Philippines Strategy:3Q17delivers good earnings growth

类型：投资策略机构：麦格理证券股份有限公司研究员：麦格理证券研究所日期：2017-11-28

Conclusion

    We just concluded with the 3Q17corporate earnings results season. This hasproven to be a source of upbeat sentiment, with aggregate net incomeachieving our optimistic forecasts at 13.9% Y/Y growth. This was by far thestrongest quarter for net income growth in 2017for our coverage universe,contrasting with low-single-digit growth in 1Q17and 2Q17. This positiveearnings delivery strengthens our overweight view of the Philippines.

    Impact

    Majority met our expectations. A majority (75%) of our coverage universeturned in 3Q17earnings that met our above-consensus expectations. Thishelped drive overall earnings growth in 3Q17to be the best quarter for theyear at 13.9% higher Y/Y. This compares with 2.1% Y/Y growth in 2Q17and3.4% Y/Y growth in 1Q17. With 9M17growth now at 7.1% Y/Y, we think thatour 2017E net profit growth forecast of 10.4% is looking reasonable.

    Property and utilities fared best in 3Q17. We were partly correct inforecasting the property sector to fare well during the quarter, with 3Q17netprofit growth of 15.3% Y/Y resulting in 9M17net profit growth of 13.3% Y/Y.Exceeding our modest expectations were the utilities sector, which had 3Q17net profit growth of 25.6% Y/Y that led to 12.0% Y/Y growth for 9M17.

    Consumer sector fell short, but from a less worrisome area. Theconsumer sector disappointed the most with net profit growing by just 5.5% in3Q17. However the shortfall was driven by narrower margins, with top-linegrowth including SSSG for retailers coming in strong, as expected.

    Poor performers poised to bounce back. We think that companies thatdisappointed in 3Q17are poised to bounce back in the upcoming quarterscarrying over into 2018, with issues related to margins being addressed andindications of a strengthening industry and macro backdrop developing. Thelatter would include positives related to a successful tax reform andinfrastructure roll out.

    Outlook

    We have an overweight view of the Philippines, with our top picks in order ofpreference being Metro Pacific Investments Corporation (MPI PM, P6.70,Outperform, TP: P8.30, Karisa Magpayo), Megaworld (MEG PM, P5.49,Outperform, TP: P6.40, Kervin Sisayan), Universal Robina (URC PM,P139.70, Outperform, TP: P165.00), Ayala Land (ALI PM, P42.80,Outperform, TP: P50.00, Kervin Sisayan), Puregold Price Club (PGOLD PM,P47.65, Outperform, TP: P62.00, Karisa Magpayo), BDO Unibank (BDO PM,P148.70, Outperform, TP: P147.00, Gilbert Lopez), Ayala Corporation (ACPM, P1,012.00, Outperform, TP: P1,172.00, Gilbert Lopez), and MetropolitanBank (MBT PM, P93.50, Outperform, TP: P101.00, Gilbert Lopez).