MACROECONOMICS WEEKLY UPDATE
The country’s preliminary labor force participation rate for December 22 was 66.4%, or 51.22 million Filipinos, according to the Philippine Statistical Authority (PSA). The anticipated unemployment rate for December 22 was 4.3%, while the employment rate for the same day was 95.7%, bringing the total number of people in employment up to 49.00 million from 49.71 million on November 22.
The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has hiked liquidity and capital requirements for select electronic money issuers (EMIs) in efforts to promote the resilience of the industry amid increasing risks related to information technology. EMIs with a monthly outstanding e-money balance of at least P100m are required to maintain liquid assets in trust accounts equivalent to at least 50% of their outstanding e-money balance.
In connection, according to BSP the placement in a bank deposit, a government bond, or another liquid asset that the BSP accepts is also required in order to pay the outstanding balance. EMIs with an outstanding e-money amount under P100m may continue to meet the liquidity criteria by maintaining adequate liquid assets.
The latest suggested retail price (SRP) bulletin from the Department of Trade and Industry (DTI) on 08 Feb 2023, showed that prices of essential items such as canned meat, sardines, noodles, and bread have increased by 10%. According to trade Undersecretary Ruth B. Castelo, the latest SRP bulletin showed price increases for 76 shelf-keeping units (SKUs). 58 SKUs raised prices by up to 10%, while 18 (primarily non-food items) raised prices by more than 10%.
In an effort to further strengthen the nation’s renewable energy (RE) sector, the Department of Energy (DOE) announced that it will hold the second round of the Green Energy Auction Program (GEAP) by 2Q23. Over 2,000 megawatts (MW) of capacities were created in the first round, which was held in June 2022, and they committed to supplying energy from 2023 to 2025 at a competitive price that was less expensive than or equal to the Green Energy Auction Reserve (GEAR) prices established by the Energy Regulatory Commission (ERC).
LRay F. Villafuerte, representative for Camarines Sur and author of a bill to tax international visitors to the Philippines at a rate of $25 per day—with the proceeds going toward local government initiatives aimed at promoting tourism and infrastructure services—introduced his proposal to the House Committee on Ways and Means. The measure would apply only to foreign visitors whose stay in the country exceeds 60 days and who pay out of pocket for their stay or have travel arrangements arranged by their employer or employer’s family member. The tax would not be applied to foreign residents on work visas, however.
President Bongbong Marcos Jr. affirmed that the infrastructure program “Build, Better, More” has been accelerated to support various economic activities in the future. Pres. Marcos noted that the previous administration’s infrastructure plans were “extremely robust and aggressive,” with the government working to overcome logistics issues and pursue an investment-led export growth strategy. He assured Japanese investors of the importance of small businesses as well as strengthening Philippines’ position as a regional industrial and service hub by attracting suppliers and anchor tenants in order to establish an effective supply chain.”
According to the Philippine Institute for Development Studies (PIDS), the government must find new areas of growth to return the economy to pre-pandemic levels, despite the economic scarring caused by the pandemic. In light of this, PIDS predicts that GDP growth will slow to 4.5-5.5% this year, well below the government’s target of 6-7%. PIDS also stated that growth this year will be hampered by persistently high inflation, a difficult business environment, and limited fiscal space.
Moody’s Analytics expects the Bangko Sentral ng Pilipinas (BSP) to raise interest rates by 50 bps in their February 16 meeting following the acceleration in the Jan 2023 local inflation rate. Moody’s Analytics said that the monetary policy tightening cycle may run for longer in the Philippines than elsewhere in Asia given the stubbornly elevated inflation.
The Metro Manila Subway Project is a 33-kilometer underground rail system that will connect Valenzuela City and FTI-Bicutan in Paranaque City. The project is being funded by the Japanese government through official development assistance and is expected to be completed by 2028. Three to four additional subway systems within Metro Manila and outside the metro area, such as in Cavite, are undergoing feasibility studies.
INDUSTRY UPDATE
INFRUSTRUCTURE
Metro Pacific Tollways Corp., a subsidiary of Metro Pacific Investments Corp. (MPI), has signed an agreement with Leighton Asia’s CIMIC Group to build a third viaduct on Metro Manila’s NLEX highway, which is expected to cost P6.1 billion. The contract was awarded to Leighton Asia because the firm holds expertise in construction of safe and high-quality roads, including the NLEX Harbor Link which connects the cities of Manila, Bulacan and Apalit, Pampanga. Construction is expected to begin in 1Q23 and last through 2024.
POWER AND UTILITIES
Manila Electric Company (MER) has signed a contract with MSPECTRUM, Inc. (Spectrum) to install solar rooftop systems at three locations. The company says the project will save P951,000 per year and reduce its carbon footprint by 87.34 tonnes, which is equivalent to planting 4,020 trees or driving 348,000 kilometers (km).
The Energy Regulatory Commission (ERC) opposed the consolidation of cases filed by San Miguel Corp.’s (SMC) subsidiaries, San Miguel Energy Corp. (SMEC) and South Premiere Power Corp. (SPPC). According to ERC, the Office of Solicitor General argued that the Court of Appeals cannot consolidate as the two are different cases, since SMEC cited economic conditions due to the supply chain disruption of the Russian-Ukraine war while SPPC cited a change in circumstance.
New Energy Corp. (SPNEC) said it expects to receive all installment payments for its P2.8 billion stock rights offering by 5 March 2023 in order to enable its share swap with Solar Philippines Power Project Holdings, Inc. (SPPPHI). As of Dec 2022, over 23 percent of the offer or P651 million remains outstanding. SPNEC said that SPPPHI offered to buy any remaining shares at the original price of P1.50 apiece.
Aboitiz Power has formed a consortium of Filipino and Japanese companies to explore innovations in the field of renewable energy. The group, which includes Kawasaki Heavy Industries Ltd., IKS Co. Ltd., and Amber Kinetics, will provide a platform for potential projects in RE. Aboitiz said that this partnership could lead to further exploration and expansion beyond the Philippines to ASEAN, Japan, and Australia.
Citicore Renewable Energy Corp., the sponsor of Citicore Energy REIT Corp., plans to sell shares in a public offering to raise cash for a clean power platform. The company has identified projects with a total capacity of 5,000 megawatts that would require over US$3.75 billion in capital expenditures over the next five years.
First Gen Corp. (FGEN) has partnered with Tokyo Gas Co., Ltd. in a liquefied natural gas (LNG) terminal project in Batangas. FGEN President Ferdinand Marcos said in a meeting with Tokyo Gas and FGEN that the partnership is expected to provide investments to the Philippines that will help boost energy demand, which in turn will result in new indigenous gas production.
TELECOMMUNICATIONS
BGlobe Telecom, Inc. (GLO) reported FY22 net income of P34.6bn, above our estimates at P16.7bn. Excluding non-recurring charges, and foreign exchange and mark-to-market charges, the company’s normalized net income is still below our expectations at P16.7bn (+6% y-o-y). Consolidated service revenues for FY22 reached P158.0bn (+4% y-o-y), as mobile revenues registered an uptick of 3% y-o-y, while total data revenues across mobile, broadband and corporate data accounted for 81% of total service revenues.“
PLDT Inc. (TEL) recently learned that a securities class action lawsuit was commenced on February 6, 2023 in the United States District Court for the Central District of California. The complaint names TEL and nine former or current employees as defendants. PLDT claimed it has not been served with a copy of the complaint and does not have any further information regarding the lawsuit at this time.
REAL ESTATE INVESTMENT TRUST
RL Commercial REIT, Inc. (RCR) reported 2022 unaudited net income of P4.4 billion (2021: P1.7 billion), above our estimates and 16% higher than the REIT plan. This was due to stable operations with 98% occupancy and higher rental income, which resulted in a 2022 revenue of P5.5 billion, 13% higher than the REIT plan.”
BANKING AND FINANCE
Metropolitan Bank & Trust Co. (MBT) has provided a P20.5bn loan facility to Aboitiz Equity Ventures Inc.’s (AEV) two subsidiaries for refinancing and general corporate requirements. MBT has extended a P15bn loan to the Aboitiz Group’s Therma Luzon Inc., a unit of power business arm Aboitiz Power Corp. (AP). The 10-year loan facility maturing in 2032 will primarily finance a portion of its remaining independent power producer administrators (IPPA)-related obligations to government-run Power Sector Assets and Liabilities Management Corp. (PSALM).
MINING
Global Ferronickel Holdings, Inc. (FNI) announced its acquisition of an additional 24% stake in its subsidiary, Mariveles Harbor Corp. (MHC) in a bid to have more control over the operations of the port. In 2019, FNI acquired a 40% stake in MHC, equivalent 1.67m shares amounting to P450m. The recent acquisition raises FNI’s ownership in MHC to 64.03%.
FAST MOVING CONSUMER GOODS
Bounty Agro Ventures, Inc. (Bounty), part of the Bounty Fresh Group of Companies, is exploring an initial public offering (IPO) that could raise $400 million to $500 million. The IPO could take place by year’s end but deliberations are at an early stage and Bounty Agro could still opt not to proceed with the offering. The company sells 100,000 roasted chickens every day and distributes dressed chicken products in supermarkets, hotels, and others under the Bounty Fresh Chicken brand.
Century Pacific Food, Inc. (CNPF) announced that its plant-based luncheon meat brand, unMEAT, is now available in over 2,000 Walmart stores in the United States. The company said it has been favorably received since its launch in 2020 and that its business plans are anchored in the potential for long-term double-digit growth in the plant-based meat market as well as the long-term ability to meet the food needs of a growing global population.
INITIAL PUBLIC OFFERING
Alterenergy Holdings Corp. (ALTER) announced that its application for an initial public offering (IPO) was approved by Philippine Stock Exchange (PSE). ALTER scaled down its maximum offer size by 15% to P1.87bn with a maximum offer of up to 1.26bn shares at P1.48 apiece. The offer is composed of 1.15bn primary common shares and an over allotment option for another 115m primary common shares. ALTER said that the proceeds will be allocated for the development and construction of the Solana Solar project and Lamut Hydro project, debt payment for the Kirahon Solar Energy Corp., and pre-development expenses of pipeline projects.
PHILIPPINE STOCK MARKET
The PSEi dipped by 36.89pts (0.54%) to close at 6,779.02 following the BSP’s 50 bps hike.
Services (+0.79%) and Mining & Oil (+0.04%) saw some modest gains, though property (-1.75%), Holdings (-0.83%) and Industrials (-0.87%) ended in the red.
Value turnover dropped to P4.3Bn and net foreign selling persisted at P121Mn. GLO (+3.55%) and TEL (+1.88%) were the biggest gainers, while URC (-2.99%) and GTCAP (-2.39%) were the biggest index losers.