The move of the Bangko Sentral ng Pilipinas to slash its key rates by 50 basis points to 6 percent is proving to be an effective catalyst for the bourse, which recently charged into the bull territory.
Analysts surveyed by Inquirer Business prefer banks, as they historically benefit the most from the decline in the cost of borrowing.
READ: Investing in the Philippine Stock Exchange
While this may not immediately impact mortgage rates, property firms still hold value, with real estate giants expected to gradually shed their unsold residential units and recover from office vacancies after the exit of Philippine offshore gaming operators (Pogos).
READ: Understanding the Philippine stock market
As a result, conglomerates carrying both sectors may be a good choice, according to experts.
For some, e-gaming and renewable energy plays are a good strategy given their rapid growth.
Here are their top three picks for 2025:
Wendy Estacio-Cruz
Wendy Estacio-Cruz
Research head
Unicapital Securities Inc.
1. SM Prime Holdings
“Buy at target price of P43. SMPH remains a top pick for retail recovery as inflation continues to ease. We expect residential demand from the middle market segment to rebound once mortgage rates adjust lower. Its valuation premium is justified by a high ROE (return on equity) of 9.7 percent, above the peer average of 8.1 percent.”
2. AC Energy
“Buy at target price P6.80. ACEN remains a top pick as the company continues its aggressive expansion on the back of falling interest rates. We expect ACEN to scale up further and faster as it intends to add more installed capacity in its portfolio, hence, increasing its renewable energy generation output. Despite its premium valuation, we are of the view that this is justified by a 25 percent expected earnings per share (EPS) growth for 2025, higher than peer average of 20 percent.”
3. DigiPlus Interactive Corp.
“Buy at target price of P28.70. PLUS continues to be a top pick due to the rapid growth of the e-gaming sector. As a dominant player with a 53-percent market share, PLUS is poised for continued growth, driven by increasing player participation. In the first half of 2024, PLUS has already exceeded its entire 2023 revenue record of P4 billion, delivering a net income of P5.2 billion. Our recommendation is supported by the company’s high ROE of 27.5 percent expected for 2025 as the company continues to expand its operations.”
Claire Alviar
Claire Alviar
Assistant manager for research and online engagement
Philstocks Financial Inc.
1. Citicore Energy Reit Corp.
“We recommend CREIT as a strong addition to investors’ portfolio. CREIT has consistently performed well in the market, regularly declaring dividends. Moreover, CREIT’s growth outlook is promising, backed by its sponsor, Citicore Renewable Energy Corp (CREC), which adds to its potential for long-term value.”
2. Metropolitan Bank and Trust Co.
“For investors interested in momentum stocks with solid fundamentals, MBT is what we recommend. Market conditions have favored the banking sector, including Metrobank. Its strong earnings performance made it more undervalued, making it an attractive dividend stock. We anticipate [that] MBT will declare high dividends next year, driven by robust 2024 earnings, in line with its history of high yields.”
3. Alliance Global Group Inc.
“While many stocks have rallied, pushing the Philippine Stock Exchange Composite Index (PSEi) above the 7,000 level, AGI has lagged, trading sideways and remaining at a loss year-to-date. This is primarily due to the underperformance of its financials this year, impacted by high interest rates that have affected its business performance.”
Manuel Cruz
Manuel V. Cruz
Executive vice president
Papa Securities Corp.
1. Ayala Land Inc.
“Target price at P45.00. It’s the largest beneficiary of rate cuts amid highest residential exposure (63 percent of EBIT or earnings before interest and taxes). Its share price consistently outperforms during periods of monetary easing. It has the highest 2023 (actual) to 2026 (forecast) net income CAGR (compounded annual growth rate) of +13 percent versus forecast by 2025. It’s insulated from Pogo ban due to its second lowest office exposure (16 percent of EBIT). Trades at a discount of 1.0 standard deviation, below five-year average price to earnings ratio (30x) and price to book value (2.3x).”
2. SM Investments Corp.
“Target price at P1,110. SM’s value proposition is that it captures almost every facet of Philippine domestic consumption, which should benefit from the positive trend in real wages. This ranges from sales generated by the tenants residing in SM Prime’s malls to consumer lending activity via its banking affiliates BDO and China Banking Corp. Moreover, its unlisted unit, SM Retail, remains firmly embedded as the country’s dominant retailer.
Easing monetary policy should ease the overhang on SM Prime’s residential business. SM’s portfolio investments, such as renewable energy and logistics, have also contributed to the group’s profits, accounting for 9 percent of the conglomerate’s net income in first half of 2024.”
3. Security Bank
“Target price at P146. It is well-positioned in this monetary easing cycle. Unlike other banks, its net interest margins stand to benefit from decreasing policy rates.
It has large exposure to home mortgage loans (16 percent of total loan portfolio versus 6-11 percent of peers), which should enable it to ride the recovery of residential for the property sector.
Our target price-to-book multiple of 0.7x is justified by increasing ROE (9.7 percent in 2025, close to SECB’s low-double-digit goal). This also aligns with Asean peers on a PB versus ROE basis.
Annika Gabrielle Angeles
Annika Gabrielle Angeles
Market strategist
Luna Securities Inc.
“Luna’s strategy remains focused on domestic demand and supporting local growth, especially as we navigate an uncertain period over the next six to 12 months following the U.S. election. As we have done in the past two years, we continue to prioritize secular stock picks over index names. We think our approach aligns with the current environment of persistently high interest rates and volatile money flows, which tend to affect large-cap stocks more significantly. By concentrating on select opportunities, we aim to position ourselves for stability and growth amid shifting market dynamics.
1. Aboitiz Equity Ventures
“AEV has a well-diversified portfolio across key sectors of the economy, including power, banking, food, infrastructure and real estate. The company is poised for growth from all their key sectors:
• Aboitiz Power: New capacities from gas, thermal and renewables will come on stream in 2025.
• Union Bank has successfully completed the consolidation and migration of Citibank. The bank is now poised for growth in 2025.
• Food: Coca-Cola Beverages Philippines will increase contribution in 2025, an election year. Capacity expansions of Pilmico feed mills in China and Vietnam.
• Infrastructure: It won the bid to upgrade and manage Laguindingan Airport. In 2025, AEV will experience full ownership, operation and management of Mactan Cebu International Airport.”
2. Converge ICT Solutions Inc.
“Converge is well-positioned to capitalize on the growing demand for high-speed broadband services.
• Broadband focus: It significantly boosted capacity by 10 terabyte with the integration of two new international submarine cables and two data centers.
• Expansion of its fiber optic cable network to continue this 2025.
• Expect more strategic value-added partnerships, such as SkyCable, and innovative new product offerings.
• As broadband demand and revenue surpasses mobile, Converge’s advantage of having no legacy equipment or infrastructure and low debt sets it apart from its peers.
3. D&L Industries
DNL’s integrated facility, now operational for over a year, offers significant potential. As a vertically integrated plant, it covers the entire value chain of DNL’s products, from upstream raw material processing to midstream manufacturing and downstream distribution. This single-site operation allows for the creation of multiple product lines and provides ample room for future expansion. As utilization ramps up, this facility is poised to significantly contribute to DNL’s net income. The immense growth potential unlocked by this facility makes DNL an attractive investment opportunity.”