the Covid-19 pandemic and raise government’s tax
revenue from the mining industry. This will be achieved through the privatization of
state-owned mining assets, as well as the passage of legislation that will provide a new
fiscal regime for the mining industry. According to NIKL, while the government’s mining
asset privatization efforts will present growth opportunities for all mining companies,
the company views that a potential shift in the overall attitude of the government
towards mining could be the key to the industry’s revival. For NIKL, the hastening of the
permitting process for the development of new mines would be the biggest catalyst for
the company. Management said that NIKL’s Bulanjao Project is currently at the tail end of
its permitting process. When approved, this project could potentially extend the mine life
of the Rio Tuba (at ~5Mil WMT production annually) by 7 years. Other notable projects
that is currently waiting for government approval include the Manicani Project in Eastern
Samar(one of the few remaining high grade nickel mine in the country), as well as the
Dinapique Project in Isabela(lower grade mine with high reserve potential).

COL Financial Group, Inc. 4

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

THU 15 OCT 2020

Raising estimates, downgrading to HOLD. Due to the increase in our LME nickel price
estimate, we are increasing our 2020E earnings forecast by 28% to Php3.6Bil, and our
2021E earnings forecast by 45% to Php4.9Bil. We are also raising our FV estimate by 29%
to Php3.95/sh. Despite the increase in our estimates, we are downgrading our rating on
NIKL to HOLD from BUY. We continue to like NIKL given that near term prices for nickel
will continue to be supported by the Indonesian nickel ore export ban. Furthermore, we
remain positive on the long term outlook for nickel due to the rising EV battery demand.
However, NIKL’s stock price has increased by 5% YTD, outperforming the PSEi’s 24%
decline during the same period. At its current price of Php3.56/sh, upside to our FV
estimate is limited at 11%.

Top Story:

Frances Rolfa Nicolas LTG: Asia Brewery drafts new ties with Heineken
Research Analyst
LT Group Inc. In a disclosure to the PSE, LTG announced that its unit, Asia Brewery, and Heineken have
N/A agreed to transition the AB Heineken Philippines Inc. joint venture to a new partnership
N/A
structure to produce and distribute Heineken beer brands, Heineken and Tiger, in the
Philippines. Specifically, Heineken will establish a sales and marketing office based in
Manila and will engage Asia Brewery to brew and distribute its beers in the country. LTG
noted that Heineken continues to see a good long term business opportunity in the
Philippines and wants to continue distributing its brands here. The process is expected
to be completed by the end of the year. (source: LTG, Businessworld)

Changes in Shareholdings

Date of Acquired or Price per

Stock Volume Person (Designation)
Disclosure Disposed share
Necisto Y. Sytengco, II
15-Oct SBS 50,000 A 4.11 (Vice Chairman, SVP Marketing
Operations, & Assistant Treasurer)
Source: PSE

COL Financial Group, Inc. 5

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

THU 15 OCT 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

CO L F IN ANC IAL G R O UP, IN C.

2402-D EAST TOWER, PHILIPPINE STOCK EXCHANGE CENTRE,
EXCHANGE ROAD, ORTIGAS CENTER, PASIG CITY
PHILIPPINES 1605
TEL NO. +632 636-5411
FAX NO. +632 635-4632
WEBSITE: www.colfinancial.com

COL Financial Group, Inc. 7