MACROECONOMICS WEEKLY UPDATE

According to a recent report by Leechiu Property Consultants (LPC), more traditional corporate occupiers are returning to the office. In 2Q22, companies engaged in manufacturing, finance, and retail accounted for 55% of the total live office space demand or 235,000sqm out of the total 450,000sqm. The demand from traditional office occupiers have outperformed IT-BPM demand of 212,000sqm during the quarter.

The House Ways and Means Committee has approved yesterday (24 Aug 2022) the new fiscal regime for the mining sector. It would bring the country’s effective tax rate on mining to 51% up from the 38% under the current regime. In addition, a minimum government share of 60% of net mining revenues, including all government taxes, fees, and charges, will be imposed on mining operations.

The Philippine Economic Zone Authority (PEZA) confirmed that it plans to extend the 30% work-from-home (WFH) arrangements for registered information technology and business process outsourcing (IT-BPO) firms to March 2023. The plan is due for final approval on the PEZA’s next board meeting tomorrow, 26 Aug 2022. Moreover, Labor Secretary Bienvenido Laguesma said that the government is currently in the process of revising the implementing rules and regulations of the Telecommuting Law.

According to the Department of Trade and Industry (DTI), sugar retail prices are still selling at a high of P100-105/kg in the markets. This is despite the three big supermarket chains, SM, Robinson, and Puregold, now selling white refined sugar at P70/kg. In a separate statement, American Chamber of Commerce of the Philippines Executive Director Ebb Hinchliffe is urging the government to import more sugar to address the supply deficit of around 600,000 metric tons (MT).

According to the Department of Energy (DOE), the state-run Philippine National Oil Company Exploration Corp. (PNOCEC), is poised to approve the sale of Shell Philippines Exploration B.V.’s (SPEX) stake in the Malampaya deep-water gasto-power project to Malampaya Energy XP Holdings (MEXP) within the year. DOE Secretary Raphael Lotilla said that PNOC-EC, which has 10% stake in the Malampaya project, will give its consent after it has reviewed the sale of SPEX’s stake. The DOE will be assisted by technical and financial advisors in reviewing the proposed sale.

The Department of Transportation (DOTr) said that it is studying the possibility of building a rail connection between the towns of Santa Maria and Norzagaray in Bulacan province. DOTr proposed three ways: (i) to develop an extension of MRT-7, (ii) to develop a rail connection by the North–South Commuter Railway (NSCR), or (iii) through a public-private partnership program. However, the DOTr considers the extension of MRT-7 from San Jose del Monte, Bulacan as the most viable option.

INDUSTRY NEWS

SMC Global Power Holdings Corp. (SMC Global Power), the power arm of San Miguel Corp. (SMC), warned that electricity prices could spike by 30% in Metro Manila and nearby provinces beginning Oct-22 should the Energy Regulatory Commission (ERC) fail to act on its joint petition with Manila Electric Co. (MER) for a temporary rate hike on their two power supply agreements (PSAs). SMC Global Power disclosed that the approval of a temporary rate hike would raise electricity by P0.30 per kilowatt-hour (kWh) but without it prices would rise by P0.80 to P1.30 per kWh over the next months.

Manila Electric Co. (MER) announced its adoption of a sustainability scorecard covering its entire value chain in a bid to strengthen and operationalise its sustainability agenda. MER created the Meralco Supplier Sustainability Scorecard (MS3) to assess suppliers and contractors on various environmental, social, and governance (ESG) criteria, using the United Nations’ Sustainable Development Goals (UNSDG) and the Global Reporting Initiative (GRI) Standards as its guidelines. The MS3 is now incorporated into MER’s accreditation process which will provide it with a comprehensive view of its business partners’ ESG performance.

MGen Renewable Energy, Inc. (MGen), the RE investment arm of Manila Electric Company (MER), and Singaporeheadquartered Vena Energy have formed a joint venture for the construction of their 68-megawatt ac (MWac) solar power project in Currimao, Ilocos Norte. The project is expected to be completed by end this year and commercial operations by 1Q23. This is already the second solar farm development of Vena Energy in the area, the other one has been the 16MWac Garcia solar farm that was commissioned in 2016 and is close to the site of the Currimao project.

ABS-CBN Corp. (ABS) and TV5 Network Inc. (TV5) have agreed to put on hold their planned investment deal amid issues raised by lawmakers and the National Telecommunications Commission (NTC). Under the deal, ABS will acquire 6.46m primary common shares, equivalent to 34.99% of capital and voting stock, in TV5. The transaction is valued at P2.16bn. TV5 will use proceeds from the deal, totaling P4bn alongside P1.84bn convertible note to fund its capital and operating expenditures. Meanwhile, ABS could air some of its programs on TV5.

Globe Telecom, Inc. (GLO) has switched to eco-friendly sodium nickel batteries for its core network sites as part of the company’s commitment to climate action, including the reduction of carbon emissions. Sodium nickel batteries were reportedly 100% recyclable and have a lifespan of 20 years, double the lifespan of the company’s previously deployed standard Valve-Regulated Lead Acid battery.

PAL Holdings, Inc.’s (PAL) Philippine Airlines, Inc. (PAL) said that it plans to seek government help to make air travel more affordable for the public by either deferring or reducing airport charges such as terminal fees, take-off and landing fees, and navigational charges. The Civil Aeronautics Board (CAB) has lowered the applicable passenger and cargo fuel surcharge for domestic and international flights to Level 9 from Level 12 in Sept-22. As for the fuel surcharge per passenger, it is currently around P389 and P1,137 for domestic flights and P1,284.40 and P9,550.13 for international flights.

HOLDINGS NEWS

  Universal Robina Corp. (URC) has ventured into the alcoholic beverages category as it launched its new product, Chill Spiked Spirit, which contains 5% double distilled alcohol, real fruit extract, and soda water. The company also said that it has no artificial sweetener and with zero trans fats, eliminating the heavy feeling in the gut that beer drinkers feel. Chill comes in 330ml cans at a suggested retail price of P51 with three flavours: red apple, lemon lime and lychee

SM Investments Corporation (SM) has increased its stake in AIC Group of Companies Holding Corp. (Airspeed), an endto-end logistics solutions and express courier company, from the existing 35% to 51% of the outstanding voting capital stock of the company.

LBC Express Holdings, Inc. (LBC) posted an attributable net loss of P82.99m in 1H22 from a profit of P310.56m in 1H21. LBC’s service revenue declined to P7.74bn (-8% y-o-y) mainly due to the decrease in domestic logistics segment partially offset by 8% growth in sales from overseas operations. Meanwhile, the cost of services dropped to P6.03bn (-4.3% y-oy) attributed to the 11% decrease in delivery and remittances.

PHILIPPINE STOCK MARKET UPDATE

The PSEi inched up 104.37 pts (up 1.58%) in a light volume session, recovering the early losses from this week to end only 0.89% lower WoW. Investors continued to remain cautious ahead of Philippine CPI data to come out early next week.
Trading ended mixed for the sectoral indices, as advances from Holdings (up 2.99%) and Industrials (up 1.72%) were partially offset by losses from Mining & Oil (down 0.68%).