TUE 15 OCT 2019

Stocks in Focus:

MPI: KKR invests in MPHHI

KKR invests in MPHHI. MPI announced that it entered into a series of transactions for (AS OF OCT 14, 2019)
the investment and entry of global investment firm KKR & Co. (KKR), in and to MPHHI. INDICES
First, KKR will subscribe to 41.366Mil common shares of MPHHI, for Php5.2Bil. Second, Close Points % YTD%
voting rights in MPHHI will also be transferred to KKR(through MetroPac Apollo Holdings, PSEi 7,884.29 34.35 0.44 5.60
Inc.’s issuance of common shares to KKR). Lastly, KKR will subscribe to exchangeable bonds All Shares 4,759.09 17.60 0.37 5.34
issued by MPI worth Php30.1Bil. The exchangeable bonds can be converted to 239.933Mil Financials 1,825.63 4.46 0.24 2.57
common shares of MPHHI. The bond can be converted on the sooner of 10 years or an IPO Holding Firms 7,704.12 33.74 0.44 4.93
of MPHHI. MPI also announced that the IPO of MPHHI will be considered after further Industrial 10,705.79 28.41 0.27 -2.24
development of MPHHI. Mining & Oil 9,091.95 -86.41 -0.94 10.87
Property 4,156.86 27.18 0.66 14.58
After the issuance of new common shares to KKR, and taken into consideration the impact Services 1,529.12 2.80 0.18 5.99
of the exchangeable bonds to KKR, MPI’s stake in MPHHI will be reduced to ~ 20% from
60% currently. Based on the conversion price of the exchangeable bonds (Php30.1Bil for Dow Jones 26,787.36 -29.23 -0.11 14.83
239.933Mil common shares of MPHHI), the valuation for MPHHI is at Php77.75Bil or ~ S&P 500 2,966.15 -4.12 -0.14 18.32
US$1.51Bil. The proceeds raised from the exchangeable bonds will be used to pare down Nasdaq 8,048.65 -8.39 -0.10 21.30
MPI’s debt, giving it higher leverage capacity to further invest in its other core businesses.

INDEX GAINERS
Top Stories: Ticker Company Price %
MEG Megaworld Corporation 4.76 3.03
NIKL: LME nickel inventory plunges on China purchases AGI Alliance Global Inc 11.06 2.60
CIC: 3Q19 earnings jump 47% y/y, in line with estimates MPI Metro Pacific Inv Corp 5.06 2.22
LTG LT Group Inc 13.54 1.96
JFC Jollibee Foods Corp 234.60 1.47
Other News:
INDEX LOSERS
GTCAP: TMP not confident of meeting 2019 sales target Ticker Company Price %
AC: AC Energy and Yoma Strategic eye renewable energy projects in Myanmar RRHI Robinsons Retail Hdlsgs 78.20 -2.13
RWM: PSE approves delisting of RWM DMC DMCI Hldgs Inc 8.82 -2.00
BLOOM Bloomberry Resorts 10.84 -1.45
FGEN First Gen Corporation 25.00 -0.99
Market Summary: SECB Security Bank Corp 197.50 -0.25

The local equities market continued to rise for the third consecutive day on Monday,
TOP 5 MOST ACTIVE STOCKS
tracking the regional market uptrend, following a partial trade deal between the US and
China. Ticker Company Turnover
AC Ayala Corporation 524,438,700
The PSEi added 34.35 points or 0.43% to close at 7,884.29. The top movers were MEG SMPH SM Prime Hldgs Inc 310,526,800
MPI Metro Pacific Inv Corp 306,764,300
(+3.03%), AGI (+2.60%), MPI (+2.22%), LTG (+1.96%), and JFC (+1.47%). MPI rose following
ALI Ayala Land Inc 188,356,600
the news that the Toll Regulatory Board approved the company’s proposed provisional toll
BPI Bank of the Phil Islands 160,762,500
rate and toll adjustment for two components of the Manila-Cavite Toll Expressway. On the
other hand, the main drags were RRHI (-2.13%), DMC (-2.00%), BLOOM (-1.45%), FGEN
(-0.99%), and SECB (-0.25%).

Value turnover declined to Php3.8Bil from Php4.5Bil in the previous session. Meanwhile,
foreigners turned net buyers, accumulating Php68.1Mil worth of shares.

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

TUE 15 OCT 2019

Stocks in Focus:

George Ching MPI: KKR invests in MPHHI

Senior Research Manager
KKR invests in MPHHI. MPI announced that it entered into a series of transactions for
Metro Pacific Inv Corp.
BUY the investment and entry of global investment firm KKR & Co. (KKR), in and to MPHHI.
Php8.19 First, KKR will subscribe to 41.366Mil common shares of MPHHI, for Php5.2Bil. Second,
voting rights in MPHHI will also be transferred to KKR(through MetroPac Apollo Holdings,
Inc.’s issuance of common shares to KKR). Lastly, KKR will subscribe to exchangeable
bonds issued by MPI worth Php30.1Bil. The exchangeable bonds can be converted to
239.933Mil common shares of MPHHI. The bond can be converted on the sooner of 10
years or an IPO of MPHHI. MPI also announced that the IPO of MPHHI will be considered
after further development of MPHHI.

After the issuance of new common shares to KKR, and taken into consideration the impact
of the exchangeable bonds to KKR, MPI’s stake in MPHHI will be reduced to ~ 20% from
60% currently. Based on the conversion price of the exchangeable bonds (Php30.1Bil for
239.933Mil common shares of MPHHI), the valuation for MPHHI is at Php77.75Bil or ~
US$1.51Bil. The proceeds raised from the exchangeable bonds will be used to pare down
MPI’s debt, giving it higher leverage capacity to further invest in its other core businesses.

Maintaining BUY rating on MPI. We are maintaining our BUY rating on MPI with a
FV estimate of Php8.19/sh. MPI’s share price has increased by 0.2% in the past 12
months, underperforming the PSEi which has risen by 5.1% during the same period. We
believe that the underperformance was mainly due to regulatory concerns surrounding
its water and toll roads businesses. However, we believe that these concerns are
overblown. Maynilad has already won its second arbitration case against the government.
Meanwhile, MPTC has already secured the first tranche of toll hike this year for the NLEX
and SCTEX, and is awaiting approval for the toll hike application for its other toll roads.
Moreover, valuations are already very attractive. Based on MPI’s current market price of
Php4.94/sh, the company is trading at a 46% discount to its NAV. The toll road business
and Maynilad are nearly worthless as investors are only paying for MPI’s 45.5% stake in
Meralco (representing 93% of MPI’s market value). MPI is now trading at only 9.9X 2019E
P/E, a discount relative to the 14.6X average P/E of its industry peers. Based on its current
market price, upside to our FV estimate of Php8.19/sh is significant at 65%.

COL Financial Group, Inc. 2

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

TUE 15 OCT 2019

Top Stories:

George Ching NIKL: LME nickel inventory plunges on China

Senior Research Manager purchases
Nickel Asia Corporation
HOLD LME nickel inventory plunges on China purchases. There was a steep decline in the
Php3.81 inventory level of nickel in the London Metal Exchange (LME) beginning in October. From
an inventory level of ~ 160,000 MT at the beginning of October, inventory level is now
~ 100,000MT. According to industry sources, China’s Tsingshan Holding Grolup Co. was
the main buyer of the nickel inventories in the LME. Tsingshan is the biggest stainless
steelmaker in the world, and it is widely believed that it is currently securing nickel supply
ahead of a looming ban on raw nickel ore export in Indonesia.

We also believe that stockpiling of nickel inventories by stainless steel producer is likely
the main reason for the decline in LME nickel inventories since the beginning of this
year. This was primarily due to the anticipation of the Indonesian nickel ore ban which
will take effect in January 2020. This has resulted to a 50% rise in the price of LME in the
YTD period. However, we believe that nickel price could correct once the stockpiling
activities end. The tight nickel supply situation could also ease from higher production
from other nickel ore producing countries such as the Philippines, as well as the ramping
up of Indonesia’s nickel refining capacity in the next two years.

Maintaining HOLD rating. We have a HOLD rating on NIKL with a FV estimate of

Php3.81/sh. While we believe that the long term outlook for nickel prices will remain
positive due to rising EV battery demand and the looming Indonesian ore export ban, we
believe that this has already been priced-in by the market. NIKL’s share price has risen
by 81% YTD, outperforming the PSEi’s 5.6% rise during the period. At its current price
of Php3.98/sh, there is no more upside to our FV estimate.

COL Financial Group, Inc. 3

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

TUE 15 OCT 2019

Justin Richmond Cheng

CIC: 3Q19 earnings jump 47% y/y, in line with
Research Analyst
estimates
Concepcion Industrial Corp.
HOLD 3Q profits jump 47% y/y to Php156Mil. In a press release from CIC, the company reported
Php37.80 3Q19 net income of Php156Mil, up 46.7% y/y. This is on the back of a 20% increase
in revenues for the quarter to Php3.1Bil. The solid results for the period were amidst
strong consumer sell-in across all product segments. Recall that channel inventory for
air-conditioning was at its lowest levels of 3.3 weeks in end-June versus the historical
average of around 7 weeks for the said period. Hence, the strong sales was boosted by
a pick-up in orders from conservative retailers that had delayed their air-conditioning
purchases in anticipation of a possible rainy season. Note that earnings growth for the
quarter was magnified by a low base in 3Q18 as profits (down 42% y/y) for the said
period declined due to weak sales (down 17% y/y) given heavy rainfall and multiple
weather disturbances.

For the first nine months of 2019, CIC’s net income reached Php643Mil, which down
4.6% y/y. Nevertheless, profits are in line with our estimates accounting for 72.1% of
COL’s full-year forecast. We expect 4Q profits to sustain the strong earnings momentum,
driven by a recovering AC and refrigerator market as well as management’s operational
adjustments and cost controls.

Exhibit 1: Results Summary

% of COL
In PhpMil 3Q18 3Q19 % Change 9M18 9M19 % Change
Forecast
Revenues 2,631 3,157 20.0 10,325 10,926 5.8 70.6%
Net income 106 156 46.7 673 643 -4.6 72.1%
Margin (%) 4.0 4.9 - 6.5 5.9 -
Source: CIC, COL Estimates

We currently have a HOLD rating on CIC with a FV estimate of Php37.80/sh.

COL Financial Group, Inc. 4

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

TUE 15 OCT 2019

Other News:

Research Analysts GTCAP: TMP not confident of meeting 2019 sales target
John Martin Luciano
Frances Rolfa Nicolas
Toyota Motors Philippines Corp., a unit of GTCAP, said that it is not confident of meeting is
Justin Richmond Cheng
2019 annual sales target of 165,000 units. This is despite the company’s car sales growing
Adrian Alexander Yu
by 4.3% y/y to 114,117 units in the nine months ended September. (Source: Businessworld)

AC: AC Energy and Yoma Strategic eye renewable energy projects

in Myanmar

In a disclosure to the PSE, AC announced that AC Energy has partnered with Yoma
Strategic Holdings Ltd. to jointly explore developing 200MW of renewable energy
projects in Myanmar. The two companies are looking to establish a 50:50 joint venture
that will work together to drive the growth of Yoma Micro Power Pte. Ltd. Note that both
parties have signed a binding term sheet to invest at least US$30Mil in the venture. (source:
AC, Businessworld)

RWM: PSE approves delisting of RWM

The PSE announced that its board of directors has approved the petition of RWM for
voluntary delisting. The company’s shares shall no longer be traded effective October 21,
2019. RWM is the developer and operator or Resorts World Manila, which runs a gaming
facility with hotel, retail, dining, entertainment and other leisure amenities in Pasay City.
(source: Businessworld)

Change in Shareholdings:

Acquired or Price per

Stock Volume Person (Designation)
Disposed share
10,000 1,095.05
James L. Go
TEL 14,835 A 1,099.03
(Director)
1,445 1,099.28
Rosemarie P. Rafael
AXLM 300,000 A 5.00
(Independent Director)
Ricardo C. Lopa Jr.
AXLM 200,000 A 5.00
(Director)
Maria Theresa Z. Paguirigan
AXLM 2,000 A 5.00
(Treasurer / CFO / Asst. Corporate Secretary)
Karilagan Imelda Z. Gorospe
AXLM 60,000 A 5.00
(Assistant Vice President & Investor Relations Officer)
Paul Rene Z. Tayag
AXLM 2,000,000 A 5.00
(Senior Vice President & Compliance Officer)
Source: PSE

COL Financial Group, Inc. 5

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

TUE 15 OCT 2019

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 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
RESEARCH ANALYST
adrian.yu@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