Philippine equity strategy 2015 Outlook: Bottom-up catching up

Summary of our views.

    We expect the Philippines’ bottom-up picture to catch up to the continued healthy macro environment for 2015.

    GDP of 6.2%, interest rates status quo, consumption improvement alongside demographic advantages all contribute to a solid macro being sustained.

    Saddled with a government lacking execution, companies are increasing capital expenditure. This should be rewarded with an acceleration in earnings growth (17% for the market in 2015, faster than the single digits in 2014).

    LT growth should also be enhanced by the addition of faster growing new names in the market, as new listings materialise from sectors with superior growth.

    Our end 2015 index target of 8,500 suggests a 20% upside potential. As one of the Overweight markets by our regional strategist, Philippines’ top picks in order of preference are SM Prime (SMPH, P15.74, OP, TP:P21.00), Metrobank (MBT, P80.50, OP, TP:P109.00), Robinsons Retail (RRHI PM, P71.00, OP, TP: P80.00), Energy Development (EDC PM, P8.30, OP, TP: P9.40), Puregold (PGOLD PM, P36.50, OP, TP: P41.00), and GT Capital (GTCAP PM, P1,100.00, OP, TP: P1,195.00).