FRI 13 AUG 2021

Top Stories:

AC: 1H21 core profit in line with estimates (AS OF AUG 12, 2020)
INDICES
JGS: 1H21 core earnings below forecast
MONDE: 2Q core EBITDA declines amid flat sales and higher costs Close Points % YTD%
PSEi 6,556.57 -110.29 -1.65 -8.17
MAXS: 2Q21 core net income turns positive at Php10Mil; above estimates All Shares 4,059.93 -51.68 -1.26 -4.98
AGI: 1H21 profit outperforms on EMP, Travellers income Financials 1,419.40 -18.51 -1.29 -1.95
Holding Firms 6,529.01 -142.90 -2.14 -11.23
Industrial 9,328.30 -52.95 -0.56 -0.69
Mining & Oil 9,781.80 141.93 1.47 2.66
Other News: Property 3,055.03 -98.90 -3.14 -16.63
Services 1,614.28 -2.75 -0.17 6.62

Economy: BSP keeps key rate at a record low Dow Jones 35,484.97 220 0.62 15.94
CEB: No further work force reductions S&P 500 4,447.70 10.95 0.25 18.41
Nasdaq 14,765.13 -22.96 -0.16 14.56

COVID-19 Update: INDEX GAINERS

Ticker Company Price %
Total Cases Total Deaths Total Recoveries URC Universal Robina Corp 136.90 1.63
RLC Robinsons Land Corp 16.24 1.50
Philippines 1,700,363 (+12,439) 29,539 (+165) 1,583,161 (+6,090) JFC Jollibee Foods Corp 194.00 1.25
TEL PLDT Inc 1265.00 1.12
USA 37,182,479 (+119,546) 635,939 (+660) 30,093,532 (+43,468) GTCAP GT Capital Hldgs Inc 535.00 0.94

Worldwide 206,156,443 (+684,844) 4,346,676 (+10,239) 185,034,986 (+554,084)

INDEX LOSERS
Ticker Company Price %
SMPH SM Prime Hldgs Inc 33.55 -4.14

Market Summary:
EMP Emperador Inc 12.24 -3.92
MEG Megaworld Corp 2.80 -3.11
SM SM Investments Corp 979.00 -2.88
The local stock market sank on Thursday as the rising COVID-19 cases dampened investor LTG LT Group Inc 9.52 -2.86

sentiment amid fears of a longer lockdown.

TOP 5 MOST ACTIVE STOCKS
The PSEi lost 110.29 points or 1.65% to close at 6,556.57. The main drags were SMPH Ticker Company Turnover
EMP Emperador Inc 346,509,500
(-4.14%), EMP (-3.92%), MEG (-3.11%), SM (-2.88%), and LTG (-2.86%). On the other hand, TEL PLDT Inc 200,403,200
these were partially offset by gainers such as URC (+1.63%), RLC (+1.50%), JFC (+1.25%), SMPH SM Prime Hldgs Inc 183,626,400

TEL (+1.12%), and GTCAP (+0.94%). GLO Globe Telecom Inc 173,272,200
ALI Ayala Land Inc 173,032,200

Value turnover increased to Php18.2Bil from the Php6.8Bil logged the previous day.
Meanwhile, net foreign buying slowed to Php50Mil from the Php513.9Mil logged on
Wednesday.

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

FRI 13 AUG 2021

Top Stories:

Richard Laneda, CFA AC: 1H21 core profit in line with estimates
Senior Research Manager

Ayala Corporation 1H21 reported profit improved 30.9%. AC reported a net income of Php10.4 Bil for
BUY 1H21 which is 30.9% higher compared to last year. Operations improved due to the
Php836.00 recovery in economic activity and the fact that companies learned how to work with
quarantine restrictions. We also note that provisions and other one-off losses were
lower this year. Looking at the different subsidiaries, all of them, except for AC Energy,
reported better results this year. Comparing the results to forecast, AC’s 1H21 lagged our
estimates due to one-off items which included additional MWC remeasurement loss and
deconsolidation. Excluding this, AC would have reported an income of Php13.3 Bil which
is in line with COL and consensus estimate

Exhibit 1. Results Summary

Source: AC, COL estimates, Bloomberg

ECQ/MECQ in 2Q broke recovery momentum in malls, hotels. The recovery

momentum that was saw in 4Q20 and 1Q21 was broken in 2Q21 when Metro Manila
and a few other key provinces were put under Enhanced Community Quarantine (ECQ)
and Modified Enhanced Community Quarantine (MECQ). Revenues of ALI the quarter
reached Php23.722 Bil which was up 90.1% from 2Q20 (the height of the lockdown) but
was up just 3.3% Q/Q as lower revenues from its investment properties offset the 20.8%
Q/Q growth in residential development.

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Exhibit 2. ALI revenue breakdown

Source: ALI

Due to the tighter restrictions in 2Q21, shopping center revenues were down 25.3% Q/Q
while hotel and resort revenues were 9.8% lower. Mall foot-traffic was around 20-33%
of pre-COVID levels in 2Q21 compared to 33-38% in 1Q21 and 35-45% in 4Q21. Tenant
sales was at 43% of pre-COVID level versus 52% in 1Q21 and 4Q20. Meanwhile, the
usually-resilient office leasing segment suffered as setback in 2Q21 as POGO departures
sent revenues 8.1% lower Q/Q. We estimate that around 34,500sqm of space was
vacated by POGOs in 2Q21, leaving ALI with around 27,000sqm of POGO exposure which
translates to 2% of its total GLA. ALI ended the quarter with 87% occupancy for its stable
offices, but they would have some difficulty leasing out the spaces vacated by POGOs
(estimated at around 73,000sqm) as these are in Circuit Makati which does not have
PEZA accreditation. The residential development segment was a bright spot for ALI with
revenues growing 145.1% Q/Q and 20.8% Y/Y for 2Q21.

Overall revenues for the first half grew 15.7% to Php46.7 Bil, fueling the 33.7% Y/Y growth
in net income.

BPI 2Q21 net income expands 28.4% y/y on lower provisions. BPI’s net income during
the second quarter expanded by 28.4% y/y to Php6.8Bil. This was driven by the decline
in provisions (-73% y/y) and recovery of fee-based revenues (+49.6% y/y). However, net
interest income during the second quarter declined 6.6% y/y to Php17.0Bil, dragged by
both lower volume and margins. The bank’s total assets declined by 3% y/y during the
quarter, pulled down by the contraction in the bank’s loan portfolio (-4.5% y/y). The
weakness in loan growth came from the decline of corporate loans (-6.3% y/y), which
accounts for 74.7% of total loans. On the other hand, we estimate that net interest margin
declined by ~16 bps y/y to 3.25%. However, on a sequential basis, net interest margin
ended slightly higher by ~7 bps q/q. The bank noted that the sequential improvement
indicates that net interest margin may have already bottomed.

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The net income of BPI for the first half was flat at Php11.8 Bil the 6.6% and 7% Y/Y decline
in net interest income and non-interest income respectively offset the 55.7% Y/Y decline
in provisions.

Lower taxes boost GLO net income Y/Y. GLO’s 2Q21 core net income rose by 27.8%
y/y to Php5.8Bil from Php4.5Bil largely due to the adoption of the CREATE law which
reduced GLO’s corporate income tax. During 2Q20, GLO booked an effective tax rate of
34%, which fell to 25% in 2Q21. This brought GLO’s 1H21 core net income to Php13.2Bil,
up 19.3% y/y.

Meanwhile, GLO’s 2Q21 service revenues increased by 5.9% y/y to Php37.6Bil from
Php35.5Bil as data-related revenues sustained its growth amid the pandemic. 1H21
service revenues amounted to Php75.5Bil, up 4.2% y/y. However, GLO’s 1H21 EBITDA
margin contracted by 350bps to 49.5%, dragged down by the 48.4% margin booked in
1Q21.

MWC 2Q21 profit up on improved Non-East Zone operations. MWC’s 2Q21 earnings
grew by 35.2% y/y to Php1.4Bil mainly due to the improvement in the company’s domestic
subsidiaries (MWPV), and international investments (MWAP). Meanwhile, the East Zone
business registered higher profits only due to the presence of foreign exchange gains
and lower taxes. These brought 1H21 earnings to Php2.7Bil, up 10.3% y/y. Meanwhile,
operating performance, as measured by EBITDA, was flattish at Php6.5Bil and revenue
were down 6.4 Y/Y to Php10.14 Bil

Energy Group profit decline on lower coal plant earnings. AC’s listed power-
generation unit, ACEN, reported a 4.5% Y/Y increase in net profit to Php2.7 Bil. Revenues
grew 35% Y/Y during the half to Php13.4 Bil as demand returned to pre-pandemic levels
and additional renewable capacity were added. Attributable capacity increased 31% Y/Y
to 1,542 MW which led to a 16% Y/Y growth in attributable output to 2.24 GwH for 1H21.
However, due to unplanned outage of a unit of SLTEC coal plant, ACEN had to purchase
more expensive replacement power. Management indicated that the impact of the SLTEC
outage was around Php400 Mil.

Meanwhile, AC Energy group’s legacy coal plants (GN Power Kauswagan and AA Thermal,
both of which are outside of ACEN) registered a 28% Y/Y decline in equity in earnings to
Php1.9 Bil in 1H21, mainly due to a loss on derivative (related to project loan) and higher
business taxes.

The combined income of ACEN and the legacy coal plants amounted to Php4.6 Bil, 11.7%
lower Y/Y.

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AC Industrials narrows loss in improved units’ performance. AC Industrials’ 1H21 net

loss narrowed from Php1.82 Bil in 1H20 to Php592 Mil as performance improved across
all business unit.

IMI reported a net profit of US$0.9 Mil in 1H21, a reversal of the US$21.5 Mil net loss
reported in the same period last year. The company reported a 35.8% jump in revenues
driven by the demand recovery in its automotive and industrial units, whose revenues
grew 48% and 44% Y/Y respectively

AC Motors reported a 67% decline in net loss to Php189 Mil as demand recovered with
the help of new model launches across all brands. Revenues of AC Motors are up 42% Y/Y

Meanwhile, Merlin Solar and MT Group reported a 26.1% and 42.4% decline in net loss
to Php255 Mil and Php181 Mil. For the MT Group, increased demand from automotive
customers drove revenues up 59% while sales of Merlin Solar surged 139% due to the
strong growth in the transportation and mobile units.

Maintain BUY with FV estimate of Php836. We are maintaining our BUY rating on
AC with a fair value estimate of Php836. The upside to our fair value estimate remains
substantial at 15%. The current state of the pandemic still presents much uncertainty, but
we believe AC has adjusted nicely and will be able to navigate through this challenging
time.

 
George Ching JGS: 1H21 core earnings below forecast
Senior Research Manager
1H21 core earnings below forecast. JGS’ 2Q21 consolidated net income to equity
JG Summit Holdings Inc.
holders of the parent amounted to Php815Mil, a reversal from the Php2.6Bil in net loss
HOLD
Php57.80 posted during the same period last year.This brought 1H21 net income to Php937Mil,
representing only 2.7% COL forecast and 6% of consensus forecast. Excluding the
performance of its airline business, JGS’ core net income would have increased by 68%
to Php11Bil. Overall earnings contribution of subsidiaries rose 165% to Php5.8Bil, as
the increase in the earnings of most businesses were only partially offset by the steeper
losses posted by CEB. In terms of core earnings, URC and MER’s profits were in line with
forecasts, while the earnings RLC exceeded forecasts.

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Exhibit 1: JGS result summary

source: JGS

URC earnings in line with estimates. Excluding non-core items such as gain on the sale
of idle land and the impact of the CREATE Law, core earnings grew 2.1% y/y to Php7.6Bil
in 1H21 This is in line with COL estimates, accounting for 50.2% of full-year forecast.
Revenues grew 1.7% y/y in 1H21 to Php68.5Bil, in line with estimates at 50% and 48.8%
of COL and consensus forecasts, respectively. Broken down, revenues from domestic
BCF declined by 7.1%, mostly due to the high base effect amid initial pantry stocking and
government relief operations last year. Meanwhile, this was offset by the rebound in BCF
International sales, which grew 13.4% y/y, led by the strong recovery in Vietnam (+51.3%)
and Thailand operations (+10.7%). Despite the improvement in sales, international EBIT
margins were negatively affected by higher raw material and freight costs.

CEB core loss amounts to Php13.8Bil. CEB’s 1H21 core net loss reached Php13.8Bil, much
wider compared to the Php9.1Bil core net loss registered in 1H20.

RLC earnings beat forecasts despite tighter restrictions. RLC’s 1H21 net income
rose 48.1% y/y to Php5.45Bil. The 1H21 results represent 88.7% of COL forecast and
74.5% of consensus forecast. Revenues grew by 55.5% to Php26Bil. Aside from the
Y/Y improvement in all major business segments, RLC also booked Php10.5Bil from its
operation from China and Php2.78 Bil in revenues from the sale of a land in Bridgetown
to Shang Robinsons Properties and RHK Land Corporation. Profit for the first half
outperformed COL and consensus estimates primarily due profit booked from the sale
of land. We note though that RLC also outperformed COL revenue estimates for its mall,
office and residential revenues and first half earnings still outperformed COL estimates
if we exclude the after-tax gain from the sale of land. Mall revenues declined 16% y/y
mainly due to higher concessions given to tenants as a result of the Covid-19 pandemic.
Office revenues rose 11% y/y as RLC added 36,500 sqm of office space during 2Q21 while
maintaining an occupancy rate of 94%. Residential revenues declined 40%.

JGSPC posts net income of Php329Mil. JG Summit Petrochemicals Corp. (JGSPC)

reported a net income of Php329Mil in 1H21, a turnaround from the Php2.7Bil net loss
during the same period last year. 1H21 net income represents only 21% of our full year
forecast.

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MER’s 1H21 core earnings in line with forecast as demand rebounds. Excluding non-
recurring items, MER’s 2Q21 core profits rose 30% to Php6.3Bil. This brought 1H21
core net profits to Php11.4Bil, 7.7% higher y/y, in line with forecasts, representing 51.4%
of COL forecast and 50.6% of consensus forecast. Net distribution revenues declined
5.6% to Php31.5Bil, mainly due to a 12% decline in tariff, but offset by a 7.2% increase
in sales volume. The net distribution revenues during 1H21 were in line with forecast,
representing 47.7% of full year forecast. 1H21 sales volume increased by 7.2% to 22,663
Gwh, in line with our forecast, representing 48.7% of our full year forecast.

Maintaining HOLD rating. We have a HOLD rating on JGS with a FV estimate of Php57.8/
sh. We like JGS as it is well positioned to capitalize on the favorable long term growth
outlook of the Philippine economy given the market leadership position of its operating
subsidiaries, the parent company’s strong balance sheet and the excellent track record
of its management team. However, it is also sensitive to the ongoing COVID-19 crisis as
vulnerable sectors accounted for 53% of NAV. Moreover, at its current prices of Php58.10/
sh, there is no more upside to our FV estimate.

Justin Richmond Cheng, CFA MONDE: 2Q core EBITDA declines amid flat sales
Senior Research Analyst
and higher costs
Monde Nission Corporation
N/A Core EBITDA declines 15.7% y/y in 2Q21 amid flattish sales and higher costs. MONDE
N/A booked a net loss of Php2.2Bil in 2Q21, bringing headline net income to only Php204Mil
in 1H21 from Php5.6Bil in the same period last year. Headline earnings during the period
include several one-off expenses such as financial expenses for the redemption of the
Arran convertible note, IPO related expenses, and some net tax benefits. Excluding these
one-off expenses worth Php4.2Bil, core EBITDA stood at Php3.2Bil in 2Q21, down 15.7%
y/y. First half core EBITDA also declined by 14.5% y/y to Php7.2Bil, trailing consensus
estimates as it accounted for only 45.5% of full-year forecasts. The decline in core EBITDA
was mainly due to flattish sales in both the Asia Pacific Branded Food and Beverage (APAC
BFB) business as well as the Meat Alternatives Business. MONDE’s gross and EBITDA
margins also suffered from unfavorable mix, higher raw material costs, and increased
advertising and promotions.

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Exhibit 1: Results Summary

Source: MONDE, Bloomberg

APAC BFB faces challenges with category declines and higher commodity prices.
Sales from the APAC BFB business grew by only 0.6% y/y to Php12.8Bil in 2Q21. This
brought 1H21 sales to Php26.2Bil, up 1.7% y/y. The flattish sales was amid lower sales of
biscuits and beverages, which outweighed the growth in noodles. Biscuits and beverages
saw market share gains (+80 bps for biscuits) during the second quarter, but these two
segments still suffered from the overall category decline as overall demand weakened
and given the high base in 2020. Meanwhile, the noodles segment managed to record
healthy growth in sales and market share (+150 bps to 69.9%), led by the growth of
its pancit canton dried pouch. In 2020, noodles accounted for 50% of APAC BFB sales.
Biscuits accounted for 31% while beverages and other products accounted for the balance
of 19%.

The APAC BFB business also suffered from a contraction in margins during the quarter.
Specifically, APAC BFB gross margin contracted by 460 bps y/y to 33.8% in 2Q21. This
was largely due to an unfavorable sales mix amid the lower sales of biscuits, higher
commodity prices, and increased advertising and promotions. Wheat and palm oil prices,
which are two of MONDE’s main raw material costs, rose by as much as 24% and 70%,
respectively as of July 2021. Going into 2H21, MONDE already locked in the price of its
major commodities for the rest of the year, protecting itself from any further increase
in the price of said commodities. MONDE also implemented an average price increase
of 3% in July 2021 for noodles and biscuits. These factors are expected to help stop the
margin erosion seen in MONDE’s 1H21 results.

Meat alternative business saw softer sales amid shift to out-of-home consumption.
MONDE’s meat alternative business under Quorn Foods saw a 0.9% decline in sales for
2Q21. This brought 1H21 meat alternative sales to Php7.5Bil, down 0.6%. The decline
in sales was driven by weaker at-home consumption amid the reopening of developed
economies. This affected the group’s frozen meat alternative products. Retail sales in
the UK were also weak, recording a steady decline in the past 12 weeks. Quorn foods
experiences a 680 bps decline in market share in the UK and 120 bps decline in market
share in the frozen category in the US. This was largely due to management’s decision

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to reduce product groups in distribution last year. Small but emerging competitors
immediately took advantage of the vacancies in both distribution and store shelf space.

In terms of margins, the meat alternatives business saw higher gross margin (+60 bps) in
2Q21, thanks to its price increases in the UK and US. However, the improvement in gross
margins was offset by MONDE’s decision to reinstate several marketing and promotional
plans. Recall that in 2020 these advertising plans were significantly reduced due to the
pandemic. The said move caused operating expenses to jump by 11.4% y/y, leading to
an 8% decline in core EBITDA for 2Q21.

Key growth strategies remain in place. MONDE remains committed in growing its
business and has set in place several key strategies. This includes the introduction of
new product developments that cater to the emerging needs of its consumers while
prioritizing health and food safety. The APAC BFB launched a new Pancit Canton Kasalo
pack to help address market share loss in select distribution areas. It also relaunched
the thinner noodles for its Pancit Canton noodles and relaunched its cup noodles Bulalo
and La Paz Batchoy with a new packaging. The group also commenced operation of a
new noodles line that employs the high-speed airflow technology for healthier noodles.
More noodle lines are expected to come online in succeeding quarters, even for its
international operations in Thailand.

For the meat alternative business, Quorn Foods is continuously investing in new product
developments (NPD). Because of this, it was awarded by its QSR partner, KFC, the NPD
supplier of the year in 2021. Apart from this, the group is also focusing on increasing its
presence and boosting consumer awareness via more distribution points through Tesco,
a key retailer for the company. Finally, Quorn Foods is continuously working on growing
its foodservice presence and penetration globally. Hence, the company is continuously
discussing with global and regional QSR players. Note that the QSR and foodservice
business accounts for 10% of total Quorn Foods’ sales, and the outlook for foodservice
remains strong amid the steady reopening of economies globally.

Guiding for mid-single digit sales growth in 2021, implying a strong recovery in
2H21. Despite the weak 1H numbers, MONDE is guiding for a mid-single digit growth
in sales for the group. This implies at least a double-digit growth in sales during the
second half of 2021. This will be driven by improved sales in APAC BFB, following its
price increases recently. More significantly, MONDE expects the meat alternatives
business to grow by low-to-mid teen, given the improvement in the foodservice industry.

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Furthermore, it expects to invest more heavily in supporting campaigns and promos to

increase awareness for its products and boost sales. Meanwhile, MONDE expects the
higher sales growth to flow into core EBITDA, but its EBITDA margin will continue to
contract due to higher commodity costs and A&P spending. To help alleviate input cost
pressures, MONDE has gradually raised prices and implemented some cost containment
efforts.

Consensus currently has a BUY rating on MONDE with a FV estimate of Php18.80/sh.

 
John Martin Luciano, CFA
MAXS: 2Q21 core net income turns positive at
Senior Research Analyst
Php10Mil; above estimates
Maxs Group Inc.
BUY 2Q21 core net income turns positive at Php10Mil; above estimates. MAXS reported
Php10.50 that net income during the second quarter reached Php56Mil, a turnaround from the
Php431Mil loss booked in the same quarter last year. However, this included a one-off gain
worth Php62Mil from the sale of its subsidiary. Excluding this figure, we estimate that core
net income would have reached Php10Mil, bringing the first half figure to Php110Mil. This
outperformed both COL and consensus full-year forecasts of -Php219Mil and Php83Mil,
respectively. The outperformance vs our forecast was driven by stronger-than-expected
gross profit margin which more than offset the weaker-than-expected revenues. Note
that the company continued to benefit from the cost cutting initiatives implemented last
year. Meanwhile, revenues jumped 67% y/y to Php1.8Bil as the restaurant benefitted from
the low base last year.

Exhibit 1: Results Summary

source: MAXS, COL estimates, Bloomberg

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Sales remain resilient despite the lockdowns. System-wide sales during the second
quarter jumped 81.7% y/y to Php2.9Bil. The strong rebound in sales came from a low base
as the peak of the lockdowns last year occurred during the second quarter. Nevertheless,
sales also improved sequentially by 2.3% q/q. This was driven by international sales
(+26.8% q/q), which accounts for ~ 26% of total sales. The company shared that North
America sales are already exceeding pre-pandemic level as mobility restrictions have
already been lifted. On the other hand, we estimate that domestic sales contracted by
4.2% q/q. This can be attributed to tighter mobility restrictions during the early part of
the second quarter. Recall that the government imposed ECQ (March 29 to April 11) and
MECQ (April 12 to May 15) to curb the increase in COVID-19 cases. This limited restaurant
operations in NCR and nearby areas to take-out and delivery. The company noted that
sales declined by ~26% in April compared to the average monthly sales of 1Q21.

Similarly, revenues during the second quarter increased 67.4% y/y to Php1.8Bil. This
brought first half revenues to Php3.6Bil, down 4.4% y/y. This was slightly below COL’s
forecast at 47.1% of our full year estimate, but slightly above consensus forecast at
50.4%. We expect sales to weaken in the third quarter after the government imposed
another ECQ in Metro Manila and nearby cities from August 6 to 20 after COVID-19
cases started increasing amidst the spread of the more contagious delta variant. This will
again limit operations to take-out and deliver. Nevertheless, we are encouraged by the
improving vaccination rollout in the Philippines. We believe this will be key in allowing
the government to ease restrictions once the uptick in COVID-19 cases is controlled.

Profitability continues improvement. Profitability improved during the second quarter

as the company benefitted from the restructuring in prior quarters. Gross profit margin
significantly improved to 31.2% from 0.3% last year. This was also higher than the
26.2% margin posted in 1Q21 as well as margins earned during pre-pandemic times.
In fact, the company noted that margins would be higher once dine-in operations start
increasing contributions as delivery sales earn lower margins due to costs of packaging
and aggregators.

Similarly, operating profit margin improved sequentially, turning positive for the first
time at 0.8% in 2Q21 vs -2.1% in 1Q21. The company mentioned that it was able to
reduce fixed costs by ~48% in June 2021 vs pre-covid average monthly fixed cost.
This was achieved through manpower optimization and lease negotiations. Given the
improvement in margins, operating income during the second quarter turned positive
for the first time since the beginning of the pandemic at Php15Mil. This caused the first
half operating loss to narrow to Php24Mil. This outperformed our forecast as we were
expecting the company to book an operating loss of Php152Mil for the full year. We
expect further improvement in margins once sales recovery resumes, particularly after
daily new COVID-19 cases start declining, allowing the government to ease restrictions.

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Exhibit 2: Margins continue to improve

Source: MAXS, COL estimates

Maintain BUY. We currently have a BUY rating on MAXS with a FV estimate of Php10.5/sh.
Although MAXS faces several headwinds in the short-term such as the high unemployment
rate and re-imposition of ECQ in August, we are encouraged by the improving vaccination
rollout in the Philippines. We believe this will be key in allowing the government to ease
restrictions once the uptick in COVID-19 cases is controlled. This will also boost consumer
confidence, allowing sales and margins to resume their recovery.

Richard Laneda, CFA

AGI: 1H21 profit outperforms on EMP, Travellers
Senior Research Manager
income
Alliance Global Inc.
BUY 1H21 profit jump 124%. AGI’s 2Q21 profit reached Php5.94 Bil which is up almost
Php15.00 sevenfold from same period last year and up 132% from the previous quarter. We saw
improved performance from all businesses as expected but what was surprising was the
Php3.74 Bil income that Travellers posted. According to management, Travellers recorded
a Php4.8- Bil one-time gain from the services rendered by its subsidiary in relation to its
Westside City project.

For the first half of the year, AGI’s net income reached Php8.5 Bil, 124% higher Y/Y,
brought about by improvement in EMP’s income, narrowing of loss by Golden Arches, and
Travellers’ huge one-time gain in the second quarter. Compared to COL and consensus
forecast, AGI exceeded expectation owing to EMP’s stronger-than-expected earnings
and Travellers’ one-time gain of Php4.8 Bil. Although, we estimate that even without
the one-time gain, AGI’s earnings would have outperformed both COL and consensus
forecast, or at least are in line to reach them given the downside risk in earnings due to
the reimposition of Enhanced Community Quarantine or ECQ in Metro Manila.

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Exhibit 1. Results summary

Source: MEG, COL estimates, Bloomberg

BUY rating maintained

We are maintaining our BUY rating on AGI following its strong earnings which was driven
by Emperador. We believe AGI shares are very undervalued. AGI’s stake in EMP is already
worth more than AGI’s market cap. At EMP’s current price of Php12.24/sh, AGI’s stake is
worth Php157.94 Bil. This is equivalent to Php16.37 per share of AGI. If we deduct parent
level net debt as of 1Q21, the value of AGI’s stake in EMP still comes out to Php140.64 Bil,
which is 47.3% higher than AGI’s market capitalization based on its current price.

 
Other News:

Research Analysts Economy: BSP keeps key rate at a record low

John Martin Luciano, CFA
The BSP kept its key policy rate at a record low for a sixth consecutive meeting on
Frances Rolfa Nicolas
Thursday, even as BSP Governor Benjamin E. Diokno warned the renewed lockdown
Justin Richmond Cheng
poses a risk to economic recovery. The Monetary Board decided to maintain the interest
Adrian Alexander Yu
rate on the BSP’s overnight reverse repurchase facility at 2.0%. Likewise, the interest rates
Kerwin Malcolm Chan
on the overnight deposit and lending facilities were kept at 1.5% and 2.5%, respectively

Latest inflation forecasts have shifted marginally higher as the central bank revised its
inflation outlook for the year to 4.1% from 4.0%. Similarly, the BSP raised its inflation
forecasts for 2022 and 2023 to 3.1% from the 3% previous estimates for both years.
Factors that led to the revision include higher global crude and non-oil prices, weakening
of the peso, as well as concerns about the speed of arrival of imported pork. This also
factored in the latest inflation outturn. At the same time, the risks to the inflation outlook
remain broadly balanced over the policy horizon. The uptick in international commodity
prices due to improving global demand amid lingering supply-chain bottlenecks could
lend upside pressures to inflation. However, downside risks to the inflation outlook are
also seen from the spread of more contagious coronavirus variants. In particular, delays
in the lifting of containment measures could further dampen prospects for global growth
and domestic demand.

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

FRI 13 AUG 2021

The Monetary Board observed that the reimposition of quarantine measures to arrest
the recent wave of COVID-19 infections could pose a risk to the ongoing economic
recovery. As such, targeted fiscal and health interventions, especially the acceleration of
the Government’s vaccination program, will be crucial in safeguarding public health and
preventing deeper negative effects on the Philippine economy. The Monetary Board is
of the view that the expected path of inflation and downside risks to domestic economic
growth warrant keeping monetary policy settings unchanged. The Monetary Board
remains keen on sustaining monetary policy support for as long as necessary in order
for the momentum of economic recovery to gain more traction as well as to help boost
domestic demand and market confidence, especially as risk aversion continues to temper
credit activity. (Source: Businessworld, BSP)

CEB: No further work force reductions

CEB’s management said that it does not intend to reduce its workforce in its staff right-
sizing plan. The clarification was made following the news that the company might
further reduce its workforce as part of efforts to mitigate the impact of the pandemic on
its operations. CEB Director for Corporate Communications Carmina Reyes-Romero said
that the plan means that they are building an organization that is fit for purpose, and this
may include replacing resignations, shifting roles, and even adding people to maintain
the right number of workforce. Recall that the company already laid off ~40%, or around
1,800 of its total employees due to the pandemic. (source: Businessworld)

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

FRI 13 AUG 2021

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

CHIEF EQUITY STRATEGIST
april.tan@colfinancial.com

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA

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, CFA
SENIOR RESEARCH ANALYST RESEARCH ANALYST SENIOR RESEARCH ANALYST
john.luciano@colfinancial.com rolfa.nicolas@colfinancial.com justin.cheng@colfinancial.com

ADRIAN ALEXANDER YU KERWIN MALCOLM CHAN

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

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

24/F EAST TOWER, TEKTITE TOWERS,
EXCHANGE ROAD, ORTIGAS CENTER, PASIG CITY
PHILIPPINES 1605
TEL NO. +632 636-5411
FAX NO. +632 635-4632
WEBSITE: www.colfinancial.com

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