MACROECONOMICS WEEKLY UPDATE

Inflation in February slightly decelerated due to the slower movement of transport-related prices including gasoline. The PSA said that the consumer price index rose 8.6% in February, slower than the 8.7% the previous month. Inflation in February was within the BSP’s 8.5-9.3% target. It is, however, still way above the baseline 2 to 4% target range. Transport inflation slowed to 9% with slower increases in the prices of gas and diesel. Core inflation though still rose to 7.8% from 7.4% in the previous month. Core inflation is now at its highest since March 1999 when it stood at 8.1%. 

The National Government’s outstanding debt in January hit a record high of Php13.7 tln (+2.1% MoM, +13.9% YoY) as the government ramped up domestic and external borrowings. Domestic debt increased to Php9.4 tln (+1.9% MoM; +12.2% YoY) during the period while external debt rose to Php4.3 tln (+2.4% MoM; +17.8% YoY). This year, the government plans to borrow an additional Php2.2 tln, of which 75% is expected to be sourced domestically. Debt-to-GDP stood at 60.9% as of end December, lower than the medium-term fiscal framework target at 61.8% but still above the threshold considered manageable by multilateral lenders for developing economies at 60%.

  Preliminary data from the Bangko Sentral ng Pilipinas showed that outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the Bangko Sentral ng Pilipinas (BSP), expanded at a slower pace of 10.4% YoY in January, from the revised 13.7% in December 2022. On a MoM seasonally-adjusted basis, however, outstanding loans, net of RRPs, remain broadly unchanged. 

INDUSTRY UPDATE 

GAMING

Bloomberry (BLOOM) reported a net profit of Php1.12 bn in 4Q22 or Php1.53 bn if we exclude forex losses from the appreciation of the Philippine Peso. This is a reversal of the Php1.20 bn net loss excluding forex gains in the fourth quarter last year and a 19% improvement from the previous quarter. Gaming and other revenues in the quarter benefitted from a recovery in consumer spending as the Philippines experienced its first normal holiday season since the pandemic. For the full-year 2022, net profit reached Php5.17 bn or Php5.05 bn excluding forex gains.

RETAIL  

Wilcon Depot Inc’s (WLCON) 4Q22 net income surged 28.3% YoY to Php888 mln, driven by sustained strong topline growth (+18.5% YoY). This brought full-year profits to Php3.8 bn, up 50.2% YoY. Sales rose buoyed primarily due to strong SSSG (+10.4%) as well as the opening of 10 new stores in 2022. Management expects sales to trend up on YoY basis as construction activity swells in the summer months. WLCON’s Board of Directors also approved the distribution of a Php0.23/sh regular and Php0.14/sh special dividend. The total dividend amount of Php0.37/sh is higher than last year’s dividends of Php0.21/sh and translates to a roughly 1.2% yield at its current price. The dividends will be payable on April 18, 2023 to shareholders of record as of March 22, 2023.

Universal Robina Corp’s (URC) headline net income in 4Q22 reached Php4.6 bn, lower by 63.9% YoY mainly due to a roughly Php10.1 bn gain on deconsolidation booked in the prior period. Full-year core profits rose 18.5% YoY to Php14.7 bn. Rise in revenues was mainly due to faster growth in their branded consumer foods (BCF) group, which grew 25% YoY to Php19.9 bn. This was driven by price increases (+13%) and volume growth (+12%). This marked the fourth consecutive quarter of record high sales.

BANKING 

According to Bank of the Philippines Islands (BPI) CEO Jose Teodoro “TG” K. Limcaoco, BPI’s merger with Robinsons Bank Corp. (RBC) could take effect earlier than expected as both parties expect to get all necessary regulatory approvals within the year. While the bank originally said the merger was expected to take effect on the first day of January in 2024, it could take place as early as October 1, if the BSP, PCC and SEC approve it within the first semester. Both banks are only waiting for the approvals from these regulators as all in-company processes have been completed.

ENERGY

  Aboitiz Power’s (AP) 4Q22 core earnings rose 61% to Php8.15 bn. This brought FY22 core earnings to Php26.5 bn, up 27% YoY. The company said the improvement in F22 results were due to fresh contributions from GNPD Units 1 and 2, higher water inflows for its hydroelectric plants, and gains from commodity hedges.

AIRLINES 

 Cebu Pacific (CEB) disclosed that it carried over 4.4 mln passengers in 4Q22, up 6.0% QoQ, as the holiday peak season encouraged travel to various destinations. Note that several international destinations like Japan, South Korea, and Taiwan eased their travel restrictions during the quarter, which boosted the recovery of the company’s international operations. This brought FY22 passengers flown to 14.8 mln, up 335% YoY. CEB flew over 108k flights and over 19.7 mln seats during the year and ended 2022 at 92% of pre-pandemic capacity. For 2023, management believes that the company is in place for a full recovery and expects to restore 100% of its pre-pandemic network and capacity in March.

LOGISTICS

SM Prime Holdings Inc. (SMPH) announced that it will be conducting a tender offer for 378,817,279 outstanding common shares of 2GO Group (2GO). The tender offer is priced at Php14.64/sh (26% premium from last traded price) and will cover all of 2GO’s free floating outstanding common shares or approximately 15.39% of outstanding shares. Tender offer will last until April 28, 2023, and is valued at Php5.5 bn with the goal of taking the logistics firm private.

 INFRUSTRUCTURE

  International Container Terminal Services Inc’s (ICT) 4Q22 net income rose 33.9% to USD169.3 mln. This brought FY22 net income to USD634.5 mln, up 43.2% YoY. In terms of core operating performance, revenues from port operation rose 20.3% to USD2.24 bn. Throughput volume rose 9.4% YoY during FY22 to 12.2 mln TEU due to a general improvement in global trade while average yield rose by 9% to USD180/TEU due to an upward tariff adjustment. ICT announced its board has approved the declaration of a regular cash dividend in the amount of Php8.56/sh, and a special cash dividend in the amount of Php1.44/sh. The total dividend of Php10.00/sh is payable on March 28, 2023. This translates to a 2023 dividend yield of 4.8%.

Philippine Stock Exchange 

The PSEi continued to drop, tracking US markets, losing 19.39pts to close at 6,589.88. Trading ended mixed for the sectoral indices, with advances by Mining & Oil (+0.17%), Property (+0.40%) and Services (+0.40%) but declines by Industrials (-0.56%), Holdings (-0.48%) and Financials (-1.25%).

Value turnover rose to P8.1Bn while foreign flows were negative (-P143Mn). Top index gainer was TEL (+2.81%) while top index decliner was GTCAP (-3.67%).