J.P. 摩根-新兴市场-股票策略-菲律宾：东方明珠的股票投资者指南-2019.7.1-120页 (2).pdf

Global Emerging Markets Equity Research01 July 2019 Philippines 101An equity investors guide to the Pearl of the OrientPhilippines Equity StrategyJeanette Yutan AC(63-2)878-Bloomberg JPMA YUTAN J.P.Morgan Securities Philippines,Inc.Daniel Andrew Tan,CFA(63-2)554-J.P.Morgan Securities Philippines,Inc.Jelline Gaza,CFA(63-2)878 J.P.Morgan Securities Philippines,Inc.Southeast Asia and Emerging Markets Equity StrategistRajiv Batra AC(65)6882-Bloomberg JPMA BATRA J.P.Morgan Securities Singapore Private LimitedASEAN Head of ResearchAjay Mirchandani(65)6882-J.P.Morgan Securities Singapore Private LimitedEM Equity StrategyPedro Martins Junior,CFA(55-11)4950-Banco J.P.Morgan S.A.Anindita Gandhi(91-22)6157-J.P.Morgan India Private LimitedSonia Tewani(91-22)6157 J.P.Morgan India Private LimitedJainik Mody,CFA(44 20)3493-J.P.Morgan Securities plcSee page 117 for analyst certification and important disclosures,including non-US analyst disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment This is the maiden edition of our Philippines 101 country handbook.This report aims to serve as a primer and reference guide on the Philippines for new and seasoned equity investors.It covers the key aspects and drivers of the countrys real economy and financial markets.Please contact J.P.Morgans ASEAN Research and Equity Strategy team for more information and advice on the Philippine equity market.Source:Violina/S2Global Equity Research01 July 2019Jeanette Yutan(63-2)878-Rajiv Batra(65)6882- Table of ContentsOur view in a nutshell.4Things to know.6Equity market.7What works in the Philippines?.7Market overview.8History and development.9Philippine market composition shifts.14PER valuation trend in the Philippines.15Market earnings growth trend.15Capital raising activities via the stock market.16Market cap and ADT trends.18Philippines:Country Overview.20Geography.20Population and demographics.22Labor.25Politics.29Education.33Income distribution.34Competitiveness and ease of doing business.36Economic backdrop.37Recession and reforms in the 1980s.37Philippines in the Asian Financial Crisis.37Post AFC pain and challenges.38Philippines road to investment grade.39The Duterte administration and the road ahead.42Economic structure.45Economic growth.47Private consumption growth drivers.48Government spending growth drivers.54Net trade:Increasing deficit in recent years.57Current account:Shift to a deficit beginning 2016.58Capital and financial account:Small,but growing FDI flows.59Equity market foreign fund flows.61Monetary policy and inflation.63Currency.65Fiscal policy.67Philippines amid global supply chain shift.71Business landscape.733Global Equity Research01 July 2019Jeanette Yutan(63-2)878-Rajiv Batra(65)6882- Sector snapshot.75Sector&industry composition.75Conglomerates.76Banking.80Property.86Consumer.93Utilities.104Telecoms.107Cement.112Appendix.114MSCI Philippines stock universe.114Top 100 Philippines stocks.1154Global Equity Research01 July 2019Jeanette Yutan(63-2)878-Rajiv Batra(65)6882- Our view in a nutshellWe expect the Philippines to grow at a 6%clip in the next two years,slightly faster than EM Asias 5.6%and EMs 4.5%.We expect the above-trend growth to be driven by steady private consumption and robust public infrastructure investment.We expect personal consumption to rebound amid a quick deceleration of inflation and steady Overseas Filipino Worker(OFW)flows.Fiscal health,on the other hand,is at its best with tax efforts running at a record high,fiscal deficit kept at a manageable 3%of GDP,and a successful ramp-up of government spending to above 5%of GDP.The Philippines is one of the most defensive economies in the region.This is especially important amid rising US-China trade tensions.Private consumption,which is two-thirds of the economy,is underpinned by the countrys demographic dividend from having a young,scalable population(63%of the 100m population belongs to the working population).The rapid expansion of middle income households is also a key driver of the economy.The strong fiscal impulse has also added to overall macro growth resiliency.Balancing growth and currency stability.The Bangko Sentral ng Pilipinas(BSP,central bank of the Republic of the Philippines)finally reversed its tightening mode last year and started cutting policy rates in May(25bps to 4.5%)amid a quick deceleration of inflation pressure.However,liquidity conditions are challenging.Excess liquidity is at a 10-year low while peso LDR has exceeded 80%.BSP has reacted by reducing the reserve requirement ratio(RRR)by 200bps to 16%and has committed reduce it to single digits by 2023.The current account deficit amid investment-led growth and a record government borrowing program make it essential for the government to do a balancing act between growth and currency stability.We are projecting PHP to depreciate to Php53.25 by end of 2019.Corporate earnings growth treading a thin line.JPM expects market earnings to grow by 11%in 2019E,slower than consensus at 13%.The key variance is from consumer and utilities,which are currently seeing the most negative revisions.Consumer is facing a tough top-line base and margin pressure from higher costs.Utilities,on the other hand,are saddled with various company-specific risks,i.e.water issues for MWC,higher interest costs for AP.Banks are expected to deliver mid-teens growth on NIM pick-up,low-teens growth,and higher non-interest income growth.Technical factors are also weighing on equity markets.The inclusion of China A,Saudi Arabia and Argentina in the MSCI EM is expected to produce a net outflow from the Philippines over the next 6-9 months.The recent MSCI rebalancing led to a passive-led outflow of US$107m.Core investment thesis.We are Neutral on Philippine equities.The Philippines is well-positioned against a backdrop of nagging external uncertainties given its domestic-centric economy,ample fiscal room,and easing monetary policy outlook.Falling inflation amid weak oil prices is a tailwind,providing a boost to private consumption and room for further monetary policy easing.Investor positioning also remains light.However,we are mindful of the fundamental downward pressure on the PHP from stronger capital spending and slowing growth of OFW remittances and business process outsourcing service export revenues.We also see further downside risk to corporate earnings growth trends.Our 2019E market EPS growth is pegged at 11%versus the markets 13%,with downside primarily from the consumer and utilities sectors.This limits the re-rating potential of MSCI PH which currently trades at 17x PER,a premium to peers and close to the historical average.Our preferred picks are MBT(improving RoE),MEG&RLC(high earnings visibility,positive sentiment on easing monetary policy),and ICT(improving FCF).We switch out of BDO to PGOLD(strong earnings visibility,attractive valuations).(See our earlier note here.)5Global Equity Research01 July 2019Jeanette Yutan(63-2)878-Rajiv Batra(65)6882- Table 1:Philippine macro forecastsAverage2012-1620172018f2019f2020fReal GDP,%change6.66.76.25.76.0Consumption5.04.75.24.94.8Investment3.62.63.85.26.1Net trade-2.1-0.7-2.8-4.3-4.9Consumer prices,%oya2.22.95.22.53.1%Dec/Dec2.32.95.12.03.7Wholesale prices,%oya-4.2-0.90.71.21.2Government balance,%of GDP-1.8-2.6-3.2-2.8-3.0Merchandise trade balance(US$bn)-21.9-34.6-41.5-44.0-44.3 Exports45.550.052.157.763.7 Imports67.484.693.7101.8107.9Current account balance7.6-2.4-8.0-7.5-9.2%of GDP2.7-0.8-2.4-2.2-2.4International reserves,(US$bn)73.771.870.873.872.8Total external debt,(US$bn)77.471.569.567.565.5 Short term16.416.216.216.216.2Total external debt,%of GDP2823212017Total external debt,%of exports7659544844Interest payments,%of exports244331.Contribution to growth of GDP.2.Debt with original maturity of less than one year.3.Exports of goods,services,and net transfers.Source:J.P.Morgan estimates.6Global Equity Research01 July 2019Jeanette Yutan(63-2)878-Rajiv Batra(65)6882- Things to knowThe Philippines is an archipelago with over 7,000 islands covering a total land area of 300k square kilometers.The large island groups are Luzon,Visayasand Mindanao.The Philippines has the 5thlongest coastline in the world,estimated at 36,289 kilometers.Blessed with a rich marine life and given its tropical climate,this makes the Philippines one of the popular beach destinations in Asia.The Philippines ranks third on the 2017 World Risk Report by the United Nations Institute for Environment and Human Security with the greatest exposure to natural disasters.The country lies in the Pacific Ring of Fire and is located above the equator,facing the Pacific Ocean.Philippines has over 100m population(13thin the world,7th in Asia)with a median age of 24 years old and half of the population living in urban areas.Averagepopulation growth is pegged at 1.7%p.a.About 63%of the population belongs to the 15 to 64 years old range.Labor force is about 43.6m with 5.2%unemployment rate and 15.6%underemployment rate(Jan-19).GDP per capita exceeded US$3,000 in 2018,lowest compared to the ASEAN 5(Indonesia,Malaysia,Singapore,Thailand,and Philippines)but the 2nd fastest growing in the last 10 years after Indonesia at 4%.Philippines has a high concentration of economic activities in Luzon,accounting for 73%of total economic output.National Capital Region(NCR)or synonymous to Metro Manila generates about 38%of the countrys GDP.NCR per capita GDP is about US$9k.Two-thirds of the economy is accounted by private consumption.Services generated 60%of GDP.Agriculture represented less than 10%of total output.Philippines biggest export is labor.It receives US$28bn(9%of GDP)in remittances from the 10m documented Filipinos working across 202 countries.Outsourcing and offshoring(O&O)generated US$24bn(7%of GDP)in service export revenues in 2018.The countrys biggest merchandise exports is electronics(60%of total exports),most of which are semiconductors.The latter has a high import content.The USA is the biggest export market(16%of total exports)while China is the biggest source of imports(20%).The Philippines has the biggest trade deficit with China.The Philippines imports almost all of its fuel requirements,majority from the Middle East countries.This has significant impact to the countrys inflation metrics given direct energy component is estimated to be around 15%of the CPI(consumer price index).The Philippines received its historic investment grade rating status in 2013 from all three major credit rating agencies(Fitch,S&P,Moodys)after a successful fiscal consolidation program which started in the Arroyo administration.This came after the country exited the IMF program in 2006 after 45 years.The improved fiscal state of health of the country allowed the government to finally address the infrastructure gap.Infrastructure spending as a%of GDP languished at below 3%for at least 15 years.It has now accelerated and is running at 5%as of 2018.FDI reached barely US$10bn in 2018.Less than 25%of which is from fresh equity.ASEAN is the largest source of the countrys FDI(U$1bn)56 250.9 Mid cap(U$0.5bn-1bn)13 8.9 Small cap(80MaleFemale24.5%11.5%9.9%8.8%8.4%6.8%4.0%26.1%TagalogBisasay/BinisayaCebuanoIlocanoHiligaynon/IlonggoBikol/BicolWarayOthers23Global Equity Research01 July 2019Jeanette Yutan(63-2)878-Rajiv Batra(65)6882- Healthcare expenditure per capita has been on a rising trend.According to the World Bank,per-capita healthcare expenditure has increased considerably since 1995.It has grown most years during 2000-2015 except for the 2001-2002 period.The growth rate has been stabilizing in recent years.Figure 20:Healthcare expenditure per capita and yearly growth ratesSource:World BankThe public/private share of healthcare expenditure has been undergoing significant shift in the last 15 years.From a fairly balanced split(45%public,55%private)in 2000,private spending on healthcare services has since grown to 73%of total in 2011-12 before cooling of in later years.As of 2015,healthcare spending is 32%public and 68%private.Figure 21:Healthcare expenditure public&privateSource:World Bank32.8 28.2 27.3 32.3 34.2 46.6 54.9 65.6 77.3 79.5 91.8 98.9 112.9 123.2 119.2 126.9-20%-10%0%10%20%30%40%(70.0)(20.0)30.0 80.0 130.02000200120022003200420052006200720082009201020112012201320142015Current health expenditure per capita(current US$-LHS)YoY growth(%-RHS)-10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.02000200120022003200420052006200720082009201020112012201320142015Domestic general government health expenditure(%of current health expenditure)Domestic private health expenditure(%of current health expenditure)Healthcare expenditure per capita stabilizing in recentyears with a shift from public to private healthcare spending24Global Equity Research01 July 2019Jeanette Yutan(63-2)878-Rajiv Batra(65)6882- UrbanizationUrban population has been growing by an average of 1.5%per annum for the period of 2004-2010.This accelerated to 2%during 2010-2017.Figure 22:Urbanization in the PhilippinesSource:World BankCurrently,around half of the country has been urbanized.This is in line with the ASEAN(ex.Singapore)average of 45.5%.Table 11:Philippines urbanization&ASEAN peers%Urbanization20132014201520162017Urban population(%of total)Singapore100.0100.0100.0100.0100.0Malaysia72.973.674.274.875.4Indonesia52.052.653.354.054.7Thailand46.246.947.748.449.2Philippines45.946.146.346.546.7Vietnam32.433.133.834.535.2Lao PDR31.932.533.133.734.4Cambodia21.421.822.222.623.0Urban population growth(annual%)Singapore1.61.31.21.30.1Malaysia2.72.62.52.32.2Indonesia2.62.52.52.42.3Thailand2.12.01.91.91.8Philippines2.12.02.02.02.0Vietnam3.33.23.23.13.0Lao PDR3.23.23.23.33.3Cambodia3.43.43.43.33.3Source:World Bank0.0%0.5%1.0%1.5%2.0%2.5%0102030405060030405060708091011121314151617MillionsUrbanization CAGRUrbanization CAGRUrbanization rate at 2.0%in recent yearsPhilippines is at an average urbanization level among ASEAN25Global Equity Research01 July 2019Jeanette Yutan(63-2)878-Rajiv Batra(65)6882- LaborDespite strong GDP growth of 5%p.a.from 2000-2012,labor market inefficiencies remained high in the country with aggregate unemployment and underemployment rate still at 25%.This reflects a low elasticity of employment to GDP growth in the early 2000s.During the period after 2012,there has been a noticeable improvement in employment conditions,with total unemployment and underemployment declining to 21%in 2019.This could partly be driven by the growth in the BPO sector(Please refer to the Offshoring&outsourcing parts of the economic section),among others.Figure 23:Labor inefficiencies%Source:Philippine Statistical Yearbook 2013,NSCBHowever,the broad labor data improvement is not comforting given the gradual decline of labor forc