Macro-Economic Analysis

Last week, the PSEi inched up 1.58% week-on-week to close at 6,545.17 (+102.8 poionts) as the number of COVID-19 cases recorded was lower than the previous week. In addition, slower inflation (actual: 4.5% vs. Feb 2021: 4.7%; Bloomberg consensus est. 4.9%) recorded last month further lifted investor confidence last week.

Market outlook for this week

This week, we expect the market to trade sideways with an upward bias as President Duterte approved the downgrading of the quarantine status in the Greater Manila area to modified enhanced community quarantine (MECQ). The expected arrival of Gamaleya and Sinovac vaccines this week should further buoy investor sentiment. However, the continued rise in COVID-19 cases in the country can serve as a downside risk to this call.

 Stock Picks This Week

1. Ayala Land Inc. (ALI)

Recommendation: BUY

1-Year Target Price: PHP 52.00

Analysis: Year-to-date, ALI is down by 15.6%. The recent drop brought the stock near its next support level of P33.80. Recent downgrading of quarantine status will likely lift sentiment of reopening winners like Property names such as ALI. We continue to like ALI’s 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.

With ALI currently trading near the key support levels, we think it is a good risk to reward trade to enter ALI at current levels or on pullbacks near P33.80.

2. Filinvest Land Inc. (FLI)

Recommendation: BUY

1-Year Target Price: PHP 1.34

Analysis: FLI posted an attributable net income of P3.7 billion (-41% y-o-y) in FY2020. Gross revenues for FY20 declined by 32% y-o-y to P17.5 billion. Real estate revenues fell by 42% y-o-y to P9.8bn in FY20 due to slower revenue recogni- tion amid construction delays. Nonetheless, 4Q20 real estate revenues rebounded by 50% q-o-q to P3.2 billion, coming on the back of easing lockdown restrictions and demand recovery.

For the real estate sector, we expect ramp up in construction activities to allow residential developers to address tight inventory levels that came about during the pandemic. This should be supportive of robust sales takeup as key drivers for residential demand remained positive coming out of the pandemic: resilient remittances and low interest rate environment.

As for the office business, in FLI’s recent earnings call, the company disclosed further details regarding the listing of its REIT. With a maximum offer price of P8.30 per share, FLI is looking to raise as much as P14.9bn. We reiterate our view that FLI’s planned REIT listing should free up capital and provide better financial flexibility for the company.

Accumulating once FLI breaks above P1.24 on strong volume is advisable. Set cut loss below P1.15. Take profit at around P1.40/P1.55.

3. Cebu Landmasters Inc. (CLI)

Recommendation: BUY

1-Year Target Price: None Indicated

Analysis: CLI posted a net income after taxes of P1.85bn (- 8% y-o-y) for FY20. Revenues for 4Q 2020 grew by 18% q-o-q at P2.6 billion, bringing FY20 to P8.3 billion (- 2.4% y-o-y). CLI also reported a 12% y-o-y jump in reservation sales to P14.3 billion in FY20.

Reservation sales should grow further with the planned launch of 15 residential projects worth P19 billion for 2021. It is also worth noting that CLI’s residential portfolio allocates around 50% to 60% of the economic segment to fill housing backlogs in the VisMin region. As for management guidance, the company targets to grow 15% – 20% for the year.

On the valuation side, despite its outperformance in the residential space, CLI is still relatively cheap trading at 3.44x F12 P/E (peer average: 11.2x) and 0.64x F12 P/BV (peer average: 1.41x). Accumulating once CLI breaks above P6.50 is advisable. Set cut loss below P6.20 and begin taking profits at around P7.30.


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