Banks, consumer plays top experts’ investment picks

MANILA  -Despite lingering concerns on the global economy, financial experts interviewed by the Inquirer believe investors could still capitalize on select opportunities in the local stock market.

Banks were a clear beneficiary during this period of elevated interest rates and this is reflected in the stock picks of of the five analysts interviewed for this report. Other major themes were consumer-focused stocks, which would benefit from the forecast downtrend in inflation, as well as the continued reopening of the Philippine economy.

Haj Narvaez
President and CEO,  BPI Trade

Haj Narvaez —Contributed PHOTOS

Top picks:  Ayala Corp., GT Capital Holdings Inc., Universal Robina Corp. and AREIT Inc.

“We generally advise investors to focus on firms that are seen to post robust growth, possess healthy balance sheets, and may enjoy some tailwinds in the next 12 months. It would also be ideal to focus on less crowded trades, which usually are stocks that are trading at attractive valuations or have been aggressively sold of late. This is how you can generate healthy returns and limit your downside.”

“We think conglomerates such as Ayala Corp. and GT Capital are attractively valued. We believe each is poised to deliver at least mid-teen earnings growth this year. More importantly, both firms have the balance sheets to support growth initiatives.”

“Among the consumer companies, we like URC (Universal Robina Corp.) which we see benefiting from slowing inflation and the full-year effect of reopening.”

“Given our outlook of a more stable interest rate environment, we believe it is an opportune time to revisit real estate investment trusts such as AREIT. The company has continued to buy value accretive assets to support dividend growth. We think investor interest, particularly from retail investors, will return once rates stabilize or fall.”

Jacqui De Jesus
Head of equity research
Maybank Securities

Jacqui de Jesus

Top picks:

SM Investments Corp. and BDO Unibank Inc.

“SM is the country’s consumption catch-basin, evidenced by its [2022] outperformance. Aside from the low margin volatility of its retail and mall segments, we expect the general impact of inflation to be muted for SM given its low exposure to oil-driven costs, the cost+ pricing model of its retail segment; and minimal [foreign-denominated] and predominantly fixed-rate debt exposure. For very similar reasons, BDO is our top pick in the banking sector as its consumer-based ecosystem, parallel physical branch expansion strategy and aggressive lending appetite positions it to benefit most from the restarting economic activity.”

GT Capital Holdings

“Toyota, which is the runaway market leader with a 46-percent share of total units sold in [the first quarter of 2023], has strong pricing power such that it is able to maintain margins, partially hedging it against foreign exchange-driven cost hikes. The inherent low auto ownership in the country, plus banks’ increased appetite for auto loans, should support continued double-digit growth in [2023 and 2024].”

Universal Robina Corp.

“[URC] should benefit from the country’s increasing mobility, with the resumption of face-to-face classes and onsite working arrangements. We also expect URC’s gross profit margins to expand in [2023] from the expected stabilization of raw materials prices and the Philippine peso this year.”

International Container Terminal Services Inc.

“[ICTSI], which generates majority of its revenues from the Philippines, is a beneficiary of increased economic activity, which should raise trading volumes and translate to higher throughput.”

Bloomberry Resorts Corp.

“Solaire is well positioned to capture industry growth, which we expect to be led by locals and permanent foreign residents, consistent with prepandemic industry growth. More than its leadership in a domestic demand-driven market and near-term recovery, BLOOM also has a promising expansion pipeline, which could add up to P101 billion in [gross gaming reserves] by [end-2026].”

Jep Tang
Vice president, equity sales
AB Capital Securities Inc.

Jep Tang

Top picks:

BDO Unibank Inc., Bank of the Philippine Islands and Metropolitan Bank & Trust Co.

“Rising interest rates, coupled with high current account-savings account deposits will allow for continued net interest margin expansion as loans are repriced upwards.”

International Container Terminal Services and Manila Water Co.

“No demand risk and their respective regulatory regimes protect their margins. Valuations are undemanding.”

Globe Telecom Inc.

“Mynt (GCash) will become one of the largest companies in the Philippines. Capital spending is finally falling and the stock has been unjustifiably hurt by contagion from PLDT Inc.’s [business] woes.”

Bloomberry Resorts Corp.

“Gaming is not only a defensive sector but is also coming back with a vengeance. Solaire’s revenues are approaching prepandemic highs even without the benefit of Chinese tourists. The opening of a new [casino] in Quezon City next year will take earnings to another level.”

Apex Mining Co.

“Elevated gold prices will cause earnings to surprise once again. Valuation of three times forward earnings is too low.”

Phinma Corp.

“With 125,000 students enrolled in the system, the company has quietly become the country’s largest education services provider. Given its growth prospects, we expect the stock to win a new following.”

Luis Limlingan
Head of sales
Regina Capital Development Corp.

Luis Limlingan

Top picks: BDO Unibank Inc., Universal Robina Corp. and International Container Terminal Services Inc.

BDO Unibank Inc.

“BDO is the largest private universal bank in the Philippines. Hence, the bank would likely be able to capture the bulk of the industry growth. Also, it surprised to the upside in gthe first quarter of 2023. During the quarter, it posted a net income of P16.5 billion—the highest in the first quarter bottom lines printed in the past three years.”

Universal Robina Corp.

“URC’s latest earnings report is well received as this came out on better-than-expected earnings for the firm. We see URC sustaining such growth especially under its branded consumer foods sector. For this, URC has been proven to be a good pick so far.”

ICTSI

“ICT posted yet another double-digit topline growth in the fourth quarter off 2022. ICT’s tight operational outputs and capital expenditure program helped grow its net income for 2022 by 44 percent. With global macroeconomic factors such as consumer spending and consumer confidence being more favorable this year compared to last year, we can expect ICT to be able to perform as a leader in the market due to the increased demand for its services.”

Japhet Louis Tantiangco
Senior research analyst
Philstocks Financial Inc

Top picks: BDO Unibank Inc., Bank of the Philippine Islands, Metropolitan Bank & Trust Co.

“We are currently bullish on the banking sector given the rising interest rates coupled with the expectations that the economy will remain strong this year. Thus, our top picks will be coming from the said sector. Aside from their attractiveness, these banks are still expected to post robust financial performance this year supported by stronger bank lending, higher net interest margins, and operational efficiency.”

BDO Unibank

“As of this writing, the bank remains attractive with its price-to-earnings (PE) ratio at 13.12 times (at P140.60) remaining below its 2017-2021 PE average of 17.65 times.”

BPI

“As of this writing, the bank is also trading at attractive levels with its PE ratio at 12.37 times, (at P108.60) below its 2017-2021 PE average of 16.98 times.

MBT

“As of this writing, the bank is trading at attractive levels with its PE ratio at 8.27 times (at P60.30) below its 2017-2021 average of 13.96 times.”