MACROECONOMICS WEEKLY UPDATE
Amid the series of aggressive rate hikes delivered by the Bangko Sentral ng Pilipinas (BSP) last year, the higher ceiling on interest rates or finance charges on all credit card transactions is seen as aiding banks in covering the cost of helping consumers. BDO Unibank Inc. (BDO) said the decision of the Monetary Board to raise the rate cap to 3% per month or 36% p.a. from 2% or 24% p.a. would help banks cope with rising costs of providing credit. The executive vice president and head of unsecured lending at the Bank of the Philippine Islands (BPI), Jojo Ocampo, said that the higher ceiling helps boost the push towards financial inclusion in the country. Likewise, Metropolitan Bank & Trust Co. (MBT) believes the decision to adjust the cap higher would help banks deliver more meaningful services to customers. Meanwhile, the 17-member Credit Card Association of the Philippines (CCAP) said the 100 basis point hike in the cap on all credit card transactions is part of the BSP’s calibrated responses to the present economic situation.
The Department of Budget and Management (DBM) reported that infrastructure spending increased to P80bn (+40% y-o-y) in Nov 2022 from P58bn in Nov 2021 as certain roads and building projects were finished. The DBM attributed the expansion to the completed and partially completed projects of the Department of Public Works and Highways (DPWH) nationwide, including the construction, improvement, repair, and rehabilitation of national, secondary, access, by-pass, and diversion roads, bridges, flood control structures, and multi-purpose buildings. Infrastructure investment in Nov 2022 grew to P869.2bn (+14.3% y-o-y) from P760.4bn while government spending rose to P455bn (+10% y-o-y), bringing 11M22, expenses to P4.51tr (+10% y-o-y). DBM states that due to these factors and relatively strong spending performance for Oct 2022 and Nov 2022, full-year 2022 disbursements are likely to exceed the target spending.
The Bureau of Treasury (BTr) will be offering about P200bn worth of treasury bills (P60bn) and bonds (P140bn) for Feb 2023. The T-bills have issue dates for the four Wednesdays of February, and they will be offered at P5bn for each benchmark tenors of 91, 182, and 364 days. For the treasury bonds, BTr will be offering P35bn for each issue date in the Thursdays of February, and the bonds will have maturities of 13, five, three, and 10 years.
Philippine Egg Board Chairman Gregorio San Diego cited increasing transport and fuel costs as well as losses due to overproduction and avian influenza (bird flu) for the wide gap between the farmgate and retail prices of eggs. He noted that several small and medium producers suspended their operations after suffering losses due to overproduction last year; hence, he recommended that the Department of Agriculture should produce data to help match the egg production with the demand.
Philippine GDP grew by 7.2% y-o-y in 4Q22 (consensus: +6.8%, 3Q22: +7.6%). This brings the full year 2022 GDP at 7.6% (around 102.9% of 2019 GDP), ahead of the 7.5% consensus estimate and the government’s target of 6.5%-7.5% for 2022.
Total trade for Dec-22 fell by 9.9% y-o-y to US$15.93bn (Dec-21: +24.8%; Nov-22: +3.8%). At the same time, trade deficit narrowed by 10.2% y-o-y (Dec-21: +108.9%; Nov-22: -21.3%) to US$4.60bn as both exports and imports declined. Exports fell by 9.7% y-o-y to US$5.67bn while imports fell by 9.9% y-o-y to US$10.26bn.
According to data from the Bangko Sentral ng Pilipinas (BSP), the value and volume of fund transfers processed through InstaPay and PESONet rose in 2022 as more Filipinos used digital platforms for their transactions. The combined value of transactions done via the BSP’s automated clearing houses, InstaPay and PESONet, grew to P9.94tr (+37.3% y-o-y, 2021: P7.24tr) in 2022. In terms of volume, transactions coursed through InstaPay and PESONet increased to 633.47m (+21% y-o-y, 2021: 523.6m) in the same period.
INDUSTRY UPDATE
REAL ESTATE AND PROPERTIES
The Court of Tax Appeals (CTA) has upheld its previous ruling that set aside Robinsons Land Corp’s (RLC) tax liabilities worth P3.76bn including penalties and interests for the fiscal year 2009. The CTA denied the commissioner of internal revenue’s (CIR) appeal to overturn the ruling since it was filed late. The CTA First Division had voided the CIR’s final letter of demand and final assessment notice because they did not show definite due dates for payment, which violated RLC’s right to due process. The CTA also said that the CIR did not comply with the tax code’s due process requirement when the official did not explain why RLC’s arguments to dispute the assessment were rejected.
POWER AND UTILITIES
Maynilad Water Services, Inc. (Maynilad), a subsidiary of Metro Pacific Investments Corp. (MPI), was ordered by the Metropolitan Waterworks and Sewerage System (MWSS) to refund over P27m following its failure to supply uninterrupted 24- hour water service to customers covered by the Putatan Water Treatment Plant (PWTP) from Dec 2022 to Jan 2023. The PWTP supply zone covers the southern portion of Maynilad’s concession area such as Muntinlupa, Las Piñas, Parañaque and portions of Cavite. Maynilad agreed with the MWSS on the rebate which will be implemented in Feb 2023.
Manila Electric Co. (MER) said that the distribution utility will start sourcing a total of 670 megawatts (MW) of electricity requirement from the Wholesale Electricity Spot Market (WESM) following the expiration of its 300 MW emergency power supply agreement (EPSA) with Aboitiz Power Corp. (AP) on 25 Jan 2023. The capacity requirement was supposed to be covered by MER’s power supply agreement (PSA) with SMC Global Power (SMCGP), a subsidiary of San Miguel Corp. (SMC), but subjected to a temporary restraining order (TRO) issued by the Court of Appeals (CA). According to ERC Chairperson Monalisa Dimalanta, the CA extended the effectivity of the TRO until end-Jan, originally scheduled to end on 23 Jan 2023.
ACEN Corp. (ACEN) announced that the company will acquire a 5% stake, equivalent to 500m shares of SP New Energy Corp. (SPNEC), as prepayment for part of the loan’s principal extended to the latter in 2021 for a solar farm development in Central Luzon. The acquisition also serves as payment of interest and arrangement and security amendment fees in consideration for ACEN releasing its pledge over shares owned by Solar Philippines Power Project Holdings, Inc. (SPPPHI) in SPNEC. Based on the omnibus loan and security agreement (OLSA) signed by ACEN and SPNEC, the repayment of the loan had been set on 26 Jul 2026.
SP New Energy Corp. (SPNEC) announced that it intends to undertake more private placements in a bid to broaden its shareholder base and accelerate development of solar in the Philippines. SPNEC said that it plans to increase its public float by another 2.1bn shares to achieve at least 20% public float upon the completion of its share swap. As part of its share swap, SPNEC will issue 24.37bn shares to Solar Philippines Power Project Holdings, Inc. (SPPPHI) at P2.50 apiece, on top of the company’s existing 10bn shares. As a result, SPNEC will have 34.37bn shares outstanding, which will require the public to own at least 6.87bn shares to achieve at least 20% public float.
San Miguel Energy Corp. (SMEC), a subsidiary of San Miguel Corp. (SMC), failed to secure a temporary restraining order (TRO) to suspend the Energy Regulatory Commission’s (ERC) order issued in Sep 2022. According to ERC, the Court of Appeal’s (CA) 16th Division said that SMEC failed to prove its right to a restraining order. The CA said that granting SMEC’s TRO will not serve its purpose since it will not maintain the contract price but set aside the assailed order itself, rendering the petition for certiorari moot. Moreover, CA said that if granted, the writ of injunction will give SMEC the unrestricted power to terminate PSA’s at its own will to the detriment consumers.
Manila Water Company, Inc. (MWC) announced a P37.3bn investment in its wastewater master plan which includes developing treatment facilities and a sewage network across the Marikina River, San Juan River, Pasig River, and Laguna Lake. According to MWC it allocates P10.2bn for the San Mateo-Rodriguez and Quezon City East sewerage systems, which will serve 129,000 residents by 2046 and support the Marikina River system, P20bn for Mandaluyong West, Quezon City South, and San Juan South, which will cover portions of catchments draining towards the San Juan River and Pasig River systems, and P2.8bn for the North and South Pasig Sewerage systems. MWC said the project would treat 60m litres, expandable to 120m litres of wastewater per day over a 53-kilometre (km) sewage network to minimise the company’s pollution.
Raslag Corp. (ASLAG) said that it will acquire over 42 hectares (ha) of land for around P273m or P650/square metre (sqm) in Tarlac to serve as the site for the RASLAG-6 solar power plant which will be connected to a 69- kilovolt (kV) transmission line of the National Grid Corp. of the Philippines (NGCP). ASLAG said that the transaction involves a downpayment of P61.43m, apart from P27.30m in earnest money to be paid upon the acquisition agreement. The balance will be paid in nine monthly payments of approximately P20.48m monthly. Moving forward, ASLAG said that the additional operating solar plant would increase its income in the coming years.
TELECOMMUNICATIONS
Converge ICT Solutions, Inc. (CNVRG) said that it had achieved its two million fibre port rollout target for 2022. As of Dec 2022, CNVRG has already deployed more than two million fibre ports in Luzon, Visayas, and Mindanao. CNVRG said it is on track to reach its accelerated target of covering approximately 55% of households nationwide by 2023, with its household coverage at 53% as of end-Sept 2022. The company added that it has allocated P21bn to P23bn in total capital expenditures for this year. Furthermore, CNVRG has extended its fibre footprint to more than 613,000km, consisting of subsea, aerial, and terrestrial fibre optic cable network all over the country.
INFRUSTRUCTURE
Cemex Holdings Philippines, Inc. (CHP) disclosed that its parent company, Cemex Asian South East Corp. will conduct a voluntary tender offer for up to 1.61bn outstanding common shares at a price of P1.30 per share. The tender offer period will be from 16 Feb 2023 to 16 Mar 2023. Assuming that the tender offer is fully subscribed, CHP’s free float will be reduced from 21.96% to 10%, which is within the current minimum free float level for listed companies.
Megawide Construction Corp.’s (MWIDE) precast unit has secured three new supply-and-build contracts with residential developer PHirst Park Homes, Inc. (PPHI). The precast business unit will supply precast materials for housing projects in three new PPHI locations: Naic, Cavite; Baliuag, Bulacan; and Tayabas, Quezon. MWIDE added that the company now has 11 projects with PPHI and is building a total of about 19,000 units for these sites across Luzon.
BANKING AND FINANCE
Bank of the Philippine Islands (BPI) raised P20.3bn through the issuance of peso fixed-rate bonds to boost its lending portfolio for micro, small, and medium enterprises (MSMEs). The amount was more than four times the original issue size of P5bn for the BPI Reinforcing Inclusive Support for MSMEs Bonds due 2024, with an interest rate of 5.75% p.a.. The 1.5-year bonds will be listed on the Philippine Dealing and Exchange Corp. (PDEx) on 30 Jan 2023. The bank decided to cut short the offering period to between 9 Jan 2023 and 13 Jan 2023 instead of the original schedule of 9 Jan 2023 to 20 Jan 2023.
GCash, the mobile wallet business of Globe Telecom, Inc. (GLO) and CIMB Bank, the country’s leading digital banking services provider, are offering users up to 8% p.a on GSave until 31 Jan 2023. The offer will be available for existing customers of the bank who opened their accounts for more than 60 calendar days at the start of the qualifying month. It will be applicable to the difference in total average daily balance (ADB) from the previous month. GCash said the promo is also inclusive of other promo and base rates for ADB growth including the 2.6% p.a. for GSave accounts. This is also inclusive of the 4% p.a promo rate applicable to the first P200,000 ADB. Additionally, any incremental ADB growth will receive 8% p.a. Lastly, for customers who have multiple deposit accounts with CIMB Bank, the interest rate reward will be computed based on the qualifying month’s total ADB for GSave accounts.
GCash, the mobile wallet business of Globe Telecom, Inc. (GLO) and Grab Philippines have tied up to allow customers to use their mobile wallet as a direct payment method when using the services of the Grab platform. By Feb 2023, GCash will be available as a direct mode of payment on the Grab platform. Once rolled out, Grab platform users can simply choose GCash as their payment method and pay cashless for Grab services, avoiding transfer fees that go as high as P50.
The Union Bank of the Philippines’ (UBP) 2022 net income rose to P12.7bn (2021: P12.58bn, +0.97% y-o-y) – below consensus estimates. This translated to a return on equity (ROE) of 9.7%, which includes the impact of the P40.0bn additional capital from the stock rights offer in May 2022. Nonetheless, revenues were at an alltime high of P52.2bn (+16% y-o-y) driven by the expansion of net interest income (NII) by P38.9bn (+31%), attributable to higher margins at 4.9% (+27bps y-o-y), higher proportion of consumer loans, and the robust growth of low-cost CASA deposits (+29% y-o-y). Fees and other income doubled to P13.4bn, largely due to the consolidation of the acquired Citi consumer business, as well as growing digital customer transactions. Furthermore, customer loans jumped by P479.2bn (+42% y-o-y), with growth coming from UnionBank, CitySavings, and the acquired Citi consumer business. These also resulted in an increase in total deposits to P711.3bn (+25% y-o-y), with the overall expansion of the retail customer base and the strong take up of cash management products by large corporates.
The Pag-IBIG Home Development Mutual Fund released a record P118bn in home loans in 2022, a 21% increase from 2021. The fund was able to finance the acquisition and construction of 105,212 homes, an 11% increase from the previous year. Of the approved loans in 2022, P8.28bn were granted to finance 18,657 socialised homes for minimum-wage and low-income members, accounting for 18% of the of the total number of homes financed and 7% of the total value of housing credit. The Affordable Housing Program offers a special subsidised rate of 3% per annum for home loans of up to P580,000 for socialised subdivision projects and up to P750,000 for socialised condominium units. This translates to a monthly amortisation of as low as P2,445.30 for a 30-year loan, with a 100% loan-to-value ratio and no cash equity required.
REAL ESTATE AND PROPERTIES
Citicore Energy REIT Corp. (CREIT) said that the Securities and Exchange Commission (SEC) granted the company the permit to sell its maiden ASEAN Green Bonds worth P4.5bn, consist of a base principal amount of P3bn with an oversubscription option of up to P1.5bn. The fixed-rate bonds will be offered from 30 Jan 2023 to 3 Feb 2023 and will be listed with the Philippines Dealing and Exchange Corp. (PDEx) on 10 Feb 2023. Coupon rate is fixed at 7.0543% due in Feb 2028. CREIT said that the proceeds of the offering will be allocated for the development of a solar rooftop system project and the acquisition of 5m square metre (sqm) or over 500 hectares (ha) land parcels in Batangas.
HOLDINGS
Metro Pacific Investment Corp.’s (MPI) dairy sector anticipates earning P500m by 2025 as its subsidiary, Metro Pacific Agro Ventures (MPAV) and LR Group are investing P2bn in partnership to develop a dairy facility in Bay, Laguna which will produce at least 6m litres of milk per year. Construction will commence in 2023, and operation will begin in late 2025 or early 2026. According to MPI, through MPAV the development of the Philippine dairy industry is the first step toward achieving food security in the Philippines as the country currently imports 2.8m metric tonnes (mt), or 99%, of its milk and milk by-products due to subpar feed and management practices, high production costs, and a lack of dairy infrastructure.
The Keepers Holdings Inc. (KEEPR), through its wholly-owned subsidiary Montosco Inc., acquired the Island Mixers brand (a non-alcoholic cocktail mixer) from Diageo Philippines Inc for an undisclosed amount. KEEPR noted that the acquisition is part of its strategy to expand its diverse spirits portfolio. As such, the company is also considering to expand the current Island Mixers lime variant into other mixing flavours and categories.
PHILIPPINE STOCK MARKET
The PSEi ended the week flat at 7,027,38, up 0.59% from the previous session but down 0.21% WoW.
Trading ended mixed for the sectoral indices, with Mining & Oil (-1.76%) and services (-0.46%) experiencing losses while financials (+0.40%), Industrials (+0.63%), Holdings (+0.03%) and property (+2.42%) showing modest gains.
Value turnover improved to P18.7Bn from P8.2Bn the previous session, and net foreign buying persisted at P351Mn. Top index gainers were SMC (+10.86%) and SMPH (+5.42%) while top index decliners were SCC (-3.14%) and RLC (02.84%).
