The
stock market volatility seen in the third quarter may have unnerved many
investors but the pullback from record highs has also opened up opportunities
for those wishing to make some of their money work harder for them in this
low-interest rate environment.
But it’s never easy to just pick up cheap
stocks in a frenzy in an environment where the market is at the brink of a bear
territory and still searching for the bottom.
Inquirer’s Doris Dumlao thus asked a mix of
stock market professionals—two floor dealers, one fund manager and one research
analyst—what they thought would be "good buys" at the local stock
market in the fourth quarter. They each gave their top three stock picks,
taking into account valuations at the end of the third quarter.
This survey shows holding firms, power and
mining as the most favored sectors for the remainder of the year mainly because
of their attractive valuations relative to potential earnings.
Luz
Lorenzo
Economist/head
of research
ATR
Kim Eng Securities
"Our top picks are Ayala Land Inc.,
Aboitiz Power and Banco de Oro. Reasons
common to the three are: good earnings growth in 2011 and 2012, blue chip
status and regular dividends mitigate risk in volatile environment attractive
valuations.
"We like ALI because of its robust profit
growth and broad revenue base given presence in many areas of property
development protects against downturn in any particular segment. We see a
potential 15 per cent upside on target price of 19 pesos (US$.44) per
share."
"Aboitiz Power has a dominant industry
position in power generation and distribution. It has a potential upside of 19
percent on target price of 37 pesos (US$.35) per share. It has an attractive
yield of over 4 per cent."
"For BDO, we upgraded our 2011 earnings
and price target to 71 pesos (US$1.64) per share implying a 25 per cent
potential upside from current price. It has an impressive loan growth in the
first half of semester and posted better-than-expected trading and foreign
exchange income. It continues to beef up capital base."
Alejandro
Yu
President
R.S.
Lim & Co.
1. Alliance Global (AGI)
"I like it because of its diversity. The
businesses it is in form a broad spectrum—liquor, fast-food, real estate and,
the center piece these days, gaming. At the recent trip of President Benigno
Aquino to China, an interesting sidelight was an informal meeting between Belle
Group’s Willy Ocier and Megaworld/Alliance Global’s Andrew Tan, from which
speculation abound about a possible merging of forces, a synergy which could
benefit all parties. Whatever happens, the gaming industry stands to gain. The
ultimate goal is to attract gamblers who frequent Macau and Singapore to give
our country a try. We do have more to offer for the tourist dollar"
Another discussion point is what AGI will do
in reaction to the recent disclosure that its main competitor, Jollibee Food
Corp., has just acquired 54 per cent of the local franchise of fast food chain
Burger King.
On the distilled spirits side, traditionally
liquor sales also get a big boost in the fourth quarter as we approach the
holiday season, this should bode well for AGI’s income stream.
AGI is trading at 8.1x PE
2. Aboitiz Power
"Its price-to-earning ratio is low at
9.3x. Its revenue stream is steady. It recently inaugurated a new power plant
and has been continuously seeking new partners and possible tie ups. It is
quiet but is operating very efficiently. Aboitiz Power is a solid stock and if
you are looking at the power sector, it is a good default buy. It has hurdled
pressures post IPO and hasn’t looked back since then.”
3. SM Development Corp. (SMDC)
"Collier’s International recently said it
is the No.1 condominium developer and I personally think it will continue so
especially in the fourth quarter, when many overseas Filipinos come home for
the Christmas season and among their priorities is to invest in affordable,
accessible living quarters for their families. With the recent spate of
typhoons and tropical depressions, when widespread flooding occurred, moving into
medium and high rise structures makes a lot of sense. Add to this the model
that SMDC has refined, wherein their condo structures incorporate mini-malls,
supermarkets, theaters as among its basic and standard amenities. The company
has also managed to locate their developments near schools and
universities."
Gus
Cosio
President
First
Metro Asset Management Inc. (FAMI)
1. DMCI Holdings
"The market’s consensus earnings per
share (EPS) for 2012 is upward of 5 pesos (US$.11) and it looks like DMCI is on
track. At today’s price, DMCI Holdings is trading at less than 6.5 times the
2012 expected earnings per share. That’s just too cheap for a company which has
interest in a water utility. If Maynilad Water were valued today for an initial
public offering, it will approximate the market cap of DMCI. I’m also looking
at the underlying businesses like Calaca and Semirara. I also think that if PPP
(public private partnership) kicks off next year, DMCI will be one of the
beneficiaries of PPP, being one of the more important builders in the
infrastructure space."
2. Semirara Mining
"It (Semirara) is also trading at about
6.5 times EPS—not a premium for the holding company. Our estimate for 2011 EPS
is about 16.85 pesos (US$.39) implying a price to earnings multiple of 10.5x.
For next year, our EPS estimate is around 27 pesos (US$.62), which means it is
trading at 6.5x.
We estimate a 32-per cent growth in net profit
next year to 7.9 billion pesos (US$183 million). This will come from expanded
energy sales of 2.4B kilowatt per hour compared to 2B kwh this year. Shipment
of coal is slightly lower but prices are holding up. It is in talks with
Meralco and is prepared to contract 75 per cent of its running capacity to
Meralco. It looks like capacity is holding pretty well. Fuel is expected to
remain steady and since Semirara has the coal, it can control the cost. We
estimate that coal sales volume is about 6.5 million metric tons—3.9 million
for domestic demand and 2.6 million for export.”
3. Oriental Peninsula Resources Inc. (ORE)
"Its price has gone down so much but I
still like the mining story because when you talk about mines, you talk about
finite resources and whoever has the finite resource and can deliver it
profitably to the market has a built-in advantage. And from what I gather, ORE
has that. It has actually been producing and had delivered 23 shipments. It is
confident about doubling its target next year to 54 shipments from its two
mines, Pulot and Toronto. It is in line with its full-year EPS of about 0.61
pesos (US$.01) and is trading at a PE of about 5x."
"For 2012, our EPS estimate is 1.45 pesos
(US$.03) per share so at its current price, it is trading at only 2.1 times its projected earnings. For a
stock that’s already been delivering to buyers, it’s worth the investment. It
also has a good cash position. We expect its third quarter earnings to
duplicate the second quarter level despite soft LME (London Metal Exchange)
prices. "
Manuel
Lisbona
Deputy
chief
PNB
Securities
1. Alliance Global Inc. (AGI)
"Buying AGI is not unlike buying a
casino/hotel/resort operator (Resorts World), real estate developer
(Megaworld), liquor distiller (Emperador) and major US fast food chain
(McDonald’s) in one shot. What makes AGI even more interesting is that its
investee companies are major players in their respective industries. As of end Sept
2011, AGI was trading at 7.7x earnings (2012 forecast) and 1.2x book
value."
2. Energy Development Corp. (EDC)
"Though the company reported a loss of
2.3 billion pesos (US$53.2 million) in first half 2011, the cause of the loss
was a noncash impairment charge resulting from the scaling down of the capacity
of its Northern Negros plant. EDC’s right-sizing initiatives will reverse the
cash hemorrhage from this plant. As of end Sept 2011, EDC was trading at 8.5x
earnings (2012 forecast) and 4x book value.”
3. Abra Mining (AR)
"This recommendation is for the more
adventurous (risk tolerant) players. AR slept through last year’s bull run but
has caught the attention of players on the back of a joint-venture with
Canada-based Olympus Pacific Minerals and the surge in gold prices in the world
market. Although gold is currently trading off its high of US$1,900/oz, it
seems that the current price (US$1,600/oz) is a level at which many mining
projects are viable."
Business Desk
Philippine Daily Inquirer
Business & Investment Opportunities
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