MACROECONOMICS WEEKLY UPDATE

The Philippines will stop the operations of 175 offshore gambling firms and deport about 40,000 Chinese workers as part of a crackdown on the online gaming industry. Leechiu Property Consultants (LPC) estimates that the complete exit of the POGO industry would leave vacant 1.05 million square meters of office space and PHP 8.9 billion in foregone annual rent. The sector employs 201,000 Chinese and 111,000 Filipinos and delivers around P190 billion to the local economy each year. LPC reported last week that once POGOs leave completely, they expect office lease rates to drop between 55 – 80%.

The Department of Finance’s (DOF) call to shut Philippine offshore gaming operators (POGOs) down appears to be based on nothing more than grim words instead of quantitative data. The DOF was placed in the hot seat Monday (October 3) during a Senate Ways and Means Committee hearing on POGOs.

The Department of Transportation (DOTr) broke ground on the construction of two stations of the Metro Manila Subway, a 33-kilometer underground railway system which will connect Valenzuela City to Pasay City. The groundbreaking for the Ortigas and Shaw Boulevard stations and tunnels, comprising package 104 of the project worth P20.46 billion, was led by President Bongbong Marcos and Transportation Secretary Jaime Bautista Monday.

According to the Department of Agriculture (DA), Typhoon Karding destroyed more than PHP 1.29 billion worth of crops and other agricultural products. The super typhoon flooded farms in a variety of regions in Central Luzon, affecting the livelihood of 82,158 farmers. Among the agricultural subsectors, the rice sector was the worst hit, with damage spanning 141,312 ha and production loss of 72,231 MT worth PHP 959.8 million. The DA mentioned it will be aiding affected farmers and fishers, including PHP 27.47 million worth of rice seeds, PHP 13.23 million worth of corn seeds and PHP 12.64 million worth of assorted vegetable seeds. The typhoon affected 76% of the nation’s standing rice crops.

President Bongbong Marcos held a meeting with present and past leaders of the Federation of Filipino Chinese Chambers of Commerce and Industry Inc. (FFCCCII) in Malacanang on Friday, September 30. Marcos thanked the FFCCCI, led by president Henry Lim Bon Liong and honorary president Francis Chua, for for sharing their ideas on how to turbocharge the country’s bounce back from the pandemic.

Total liabilities of the national government (NG) rose by 11 percent to P13.02 trillion as of end-August due to the issuance of domestic securities and currency adjustments, the Bureau of the Treasury (BTr) reported on Friday. Bulk or 68.7 percent of the liabilities is accounted for by those sourced from domestic creditors while the balance of 31.3 percent was sourced from overseas.

INDUSTRY NEWS

Globe Telecom, Inc. (GLO) achieved its first closing of 800 towers out of the total 3,529 towers to be acquired by Frontier Towers for a cash consideration of PHP 10 billion. The full sale of GLO’s 3, 529 towers will amount to PHP 45 billion with an initial lease back period of 15 years.

The cut-off for the November rebalancing will be anytime during the last 2 weeks of October and thus the numbers today are just indicative of what the actual changes will be.

 

BANKING AND FINANCE 

 In a disclosure last Friday, the merger between Ayala-led Bank of the Philippine Islands (BPI) and the Robinsons Bank Corporation (RBC) of the Gokongwei Group was approved by their respective boards through a share swap agreement, with BPI as the surviving entity. The transaction is subject to the approval of regulators, including BSP, SEC, Philippine Deposit Insurance Corp. (PDIC) and the Philippine Competition Commission. The parties hope to complete the process before the end of 2023. Upon completion of the merger, RBC shareholders JG Summit Capital Services Corp. and Robinsons Retail Holdings, Inc. (RRHI) will hold 3.6% and 2.4% of BPI, respectively, bringing the Gokongwei’s ownership to 6%.

HOLDINGS NEWS

Alfred Ty picked up some stocks in his family’s holding company which has lost a third of its value over the last 12 months. Ty bought a total of 4,700 shares of GT Capital Holdings (GTCAP) at a price range of P416 to P432.50 on September 28. GTCAP dropped to P415.60 on September 30, down 33 percent from its 52-week high of P623.

POWER AND UTILITIES NEWS

The application for a temporary relief on San Miguel Global Power Corporation’s (SMGPC) 1,000MW power supply agreement (PSA) with Meralco was not approved by the ERC. The ERC cited that the PSA signed in 2019 were financial contracts which means SMGPC must deliver the contracted capacities regardless if they are generated by Sual and Ilijan plants. The 1,000MW PSA between Meralco and SMGPC has an original contract term of 10 years and will expire on December 25, 2029.

The Manny V. Pangilinan-owned Maynilad Water Services and Ayala-Razon’s Manila Water are likely to increase rates in 2023 as the peso weakens further against the dollar. Metropolitan Waterworks and Sewerage System (MWSS) chief regulator Patrick Lester Ty said the two water concessionaires will likely ask permission to charge higher fees by the first quarter of 2023.

Prime Infrastructure Capital Inc. of Enrique K. Razon Jr. has secured the government’s nod for its acquisition of Malampaya operator from Shell Philippines Exploration B.V. (SPEX), marking its initial foray into the upstream energy market. The Department of Energy (DOE) said that after a thorough review, it has approved the sale of Shell’s 45 percent interest in Malampaya Service Contract 38 to Prime Infra.

Energy Secretary Raphael Lotilla welcomed the Department of Justice (DOJ) opinion that relaxes foreign ownership restrictions in renewable energy sector. DOJ has opined that exploration, development, and utilization of inexhaustible RE sources are not subject to the 60:40 foreign equity limitation as provided under Section 2, Article XII of the Constitution.

Realizing the multiple benefits it could reap from renewable energy (RE), the provincial government of Iloilo issued an ordinance that will help it achieve energy self-reliance. The ordinance mandates the establishment of infrastructure and mechanisms on RE, encourages barangays, municipalities, and cities to identify and allocate possible sites for RE investments, and provides incentives.

REAL ESTATE AND PROPERTIES 

Rockwell Land Corp. will tap a P3 billion loan facility from Metropolitan Bank and Trust Co. to support its aggressive expansion. n a stock exchange filing, Rockwell Land said the loan would have a term of up to seven years. From January to June, Rockwell spent a total of P3 billion for project and capital expenditures, bulk of which went to the development of The Arton, Proscenium, Rockwell South and Balmori Suites.

• Homegrown Filipino Hotel101 of DoubleDragon Properties is all set to conquer Japan as it wrapped up the acquisition of a 9,000-square meter property there. DoubleDragon said subsidiaries DDPC Worldwide Pte Ltd and Hotel 101 Worldwide Pte Ltd have executed the full payment for the acquisition of the prime land located in Japan’s Hokkaido Prefecture.
• Vista Land & Lifescapes (VLL) of Manny Villar might have limited exposure to Philippine Offshore Gaming Operations (POGO), but it is the most at risk to an economic fallout from the proposed ban on Chinese-backed tenants. VLL has the biggest loan exposure among the country’s top property companies with a net debt to equity ratio of 128 percent.
• The rest of the Big Six property firms have a debt-equity ratio of less than 90 percent:

                                                                                                           * SM Prime Holdings (89 percent)

                                                                                                           * Ayala Land Inc. (77 percent)

                                                                                                          * Filinvest Land Inc. (70 percent)

                                                                                                          * Robinsons Land Corp (29 percent)

                                                                                                           * Megaworld (24 percent)

OIL AND MINING 

 Global Ferronickel Holdings Inc. (FNI) has finalized its acquisition of a 20% stake in Guangdong Century Tsingshan Nickel Industry Co. Ltd. (GCTN) from GHGC Holdingskl Ltd. GCTN is a nickel alloy enterprise in China operating one of the world’s advanced smelters with RKEF technology in a 33-hectare facility employing over 600 employees.

Nickel Asia Corp. has jacked up its stake in the company that operates a high pressure acid leach (HPAL) processing plant in Bataraza, Palawan. Nickel Asia said it purchased 33.05 million common shares of Coral Bay Nickel Corp. from majority shareholder, Sumitomo Metal Mining Co. Ltd. (SMM) for $25.94 million. The acquisition of the additional shares has raised Nickel Asia’s equity ownership in CBNC to 15.625 percent from 10 percent.

MacroAsia Corp. of Lucio Tan is applying for a permit to mine nickel ore in a 1,114- hectare area in Brooke’s Point, Palawan. MacroAsia, through subsidiary MacroAsia Mining, partnered last year with Calmia Nickel to explore and operate the long idle Infanta nickel project.

PHILIPPINE STOCK MARKET UPDATE

The PSEi ended flat, gaining only 0.87 pts (up 0.01%) to close at 5,988.59 after Philippine inflation for September clocked in at 6.9%, higher than August’s 6.3% print but in-line with median forecasts.

Trading ended mixed for the sectoral indices, as gains from Mining & Oil (up 0.74%) and Industrials (up 0.23%) were offset by the decline in Holdings (down 0.61%) and Property (down 0.82%). Value turnover was also flat at P4.4B while foreign flows turned positive (+P189M).

Top index gainer was MONDE (up 4.51%) while top index decliner was CNVRG (down 7.98%).