The Philippines Stock Index (PSEi) is up by more than 15% this year? Can it continue? Yes, according to UBS. If the government delivers on its initiatives for more inclusive growth, there could be upside to corporate earnings.
Philippines Government Initiatives
- Higher pension for retires
- Banning end-of-contract arrangements, which do not pay benefits to permanent workers
- Free education in state colleges
- Tax reform to increase tax burden on wealthier individuals and conditional cash transfers or subsidies to the poor.
If these initiatives are delivered, consumer spending could improve with upside to economic growth. Top sector prefers are – property, banking and consumer – as these sectors benefit directly from higher consumer spending.
SM Prime – benefit from retail spending as 75% of mall rentals are linked to tenant sales. Aggressive capex in high growth areas
Ayala Land – landbank strategically positioned near government infrastructure projects and targeted growth centres.
BDO Unibank – Sensitive to rising rates due to its large low-cost deposits and loans repriceable within a year. Aggressive in branch expansion
Univeral Robina – strong brand name to benefit from government’s inclusive growth.
Metrobank – NIM flat, but upside from lower funding costs. Attractively valued
Megaworld – Trades at low multiple but could re-rate as fears of oversupply are overdone.
Puregold – food retailer and supermarket. Benefit from government’s inclusive growth strategy. Expansion into less penetrated provincial areas.
Robinson Retail – multi-format retailer seeing steady growth in supermarket, DIY and specialty store formats.