Macro-Economic Analysis

Last week, the PSEi fell by 1.55% to close at 6,443.09 (-101.5 points) as investor sentiment was dampened by: (i) daily COVID-19 infection cases breaching the 10,000 mark for the first time, (ii) worries over the extension of the one-week enhanced community quarantine (ECQ) in Metro Manila, and (iii) the unemployment rate edging up to 8.8% in Feb-21 (Jan-21: 8.7%).

Market outlook for this week

This week, we expect the market to sustain last week’s trend, trading sideways with a downward bias as mobility remains constrained with Metro Manila, Bulacan, Cavite, Laguna, and Rizal under ECQ for another week amid the continued spike in infection cases. Meanwhile, investors await the PH inflation print for Mar 2021 which will be released on Tuesday.

 Stock Picks This Week

1. Universal Robina Corp. (URC)

Recommendation: BUY

1-Year Target Price: PHP 178.00

Analysis: Last March 2021, URC outperformed most index names and rallied by 4.2%. For 2021F/2022F, we see URC’s earnings growing by a 13.5% CAGR as the company benefits from:

(i) re- bound of its out-of-home categories;

(ii) further gains from its cost rationalization initiatives;

(iii) increased distribution network (having reached 200k distribution points as of end2020); and

(iv) better operating margins from its Farms segment post rightsizing of its hog operations.

Moreover, URC is among the index glamour names trading at attractive valuations, relative to its earnings trajectory at 22.6x FY21F PE, or -2SD of its mean.

Accumulating once URC breaks above P134.50 is advisable. Set cut loss below P125.00 and begin taking profits at around P148.0. For long-term investors, we have a target price of P178.00.

2. Robinsons Retail Holdings, Inc. (RRHI)

Recommendation: BUY

1-Year Target Price: PHP 88.00

Analysis: Last March 2021, RRHI outperformed most index names and rallied by 1.2%. We expect its discretionary formats to pick up pace this year on top of its blended sales growth recovery of 32.3% q-o-q in 3Q 2020. This should be supported by the further easing of restrictions, as well as improved consumer confidence and discretionary spending. It is advisable to accumulate RRHI above P59.40. For long- term investors, we have a target price of P88.00.

3. Semirara Mining and Power Corp. (SCC)

Recommendation: SELL

1-Year Target Price: PHP 17.18

Analysis: Last 25 March 2021, Semirara Mining and Power Corp. (SCC) has declared regular cash dividend of P1.25 for record holders on 13 April 2021 to be paid on 23 April 2021. Ex-dividend date is scheduled on 07 Apr 2021.

We expect SCC’s share price to fall closer toward its share price prior to the dividend announcement (P12.0) – on or shortly after the dividend ex-date, 07 Apr 2021. This is in view of investors who accumulated at the ex-date (hence, not entitled to dividends), and are therefore unwilling to pay premium to increase exposure on the counter. The possible pullback on the dividend ex-date provides short-term traders an opportunity to take profits now, while giving long-term investors another opportunity to buy back at a lower average price.

As for the company’s growth prospects, while the average selling price for energy this year is expected to improve as the company is increasing its long term contracted capacity with distribution utilities and retail customers, management said that earnings for the segment will likely underperform as SCPC unit 2 is currently on unplanned outage, which is expected to last until June 2021.

For the coal business, Molave North Block 7 (NB7) is expected to resume mining operations by 2Q 2021. That being said, while SCC’s earnings may improve this year, we expect the company’s bottomline to lag compared to other energy and mining companies given the company-specific headwinds.

For short-term traders, lightening position either any time before the dividend ex-date or once SCC breaks below P13.00 are advisable. Next support level is P12.00.

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