J.P. 摩根-亚太地区-股票策略-菲律宾股票策略：2019年展望——注意增长和汇率风险-2019.3-58页.pdf

Philippine Equity Strategy2019 outlook:Mind the growth and currency risksPhilippine Equity StrategyJeanette YutanAC(63-2)878-J.P.Morgan Securities Philippines,Inc.See the end pages of this presentation 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 decision.Asia Pacific Equity ResearchMarch 2019Daniel Andrew Tan(63-2)554 J.P.Morgan Securities Philippines,Inc.ASEAN Equity StrategyRajiv Batra(91-22)6157-J.P.Morgan India Private Limited2Philippine Equity StrategyAgendaSummaryMacro drivers:Slower growth,easing inflation,and potential rate cutsFiscal policy:Minimal noise from mid-term electionsStock Views:Top Picks&AvoidsSector ViewsEarnings&valuations:Downside to 13%Street EPS growth expectations3Philippine Equity StrategySummaryStock Views:Top Picks&AvoidsSource:J.P.Morgan estimates,Bloomberg.Valuations as of 13 March 2019.Neutral on Philippines.The deceleration of inflation and the appointment of a pro-growth BSP Governor could pave the way for an earlier-than-expected easing of monetary policy.However,we are mindful of the downside risks to GDP and EPS growth.We are also concerned about the structural CAD amid dampened outlook on external trade,slowdown in BPO&OFW flows,and chronically low level of FDIs.GDP growth could decelerate to 6%in the next two years from the 6.6%average in the last 5Y,due to risks to government spending and net trade.Near-term risks include delayed passage of the 2019 national budget.Earnings could disappoint Street growth expectations of 13%/12%in 2019E/2020E.Higher interest rates&slowdown in growth pose risk to corporates earnings.Monetary policy could turn more accommodative following the inflation downtrend and appointment of former budget Chief Ben Diokno as BSP governor.The BSP Chief has signaled potential rate cuts and quarterly RRR cuts.However,this dampens the currency outlook;CAD is expected to stay at 2.5%of GDP.External drivers that could drive re-rating of PH equities growth differential of PH vs rest of the world on a faster slowdown of global growth.Stock preferences.Despite potential for easing of monetary policy,we think banks mid-teens EPS growth in 2019 will be a positive driver for the big banks to outperform the broader market.Our preferred picks are BPI and MBT.Outside of banks,our portfolio construction is based on a bottom-up process.We favor the mid-caps real estate names like MEG and RLC.Both have low or no bottom-up risks,high earnings visibility,and attractive valuations.On the other hand,we think there are still legs for ICT to move up on sustained earnings strength due to its solid operational trends.MSCI Philippines 12m forward PERSource:Bloomberg.Mkt capPER(x)P/BV(x)DY(%)ROERating(US$m)FY19EFY19EFY19EFY19ETop PicksBPI OW 7,40313.81.472.111.1MBT OW 5,95311.71.031.39.1RLC OW 2,33414.91.221.28.5MEG OW 3,30710.40.991.210.0ICT OW 4,51622.02.242.610.1Stocks to AvoidGLO UW 4,66912.53.084.925.8URC UW 6,05131.23.672.212.0SMPH UW 20,61330.83.501.011.94Philippine Equity StrategyOur Base,Bull,Bear Cases for PhilippinesBase Case(PSEi=7,700)EPS Outlook5%downside to consensus FY19E/FY20E EPS growth of 13%/12%for MSCI PHAve EPS growth of 7%in the last 8YStable PERSteady 15x PER,or 1SD below 10Y meanLower PER accounts for new macro norms normalization of interest rates,slower GDP growth,US Fed rates,Govt crowding out,persistent CADGDP support from strong fiscal impulse,moderation of inflation,and light investor positioning limit risk of further de-ratingBull Case(PSEi=9,500)EPS potential upside5%upward EPS revision vs consensus 2020E EPS growth of 12%Established downtrend in inflation and shift to an accommodative monetary policyGDP growth moves back to 7-8%Banks asset quality remains healthy,mid-teens credit growth sustainedPER re-rating of 11%to 16.7x or 10Y meanImprovement of service and merchandise exports,leading to stable current account and currencySupply chain shift to the PH on the back of an escalated US-China trade warStable fiscal healthBear Case(PSEi=5,800)EPS potential downside10%downside EPS revision or broadly flat EPS growth in 2020ESharp increase in global oil prices,sustained high inflation,and further tightening of monetary policy which will dampen demand and pressure margins across sectorsThird telco aggressively rolls out its infra leading to lower yields and price competitionBanks asset quality deterioratesPER de-rating of 20%to 12x or 2SD below 10Y average driven by:Elevated inflation trajectorySharp PHP depreciation on further widening of CADDeterioration of fiscal metrics due to further strength in government spending,increase in govt debt,shortfall in govt revenue collectionsGDP growth slows down to below 6%5Philippine Equity StrategyAgendaSummaryMacro drivers:Slower growth,easing inflation,and potential rate cutsFiscal policy:Minimal noise from mid-term electionsStock Views:Top Picks&AvoidsSector ViewsEarnings&valuations:Downside to 13%Street EPS growth expectations6Philippine Equity StrategyMacro:Medium-term structural drivers intactStable fiscal dynamics(govt debt to GDP)Source:CEIC,J.P.Morgan.Elevated medium-term private consumption trendSource:PSA,J.P.Morgan.Attractive demographicsSource:Investor Relations Office of ROP.Source:Department of Budget and Management.Improving infrastructure spending trendPrivate ConsumptionGDP1951-19606.5%6.4%1961-19704.7%5.9%1971-19804.7%5.9%1981-19903.0%1.8%1991-20003.5%3.1%2001-20104.5%4.8%2011-20186.2%6.2%7Philippine Equity StrategyGDP:Slowing growth on domestic demand and trade deficitGDP growth at 6.1%oya in 4Q18Domestic demand trade contribution to growthInflation impact to demand8Philippine Equity StrategyGDP:Slower growth outlook across the boardFixed investments sustaining at high levelsDriven by imported goodsSource:PSA,J.P.Morgan estimates.1.Contribution to growth of GDP.2.Debt with original maturity of less than one year.3.Exports of goods,services,and net transfers.Philippines:economic indicatorsAverage2012-1620172018f2019f2020fReal GDP,%change6.66.76.26.05.9Consumption5.04.85.25.14.8Investment3.62.64.06.45.6Net trade-2.1-0.8-3.0-5.5-4.5Consumer prices,%oya2.22.95.22.62.4%Dec/Dec2.32.95.12.22.4Wholesale prices,%oya-4.2-0.90.81.21.2Government balance,%of GDP-1.8-2.6-2.9-3.0-2.6Merchandise trade balance(US$bn)-21.9-34.6-40.7-46.0-44.4Exports45.550.053.055.861.5Imports67.484.693.7101.8105.9Current account balance7.6-2.4-7.2-8.7-8.4%of GDP2.7-0.8-2.2-2.5-2.2International reserves,(US$bn)73.771.870.870.069.2Total external debt,(US$bn)77.471.569.567.565.5Short term16.416.216.216.216.2Total external debt,%of GDP2823212017Total external debt,%of exports7659544945Interest payments,%of exports244339Philippine Equity StrategyGDP:Further delay in budget passage is a downside riskReenacted budget could lead to 1.2-1.5%cut in GDP,but significant decrease in borrowingsKey detailsAmount(Php bn)RemarksProposed 2019 budget3,757Cash-basedReenacted 2018 budget3,300Php3.767Tr budget in 2018,but only Php3.3Tr available for spendingDecline in budget 2019 vs.2018467Impact to GDP1.2-1.5%BorrowingsForeign(net)140Domestic(net)903Total1,043Potential decline in borrowings45%DeficitDeficit program624%of GDP3.2%Decline in budget deficit(%of GDP)2.4%Source:DBM,Philippine Star,J.P.Morgan estimatesSource:Rappler,Inquirer,BusinessMirrorBoth houses of Congress ratified the bicameral conference committee report on Feb.8,but it has not yet been signed by the President.President Duterte met with Congressional leaders on March 12 but failed to reach a consensus.Senate President Sotto said the House realigned Php79bn from the budget agreed upon during the bicameral committee.House leadership moved to itemize lump-sum entries in the bicameral-approved version of the 2019 GAA bill,even though the changes were introduced after both chambers in plenary had ratified the bicameral report.NEDA said using the re-enacted budget for the full year could lead to a GDP growth of 4.6%to 5.1%(budget impasse until August)or 5.3%(budget impasse until April)10Philippine Equity StrategyInflation:Food and oil drive sharp downtrendPrice pressures soften across the basketSharp improvement in November and DecemberFood,utilities,transport are key inflation driversRice tariffs signed into lawSource:PSA,J.P.MorganSource:PSA,J.P.MorganRemoval of quotas on rice imports:35%tariff from ASEAN and 50%from non-ASEANExpected to lower rice prices by Php4-7/kilo(current retail price of well milled rice at Php41/kilo)Establishment of Php10bn annual Rice Fund for next 6 years to aid farmers%oya2017 2018 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19CPI2.95.26.46.76.76.05.14.43.8Food 2.63.68.59.79.48.06.75.64.711Philippine Equity StrategyMonetary policy:Expecting a more accommodative stanceBSP has hiked policy rate by 175bps in 2018Benjamin Diokno appointed BSP GovernorInflation heads toward policy target range of 2-4%RRR cuts could resume in 2019Source:BloombergSource:BloombergFormer Budget Chief(DBM)of the current administrationDiokno:“Price stability is one goal of BSP.Financial stability is the other one.But its more than that.The BSPs role is to ensure steady,strong growth.In order to achieve this,monetary policy has to be in sync with fiscal policy.”Philippine StarDiokno:“Given the decelerating inflation in the Philippines,theres an opportunity for monetary easing.But as Ive said,that would be dependent on the data that will be given to us by our technical staff”Philippine StarJPM expects 100bps RRR cut each in 2Q19/3Q19,and 25bps policy rate cut in 3Q1912Philippine Equity StrategyInterest rates:Inflation and liquidity suggest possibility of RRR cutsModerating inflation outlookDeclining excess liquidity(%of deposits)Targeting more domestic borrowingsGovt programs Php1Tr borrowings in 2019Source:PSA,J.P.Morgan estimatesSource:CEIC,J.P.Morgan estimatesSource:CEIC,Bureau of the Treasury.2018 and 2019 are estimates.Source:CEIC,Bureau of the Treasury.2018 and 2019 are estimates.13Philippine Equity StrategyCurrency:Downside bias from CA and trade deficitPHP trend follows BoPJ.P.Morgan USDPHP forecastsCurrent account vs.PHP long-term trendBoP trend breakdownPeriod endUSDPHPMar-1952.00Jun-1952.25Sep-1952.50Dec-1953.00Source:J.P.MorganSource:CEIC,J.P.Morgan14Philippine Equity StrategyCurrency:Winners and losers from weak PHPOnly 29%of overall debt in USDWinnersLosersSource:J.P.MorganCompany NameOverall Debt in USDPropertyAyala Land1%SM Prime16%Megaworld31%Vista Land36%Fillinvest Land0%Robinsons Land5%ConsumerRobinsons Retail0%Puregold Price Club0%Universal Robina Corp 89%Jollibee Foods34%ConglomeratesLT Group0%Ayala Corp 28%SM Investments45%Metro Pacific Investments0%DMCI 0%San Miguel Corporation33%UtilitiesSemirara 22%Aboitiz Power42%Manila Water60%Meralco0%TelcosPLDT16%Globe14%TransportCebu Air62%ICTSI78%CommoditiesCemex 9%Petron46%Pilipinas Shell0%Total29%Ex-companies with natural hedge26%Ex-companies with hedging/matching23%Partial/full hedgingNatural hedge from operationsSource:Company disclosure,J.P.Morgan estimatesSignificant USD debtCEB,MEG,AP,TEL,GLO,PCOR,CHPSignificant USD input costsCEB(jet fuel)GTCAP(auto)CHP(coal)JFC,URC,PGOLD(raw materials)Property sector stronger residential sales from OFW-dependent householdsMER US$330m investmentsSCC coal exportsDMC SCC exposureMAC revenues in USD15Philippine Equity StrategyOFW:Moderating remittances growth trendOFW stock,deployment,and remittances by continentSource:CEIC,BSP,JP Morgan estimatesVolatile monthly remittance growth trendSource:BSP,CEICSource:BSP,CEICRemittances growth at 3-5%in last 4Y vs.6-8%in 2010-14%of 2013%of 2013%of 2013%of 20132010-2013 CAGR%of 2016 OFW2010-20132012-2016%of 20182010-2014 CAGR2014-2018 CAGRPermanent TemporaryIrregulartotal OFW stockOFW stockdeploymentOFW deploymentOFW deploymentOFW Inflows OFW InflowsOFW InflowsBy ContinentWorld Total48%41%11%100%3%100%8%6%100%6%4%Africa7%83%10%1%-7%1%1%-8%0%-9%42%Asia:East&South17%50%32%16%11%23%19%10%16%15%6%Asia:West0%93%7%24%-4%50%8%8%30%17%7%Europe49%33%18%8%9%1%-7%-11%8%4%-2%Americas&Trust Territories88%6%6%42%4%1%5%-9%23%-6%3%Oceania77%22%1%5%6%1%36%7%3%24%2%Sea-based0%100%0%4%2%21%2%4%21%8%3%16Philippine Equity StrategyBPO:Decelerating growth,minding TRAIN 2 riskIT-BPO sector revenue growthSource:IT-BPAP.In USD bn.Risks to BPO growthSource:PSA.In PHP Mn.Approved ICT investments settled at lower levelsSlower expected growth trajectorySource:IT-BPAPOffshore and outsourcing industry revenues in US$billions Potential rationalization of fiscal incentives from TRAIN 2Rising protectionist stance in numerous countriesProcess automation may lead to job losses over the long runAvailability of talent given shift to K-12 system,ability to develop talent for higher value jobsInfrastructure constraints17Philippine Equity StrategyTrade War:Expecting minimal benefit to the PhilippinesPH approved FDI vs.total FDIEM Asia export impact from 25%tariff on all China exportsEmerging interest in the PhilippinesFDI moved slightly lower in 2018New Kinpo Group announced plans to shift its manufacturing to the Philippines from China hard drive manufacturerAyala Corporation CEO Jaime Augusto Zobel de Ayala noted that a Chinese company in Guangdong is looking to set up one of the largest tile factories in the worldThere have also been electronics companies from Taiwan and China looking to start manufacturing in the PhilippinesDyson announced a US$20m expansion of its manufacturing facility in 2017Source:CEIC,J.P.MorganSource:Bloomberg,BusinessWorld02468101206081012141618US$bn,12qmaSource:J.P.MorganActual gross FDIApproved18Philippine Equity StrategyAgendaSummaryMacro drivers:Slower growth,easing inflation,and potential rate cutsFiscal policy:Minimal noise from mid-term electionsStock Views:Top Picks&AvoidsSector ViewsEarnings&valuations:Downside to 13%Street EPS growth expectations19Philippine Equity StrategyMid-term elections:Incumbents lead early polls for May 2019 electionsPulse Asia senatorial preferences(poll taken Jan-19)Source:Pulse Asia2019 mid-term electionsKey details:The election will be on May 13,2019,with winners taking office on June 30,2019Positions available include 12 senators,the whole House of Representatives,and all provincial and city-level officialsCongress will be on recess from Feb.8 to May 20Senatorial preferences:Out of the 11 outgoing Senators,4 will not be eligible for reelection.The remaining 7 are all vying for re-election,and are generally among the preferred candidates based on latest polls by Pulse Asia.20Philippine Equity StrategyMid-term elections:Limited evidence of GDP growth spikeGDP and private consumption growth trends saw minimal change during previous electionsSource:PSA,J.P.Morgan.Government