FRI 01 OCT 2021

Top Story:
(AS OF SEP 30, 2020)
AEV: JERA deal gives AP a competent technical partner, opens up INDICES
investment opportunities for the group
Close Points % YTD%
PSEi 6,952.88 18.77 0.27 -2.62
All Shares 4,325.84 28.83 0.67 1.25
Other News: Financials 1,404.49 -6.70 -0.47 -2.98
Holding Firms 6,963.05 12.13 0.17 -5.32
Industrial 10,256.00 219.53 2.19 9.18
Banking Sector: Bank Lending expands 1.3% y/y in August Mining & Oil 9,281.90 196.02 2.16 -2.58
Economy: Metro Manila to stay under Alert level 4 until mid-Oct Property 3,024.21 -24.14 -0.79 -17.47
Services 1,935.38 18.18 0.95 27.82

COVID-19 Update:
Dow Jones 34,390.72 91 0.26 12.36
S&P 500 4,359.46 6.83 0.16 16.06
Total Cases Total Deaths Total Recoveries
Nasdaq 14,512.44 -34.24 -0.24 12.60

Philippines 2,549,966 (+14,286) 38,294 (+130) 2,373,378 (+8,268)

INDEX GAINERS
USA 44,311,573 (+111,071) 716,664 (+1,722) 33,708,127 (+73,425)
Ticker Company Price %
Worldwide 234,521,405 (+481,512) 4,796,220 (+7,625) 211,314,970 (+465,482) CNVRG Converge ICT Solutions Inc 40.00 5.26
FGEN First Gen Corporation 33.95 4.62
JFC Jollibee Foods Corp 205.00 4.59
URC Universal Robina Corp 135.90 4.22
Market Summary: AP Aboitiz Power Corp 31.00 4.03

The local stock market closed higher on Thursday amid hopes that the government will INDEX LOSERS
further ease restrictions in Metro Manila. Ticker Company Price %
SMPH SM Prime Hldgs Inc 32.75 -2.82
AEV Aboitiz Equity Ventures 48.60 -2.61
The PSEi rose 18.77 points or 0.27% to close at 6,952.88. The top movers were CNVRG ICT Intl Container Term 195.00 -2.50
(+5.26%), FGEN (+4.62%), JFC (+4.59%), URC (+4.22%), and AP (+4.03%). On the other BDO BDO Unibank Inc 110.60 -2.47
hand, these were partially offset by decliners such as SMPH (-2.82%), AEV (-2.61%), ICT GTCAP GT Capital Hldgs Inc 510.00 -0.97

(-2.50%), BDO (-2.47%), and GTCAP (-0.97%).

TOP 5 MOST ACTIVE STOCKS
Value turnover was flat at Php9.9Bil. Meanwhile, net foreign selling went down to Ticker Company Turnover
Php346.7Mil from the Php1.5Bil billion seen on Wednesday. CNVRG Converge ICT Solutions Inc 1,139,568,000
AC Ayala Corporation 574,183,900
ICT Intl Container Term 527,890,500
BDO BDO Unibank Inc 506,321,500
ACEN AC Energy Phils Inc 472,075,500

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

FRI 01 OCT 2021

Top Story:

George Ching
Senior Research Manager
AEV: JERA deal gives AP a competent technical
partner, opens up investment opportunities for the
Aboitiz Equity Ventures group
HOLD
Php54.95 AP obtains a competent technical partner in JERA. AEV announced last September 27
that it has agreed to sell a 25% stake in AP (1.84Bil common shares of AP) to JERA Asia Pte.
Ltd. (a wholly owned subsidiary of JERA Co., Inc., a power generation company based in
Japan, and a JV between Tokyo Electric Power Group and the Chubu Electric Power Group)
for US$1.46Bil (Php74.6Bil). Based on our discussion with AEV management, one of the
main consideration for the partial stake sale of AP is to bring in a competent technical
partner that will help AP achieve its long term goals. JERA is one of Japan’s largest power
generation company with 80,000MW of power generation capacity with presence in over
10 countries (including the Philippines, where it partnered with AP for the Pagbilao coal
unit 3). JERA’s specializes in offshore wind power generation and LNG power generation
technologies. This could give a boost to AP’s entry into LNG power generation, as the
company is looking to build 1,000MW of LNG power generation capacity by 2030. JERA
could also enhance the sourcing of AP’s LNG fuel supply as JERA is the largest user of
LNG in the world. Overall, management believes that this partnership puts AP a step
closer to its goal of increasing its generation portfolio to 9,200 MW by 2030 and achieve
its 10-year strategy of a 50:50 balance between “Cleanergy” and thermal portfolios.

Proceeds will be used to pursue growth initiatives across the Group’s businesses.
With regards to the use of the Php74.6Bil in proceeds raised from the sale, AEV said this
will enable the company to reallocate capital to fund growth projects across the Group’s
other core businesses, which include banking (UBP), Infra-Cement (Republic), Food
(Pilmico) as well as real estate (Aboitiz Land). Management also believes that with the
sudden boost in liquidity, AEV can also begin to assess investment opportunities outside
its core businesses. Unfortunately, management has yet to give the specific details on
these potential investments. Management also added that part of the proceeds (size yet
to be determined) could be used to refinance AEV’s debt.

Maintaining HOLD rating. We have a HOLD rating on AEV with a FV estimate of 54.96/
sh. We continue to like AEV given the expansion plans of its power subsidiary AP. AEV
is also well positioned to benefit in the government’s infrastructure programs owing to
its investment in republic cement as well as its strong balance sheet and excellent track
record in acquiring businesses. However, AEV’s share price has increased by 3% in the
YTD period, outperforming the PSEI’s 2.6% decline. Based on its current market price of
Php48.6/sh, upside to our FV estimate is limited at 13.1%.

COL Financial Group, Inc. 2

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

FRI 01 OCT 2021

Other News:

Research Analysts Banking Sector: Bank Lending expands 1.3% y/y in August

John Martin Luciano, CFA Bank lending recovered in August to register its first annual growth after eight straight
Frances Rolfa Nicolas months of decline amid improvements in sentiment brought about by the continued
Justin Richmond Cheng rollout of COVID-19 vaccines and the gradual easing of quarantine restrictions.
Adrian Alexander Yu
Outstanding loans of universal and commercial banks increased by 1.3% y/y in August
Kerwin Malcolm Chan
following a 0.7% y/y decline in July. Loans for production activities grew faster at 3.1%
y/y from 0.8% y/y in the previous month. The expansion was driven by the growth in
loans for real estate activities (+7.2% y/y); information and communication (+20.3%
y/y); manufacturing (+3.0% y/y); professional, scientific and technical activities (+89.8%
y/y); and transportation and storage (+9.5% y/y). On the other hand, consumer loans
remained subdued, contracting by 8.1% y/y largely due to the continued decline in
motor vehicle and credit card loans. (Source: BSP, Businessworld)

Economy: Metro Manila to stay under Alert level 4 until mid-

Oct

Malacañang announced that Metro Manila would stay under Alert level 4 from October
1 to 15. Note that Metro Manila is being used as the pilot area for the new quarantine
classification system. Under Alert level 4, there are less restrictions with the government
allowing certain indoor services to operate at 20% capacity for fully vaccinates-
individuals. Specifically, Alert level 4 allows dine-in services, in-person religious services,
and personal care services. The government’s COVID-19 task force also allowed the
reopening of fitness services at 20% capacity. These easing of restrictions have taken
into account the lower daily cases in the said area. (Source: Philstar)

COL Financial Group, Inc. 3

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

FRI 01 OCT 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

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COL Financial Group, Inc. 5