Volatility calls for discerning investors

MANILA, Philippines — Investors need to be more discerning in choosing which companies to invest in this year, given the volatile stock market conditions observed in the first quarter.

Analysts surveyed by Inquirer Business are advising mostly diverse plays, with their stock favorites ranging from defensive stocks such as utilities, and procyclical stocks, or those dependent on economic recovery, like consumer and banking.

Experts at Regina Capital Development Corp., AP Securities, and Philstocks Financial Inc. are leaning toward banks that may benefit from the projected growth in loan demand in the latter part of the year once the Bangko Sentral ng Pilipinas cuts interest rates.

On the other hand, China Bank Securities sees much potential in telecommunications giant PLDT Inc., as demand for mobile data and home broadband continues to grow.

They are also favoring Manila Electric Co. and Manila Water Co. Inc., whose services are needed or are in high demand regardless of the business cycle.

Here are their top stock picks:

Luis Gerardo Limlingan

Regina Capital Development Corp., head of sales

Top picks: Bloomberry Resorts Corp. Corp. (BLOOM), Metropolitan Bank and Trust Co. (MBT), and SM Investments Corp.

“BLOOM is well-positioned to benefit from the easing of pandemic restrictions and the return of tourism. As foot traffic and gaming revenue increase, BLOOM is expected to experience growth, particularly with its expansion plans, such as the development of Solaire North in Quezon City.”

“MBT is one of the largest and most established banks in the Philippines. With the economy on the path to recovery, MBT stands to benefit from increased lending activity and improved asset quality, supported by its solid fundamentals, diverse revenue streams, and strong management.”

“Finally, SM, a conglomerate with interests in retail, banking, and property development, offers stability and growth potential. SM’s ownership of SM Supermalls is integral to the Philippine consumer market, while its investments in banking and property development provide further avenues for growth as the economy rebounds.”

Rastine Mercado

China Bank Securities, head of research

Top picks: PLDT Inc. (TEL), Monde Nissin Corp. (MONDE), Manila Electric Co. (MER)

“Given the continued recovery of its mobile business—led by mobile data, nascent demand opportunities in the home broadband and enterprise markets, and attractive dividend yield prospects, it’s worthy to note that TEL has also seen an influx of foreign buying year-to-date.”

“We like MONDE given its margin recovery story this year due to the easing input cost environment and expectations of its alternative meat business breaking even. We also note that improving economic conditions in the U.K. (i.e., easing inflation, gross domestic product returning to positive territory in the first quarter of 2024) along with prospects of an interest rate cut from the Bank of England in the summer should help prop up demand prospects for its alternative meat unit.”

“We have an upbeat outlook on MER given expectations of (1) continued recovery of power distribution volumes, (2) margin windfall from declining purchased power costs, and; (3) the continued expansion of its power gen portfolio. We also note that MER has a dividend policy of paying 50 percent of core income, which we think adds to its attractiveness given the shifting expectations on policy rates.”

Alfred Benjamin Garcia

AP Securities Inc., research head

Top picks: Universal Robina Corp. (URC), BDO Unibank (BDO), Manila Water Co.“

While there are still some challenges from slowing consumer spending, we are seeing some pickup in sales volumes for URC likely due to their market leader position in the categories they do business in. Coupled with easing costs, this has led to improvements in URC’s margins.”

“Elevated rates should keep net interest margins (NIM) robust. While we don’t see any more NIM expansion on the horizon, BDO is best positioned to generate loan growth and make the most of this high-interest rate environment.”

“Despite the run-up, we still think that there is still more value that can be unlocked from MWC. It’s also a very good defensive play that is insulated from most macroeconomic headwinds.”

Mikhail Plopenio

Philstocks Financial Inc., researcher

Top picks: Metrobank, Citicore Energy REIT (CREIT), Semirara Mining and Power Corp. (SCC)

“One of our top recommendations is Metrobank because of its attractiveness and growth prospects. As of May 9, 2024, MBT has been trading at a price-to-earnings (P/E) ratio of 7.04x, below its 2019 to 2023 P/E ratio average of 10.14x.

MBT’s PE ratio is also lower compared with those of its banking peers in the PSEi. The bank’s fundamentals remain robust so far amid healthy core operations. In the first quarter 2024, MBT registered higher net interest margins and return on equity, and lower nonperforming loans ratio compared with the same period last year. Prospects are also good in line with the expected decline of interest rates in the future, which would boost loan demand. Finally, another investment narrative for MBT is its competitive dividends.”

“Amid lingering concerns in the economy, it is advisable to invest in less risky assets that can still yield decent returns. Currently, Real Estate Investment Trusts (REITs) stand out as viable options, with dividends that beat inflation. Among these, Citicore Energy REIT Corp. has been one of the REITs with an outstanding performance since its market listing, consistently delivering increasing dividends.

With an offer price of P2.55, it boasts of an annualized dividend yield of 7.8 percent. We anticipate CREIT to continue offering robust dividends despite economic challenges, given its operations in a crisis-resistant and essential industry, especially amidst the shift toward renewable energy. Furthermore, CREIT’s growth prospects are supported by its sponsor, Citicore Renewable Energy Corp., which could potentially result in long-term capital gains.”

“SCC is known for its relatively high dividend yield. This stock is what made investors jump into the stock as it somehow increased its dividend distribution in the past years. SCC has one of the highest yields compared with other stocks in the Philippine Stock Exchange Index. It has a dividend yield of 22.19 percent. With the current market conditions, aiming for stocks that has high dividend yields are recommended.” INQ

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