President Rodrigo Duterte has urged Congress, especially the Senate, to fast track three bills which will further open up the economy to more foreign investors and, according to his economic managers, help the economy recover from pandemic-induced recession.
The proposed amendments to the Public Service Act and the Foreign Investments Act would legally remove foreign ownership restrictions in several sectors including broadcasting and telecommunications.
One particular company, in our view, that is most susceptible to these measures is DITO Tel. We think that its current debt level and the long-term drag on its cash flow may prompt the company to look for equity investors. A possible option for this is for China Telecom to increase its stake in the 3rd telco player and the proposed amendments may allow the foreign company to do so.
Meanwhile, on the Retail Trade Liberalization Act, the proposed measure will lower the required capital for foreign-led retailers.
Although the measure may have a negative impact on the consumer industry, we think that this would bode well for property companies with high exposure to retail space, specifically SMPH considering that 31% of its revenues is derived from its retail space vs. 11% of ALI and 23% of RLC.