In the first half of 2012 all sectoral indices were positive, led by real estate and banking stocks. The financial index surged 34.6 per cent making it the best performer at the end of June.
BPI Asset Management favours Philippine conglomerates which are well-positioned to benefit from the administration’s infrastructure spending and consumer’s rising disposable income, which should be further buoyed by election spending in 2013, said Maria Theresa M. Javier, senior vice- president and group head, BPI Asset Management.
She believes property and banking stocks will be at the forefront of the market’s upswing. “Property [stocks] remains one of the best proxies for the Philippine economy and we expect their net income growth to be steady as they recognise completion of previous year’s sales. Philippine banks, on the other hand, are expected to exhibit double-digit loan growth moving forward as well. This will be supported by the expected rise in financing requirements by local companies’ participating in the public-private partnership (PPP) projects which are in the administration’s pipeline.”
Maybank has focused on utility and consumer companies, which have continued to provide stable returns, since the beginning of the year. In the July market report, Luz Lorenzo, market strategist and head of research at Maybank, said they were sticking to their current allocations of Universal Robina Corp. Pepsi Cola Products Philippines, First Gen Corp., Manila Water and First Philippines Holding Corp.
Gregg Adrian R. Ilag, equity analyst at AB Capital Securities Inc., said the sectors they like include power, gaming, construction and media.
“We remain bullish on power companies due to the capacity shortages expected to occur in the Philippine regions,” said Illag. “Required additional capacity is approximately 16,550MW over the next 18 years. Out of these only 1,354MW is committed by investors.
“We also like the gaming industry which is going to get a boost from tourist influx in our country. Meanwhile, construction companies are a direct play on the government’s plan to increase spending by releasing more PPP projects. We also favour the media sector as they will be prime beneficiaries on the upcoming election spending.”
Currently he favours: First Philippine Holdings Corp., a conglomerate focused on the power sector and trading at large discount to NAV (net asset value). In media, his pick is GMA Networks Inc. due to its impressive profitability and high dividend payouts.
In the construction sector, he likes EEI Corporation. “EEI’s liquidity, large size and cheap valuations (7x 2012 P/E) makes it attractive,” he explained.
“In gaming, we’re currently looking at Bloomberry Resorts Corporation (Bloom) and Alliance Global Inc. AGI is a conglomerate with a diversified portfolio (food and real estate, among others). It is very attractive in terms of valuations: 10.1x 2011 P/E against the mean of 16x for conglomerates.”