Stocks in Focus: WED 27 MAY 2020

FGEN: Singapore group plans to acquire up

to 9% of FGEN at Php22.50/sh
Singapore group plans to acquire up to 9% of FGEN at Php22.50/sh. Valorous Asia (AS OFMAY 26, 2020)
Holdings, a wholly owned subsidiary of KKR Asia Pacific Infrastructure Holdings, Inc., is INDICES
seeking to acquire from 215.9Mil to 323.8Mil outstanding common shares of FGEN through Close Points % YTD%
PSEi 5,496.83 -42.36 -0.76 -29.67
a tender offer exercise. The number of shares represent 6% to 9% of FGEN’s outstanding
All Shares 3,313.02 -36.96 -1.10 -28.75
common shares. The tender offer price is at Php22.50/sh. The tender offer period is from Financials 1,077.16 -25.34 -2.30 -42.20
MAY 27 to JUNE 24 2020. Holding Firms 5,541.82 1.38 0.02 -27.01
Industrial 7,092.13 -212.68 -2.91 -26.39
Mining & Oil 4,337.50 -127.77 -2.86 -46.40
The tender offer price represents a 26.8% premium to FGEN’s market price and only a 4.7% Property 2,764.89 -21.01 -0.75 -33.45
discount to our FV estimate for FGEN. So far, FPH, FGEN’s controlling shareholder, has yet Services 1,319.50 -2.63 -0.20 -13.82
to announce whether it will participate in the tender offer. Assuming full participation, for
Dow Jones -9 -0.04 -14.27
every 11.11 shares, shareholders are entitled to tender 1 share. 24,465.16
S&P 500 2,955.45 6.94 0.24 -8.52
Nasdaq 9,324.59 39.71 0.43 3.92

Top Stories:
INDEX GAINERS
Ticker Company Price %
Economy: House panel approves Php1.3Tril stimulus bill
SMPH SM Prime Hldgs Inc 29.50 1.72
Economy: Government mulls new taxes in 2021 to recover stimulus costs LTG LT Group Inc 7.49 1.35
Economy: Metro Manila mayors agree to recommend shift to GCQ on June 1 SM SM Investments Corp 838.00 1.21
Banking Sector: BSP says loans to affected large firms RRR compliant ICT Int'l Container Term 85.30 1.19
AP Aboitiz Power Corp 26.80 1.13
PCOR: 1Q20 net loss reaches Php4.9Bil on weak demand and oil price

INDEX LOSERS

Other News: Ticker Company Price %

JFC Jollibee Foods Corp 119.00 -10.53
SECB Security Bank Corp 77.10 -6.83
ABS: NTC says no abuse in ABS’ halt order DMC DMCI Hldgs Inc 3.93 -4.15
HLCM, CHP: HLCM and CHP resume operations BDO BDO Unibank Inc 85.90 -4.13
ALI Ayala Land Inc 29.90 -3.24

COVID-19 Update TOP 5 MOST ACTIVE STOCKS

Ticker Company Turnover
JFC Jollibee Foods Corp 571,918,200
Total Cases Total Deaths Total Recoveries
ALI Ayala Land Inc 559,858,100
BDO BDO Unibank Inc 504,693,500
Philippines 14,669 (+350) 886 (+13) 3,412 (+89) PGOLD Puregold Price Club Inc 316,352,100
SECB Security Bank Corporation 228,057,600
USA 1,725,491 (+19,334) 100,573 (+769) 478,293 (+15,524)

Worldwide 5,678,362 (+95,992) 351,666 (+4,103) 2,426,456 (+65,413)

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

WED 27 MAY 2020

Market Summary

The local stock market continued to slide, dragged by the performance of JFC (-10.53%)
following its disclosure that it will spend Php7Bil to restructure its business and will have
poor earnings this year.

The PSEi fell 42.36 points or 0.76% to end at 5,496.83. The main drags were ALI (-3.24%),
BDO (-4.13%), JFC (-10.53%), AC (-1.80%), and SECB (-6.83%). On the other hand, these
were partially offset by gainers such as SM (+1.21%), SMPH (+1.72%), BPI (+1.12%), ICT
(+1.19%), and AEV (+0.48%),

Other restaurants such as MAXS (-1.96%) and PIZZA (-2.82%) as well as food manufacturer
URC (-1.95%) also declined amidst reports that the government seeks to tax junk food
including salty snacks, burgers, fries, fried chicken, and pizza.

Value turnover rose to Php5.2Bil from Php4.0Bil in the previous session. Meanwhile,
foreigners continued to sell stocks, liquidating Php1.2Bil worth of shares.

In the US, major stocks indices (DJIA +2.17%; S&P 500 +1.23%; NASDAQ +0.17%) rallied
amidst optimism on the reopening of the economy. 

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Stocks in Focus:

George Ching FGEN: Singapore group plans to acquire up to 9%

Senior Research Manager
of FGEN at Php22.50/sh
First Gen Corporation
BUY Singapore group plans to acquire up to 9% of FGEN at Php22.50/sh. Valorous Asia
PHP23.60 Holdings, a wholly owned subsidiary of KKR Asia Pacific Infrastructure Holdings, Inc.,
is seeking to acquire from 215.9Mil to 323.8Mil outstanding common shares of FGEN
through a tender offer exercise. The number of shares represent 6% to 9% of FGEN’s
outstanding common shares. The tender offer price is at Php22.50/sh. The tender offer
period is from MAY 27 to JUNE 24 2020.

The tender offer price represents a 26.8% premium to FGEN’s market price and only a 4.7%
discount to our FV estimate for FGEN. So far, FPH, FGEN’s controlling shareholder, has
yet to announce whether it will participate in the tender offer. Assuming full participation,
for every 11.11 shares, shareholders are entitled to tender 1 share.

Maintaining BUY rating for FGEN. We have a BUY rating on FGEN with a FV estimate
of Php23.6/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. Based on FGEN’s market
price of Php17.74/sh, the stock is trading at only 7X 20E P/E, while upside to our FV
estimate is significant at 33%.

Top Stories:

Kerwin Macolm Chan Economy: House panel approves Php1.3Tril

Research Analyst
stimulus bill
The House of Representatives’ Defeat COVID-19 Committee approved the Php1.3Tril
economic stimulus package that aims to sustain worker income and help industries that
were affected by the global pandemic. Under the proposed stimulus package, Php650Bil
will go to the government’s Build, Build, Build program for three years starting 2021.
Meanwhile, for this year, Php568Bil will be earmarked for providing working capital
assistance to ensure businesses will continue operating post-lockdown and help workers
affected by the pandemic. For 2021, the remaining Php105Bil will be allocated for loans
for MSMEs and funding for the National Development Corp. The Defeat COVID-19

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Committee also approved the proposed COVID-19 Unemployment Reduction Economic

Stimulus Act of 2020 that sets a Php1.5Tril infrastructure spending program over three
years, which targets increased spending on readily implementable health, education,
agriculture, local roads, and livelihood spending items. (Source: Bworldonline)

Justin Richmond Cheng Economy: Government mulls new taxes in 2021 to

Research Analyst recover stimulus costs
The government is looking to implement new taxes starting 2021 to help partially offset
the stimulus measures being done this year amid COVID-19. In fact, costing is currently
being studied for a proposed VAT on the digital economy, higher sugar-sweetened
beverage taxes, and new taxes on junk-food. Assistant Finance Secretary Teresa Habitan
said that aside from a return to growth pre-COVID, the DoF also wants to see a budget
deficit that is sustainable and upholds the country’s overall creditworthiness.

Under the government’s plan, the digital economy VAT is expected to generate Php15Bil
on its first year of implementation. Meanwhile, the ‘junk-food’ tax is expected to generate
Php800Mil to Php1Bil in three years, after levying an 8% tax on foods containing high
trans-fat and salt. This is supported by the National Tax Research Center’s (NTRC) study,
albeit the NTRC proposes a higher tax rate. Finally, the government is looking to index
the present sugary drinks tax to 6%, and higher motor vehicle user charges are also being
proposed. (Source: Philstar)

John Martin Luciano, CFA

Economy: Metro Manila mayors agree to
Senior Research Analyst
recommend shift to GCQ on June 1
All mayors in Metro Manila have unanimously approved the recommendation to place
the National Capital Region (NCR) from modified enhanced community quarantine
(MECQ) to general community quarantine (GCQ) on June 1, citing that the economy in
the NCR suffered amidst the various restrictions imposed due to the coronavirus disease
pandemic. However, local government units may still impose lockdown in specific areas
like barangays with increasing cases of coronavirus disease. The Metro Manila Council,
which is a policy-making body composed of Metro Mayors and MMDA, will submit their
recommendation to the IATF, who will give the final decision whether to extend to MECQ
or shift to GCQ in Metro Manila. (Source: Inquirer)

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John Martin Luciano, CFA Banking Sector: BSP says loans to affected large
Senior Research Analyst
firms RRR compliant
The BSP has expanded the coverage of relief measures to include large enterprises
affected by the economic fallout from the coronavirus pandemic. Loans granted by banks
to affected large enterprises with an asset size of more than Php100Mil, excluding land,
as well as a workforce of 200 or more would now be counted as part of compliance with
the reserve requirement ratio (RRR). Large enterprises directly impacted by the contagion
such that its liabilities has become more than its assets or has experienced at least a 50%
drop in gross receipts for at least one calendar quarter would be covered. The new policy
would be effective on May 29 and would be available to banks and quasi-banks until
December 30 next year. (Source: Philstar)

Frances Rolfa Nicolas

PCOR: 1Q20 net loss reaches Php4.9Bil on weak
Research Analyst
demand and oil price
Petron Corporation
HOLD 1Q20 net loss reaches Php4.9Bil on weak demand and oil price. PCOR’s 1Q20 net
PHP3.10 loss reached Php4.9Bil, a reversal from the Php1.3Bil net income registered in 1Q19. The
huge loss was attributable to weak demand for petroleum products amid the COVID-19
pandemic, and the significant drop in oil prices. Note that the company incurred significant
inventory losses as oil price plunged by 66% to US$23/bbl by end-March from US$67/
bbl by end-December last year. Meanwhile, 1Q20 revenues dropped 16% to Php104.6Bil
due to lower pump prices and lower volumes. The company noted that combined 1Q20
volumes from Philippines and Malaysia fell 6.1% to 24.7Mil barrels.

Exhibit 1: Results Summary

source: PCOR

We currently have a HOLD rating and FV estimate of Php3.1/sh on PCOR.

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Other News:

Research Analysts ABS: NTC says no abuse in ABS’ halt order

John Martin Luciano, CFA The National Telecommunications Commission (NTC) has asked the Supreme Court to
Frances Rolfa Nicolas deny ABS’ petition to stop the implementation of its cease-and-desist order. The NTC
Justin Richmond Cheng
argued that the halt order is valid and that it did not commit grave abuse of discretion.
Adrian Alexander Yu
NTC said that the letter of the House of Representatives and the Senate Resolution, which
Kerwin Malcolm Chan
urged the commission to issue provisional authority to the network, merely express the
sentiment of the Congress. Moreover, the NTC maintained that it cannot authorize ABS
to operate without a new franchise from Congress. (source: Businessworld)

HLCM, CHP: HLCM and CHP resume operations

HLCM and CHP disclosed that they have restarted operations in their manufacturing
plants in Luzon and Davao. Specifically, HLCM’s facilities in La Union, Bulacan, Manila,
Batangas and Davao, and CHP’s Solid cement plant in Rizal have resumed work following
the imposition of a relaxed quarantine. Recall that both companies suspended their
operations mid-March due to the lockdown. (source: Businessworld)

Change in Shareholdings:
Date of Acquired or Price per
Stock Volume Person (Designation)
Disclosure Disposed share
Isidro A. Consunji
22-May DMC 600,000 A 4.10
(Chairman and President)
Angelo Raymundo Q. Valencia
26-May NIKL 10,000 A 1.58
(Independent Director)
Source: PSE

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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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