Macro-Economic Analysis

Last week, the PSEi tracked the global market sell-off, dropping by 1.9% week-on-week to 6,794.86 (-131.55 points) as the continuous rise in bond yields dented the appetite for equities. On the local front, sentiment was dampened following President Duterte’s decision to scrap proposals to place the country under modified general community quarantine (MGCQ) until vaccines are rolled out. The index’s volume was notably higher relative to previous weeks, as funds realigned portfolios with MSCI rebalancing changes that took effect on Friday’s close.

Market outlook for this week

This week, we expect the market to trade sideways with an upward bias amid the following developments:

(i) President Duterte’s signing of a measure that would expedite the procurement of COVID-19 vaccines and establish a P500m indemnity fund;

ii.) Possible reconsideration of Metro Manila being placed under Modified General Community Quarantine after the arrival of the first batch of the Sinovac vaccines;

iii.) the Inter-Agency Task Force’s (IATF) approval of uniform protocols on local travel; and

iv.) U.S. Congress passing of the US$1.9tr COVID relief bill.

Investors will also be on the lookout for the manufacturing PMI, inflation data, additional blue-chip earnings releases this week, as well as the final schedule of AstraZeneca vaccine arrival.

Our Partner Broker’s Stock Picks This Week

1. SM Investments Corp. (SM)

Recommendation: BUY

1-Year Target Price: PHP 1,250.00

Analysis: SM dropped by 5.3% due to significant net foreign selling amid MSCI-related trades. That brought the stock to trade near its key support level of P1,000. We believe the stock still has room to run on strong earnings delivery given its exposure to sectors where recovery is expected to be robust, namely the retail, property, and banking sectors. Among our stock coverage, we see SM as best positioned to benefit from our V-shaped economic recovery story. Our estimates assume earnings to grow at 81% 2020-2022 CAGR, with FY22F EPS coming in 14.7% higher than pre-COVID levels.

Bargain hunters can accumulate at current prices. For long-term investors, we have a target price of P1,250.0 (+23% upside from last closing price of P1,009.00).

2. Megawide Construction Corp. (MWIDE)

Recommendation: BUY

1-Year Target Price: PHP 19.00

Analysis: Since 18 Feb 2021, MWIDE has dropped by 5.9% bringing the stock back near to its key support level of P7.05. With the vaccines arriving in the country, sentiment for the stock will likely be lifted as the recovery in tourism nears. We remain positive on the longer-term outlook of the company, and anticipate earnings to accelerate as it realises the value accretion from the ramp-up of its expanding airport business and improving transportation hub business.

Accumulating at current prices until P7.05 is advisable. Set cut loss below P7.00 and take profit at around P8.15.

3. EEI Corp. (EEI)

Recommendation: BUY

1-Year Target Price: PHP 9.20

Analysis: After EEI rallied in the middle of Feb-21, the stock has pulled back to its breakout level. Recall that the joint venture of EEI Corp. (EEI), Shimizu Corp., Fujita Corp., and Takenaka Civil Engineering Co. Ltd. will be in charge of the design and construction of the Metro Manila subway’s partial operability section. This news might be welcoming for investors looking to accumulate companies that have a clear positive catalyst ahead. The physical arrival of the tunnel boring machines will help support the share price since it is the equipment used to drill through the ground to make way for the construction of the subway. Moreover, as of end-Sept 2020, the unworked portion of the EEI’s existing contracts valued at P52 billion is expected to provide three years of revenues for the company.

Those looking to accumulate can buy at current prices and take profit at around P9.00

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