Analysis and Recommendation
International Container Terminal Services Inc. (ICTSI) is cautiously optimistic this year, with the commencement of global vaccination efforts seen to improve trade activities worldwide.
MSCI announced last week the results of its February 2021 Quarterly Index Review (QIR). At the country level, the Philippines will have a marginal weight decrease in the MSCI Emerging Markets Index – total estimated outflows is about US$123 million.
International Container Terminal Services, Inc. (ICT) and Ayala Land, Inc. (ALI) had the top weight increases, while Metro Pacific Investments Corp. (MPI), SM Prime Holdings, Inc. (SMPH), and Megaworld Corp. (MEG) had the top weight decreases. All changes will be made available as of the close of 26 Feb 2021 (effective 01 Mar 2021).
Following the MSCI rebalancing announcement, tracker funds who follow the MSCI Philippines Standard Index will realign their portfolios in accordance with the announced adjustments. Investors can take advantage of share price movements by:
1. Loading up on ALI – given its strong positioning in the Residential segment (65% of pre-pandemic EBIT), which we expect will rebound faster than other property segments. Moreover, the low interest rate environment and large foreign fund inflows are supportive of higher valuations (Click here for our fundamental analysis on the counter).
2. Taking advantage of the pullback for SMPH – we are of the view that the successful rollout of COVID19 vaccines should see a recovery in SMPH’s Malls segment (which accounted for at least 60% of pre-COVID income) and higher Residential sales take-up (supported by the resumption of project launches and healthy demand). Furthermore, we think current valuations with SMPH (as an index glamour name) largely benefitting from the inflow of foreign funds. (Click here for our fundamental analysis on the counter).
For long-term investors, our target price for ALI is PHP 52.00 ( +28% upside from last closing price of P40.50). Meanwhile, for SMPH, our target price is PHP 45.00 (18% upside from last closing price of P38.10).