Better earnings make JG Summit an attractive stock — analysts

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BETTER EARNINGS and renewed investor interest made JG Summit Holdings, Inc. one of the most active stocks at the stock exchange last week.

A total of P464.489 million worth of 7.245 million shares were traded from Aug. 13 to 16, data from the Philippine Stock Exchange (PSE) showed.

“[JG Summit] rallied to as high as P66.5 [last week] on the back of its strong earnings for the first half of 2019 with net income surging by 63.05% year-on-year to P23.8 billion [from P14.6 billion],” said Philstocks Financial, Inc. Japhet Louis O. Tantiangco in an e-mail.

“The conglomerate showed strong fundamentals for the first half… Net margins also improved to 15% this first from 10% [in the same period last year] showing better efficiency in generating profits,” he added.

Mr. Tantiangco noted, however, that there has been some profit taking last Friday “amid the persistence of negative sentiment in the overall market brought by global economic worries.”

Prior to Friday’s profit-taking, the stock was up 5.5% to P66.5 per share from the previous week’s closing price of P63.05 per share. On Friday, its stock price went down by 4.5% to P63.5 per share from the previous day, bringing the stock’s week on week growth by just 0.7%.

Year to date, however, the price of the stock is up 15.25%.

Luis A. Limlingan, head of sales of Regina Capital Development Corp., likewise cited the JG Summit’s latest earnings report, noting that the company’s businesses “have performed strongly” during the April to June period.

“For starters, its airline unit Cebu Air, Inc. more than doubled its net income for the first half, reaching P7.14 billion, at the back of the stable volume and revenue growth, and better average fuel prices,” said Mr. Limlingan.

In a regulatory filing, the Gokongwei-led holding company reported an attributable profit of P9.96 billion in the second quarter, 99% more than the P5 billion during the same period in 2018.

The company’s consolidated revenues grew 11% to P82.18 billion during the period, coming mostly from snack and beverage firm Universal Robina Corp. (URC).

URC’s revenues during the quarter reached P33.72 billion, up 3% year on year.

In terms of revenue growth, its banking segment, under Robinsons Bank Corp. was the largest, surging by 45% to P2 billion during the quarter due to higher interest income.

Other segments that saw revenue growth were its airline segment through budget carrier Cebu Air (20% to P23.53 billion); and real estate and hotel business through Robinsons Land Corp. (19% to P7.98 billion).

On the other hand, its petrochemicals group, represented by Petrochemicals Corp. and JG Summit Olefins Corp., posted a 16% decline to P9.01 billion due to lower selling prices and volumes sold during the period.

“The transformation program being undertaken by URC seems to be paying off as it was able to register a 6.6% net income growth to P5.13 billion during the first half on the back of the double-digit growth in its coffee business,” Mr. Limlingan said.

To recall, URC earlier implemented initiatives to improve its coffee business in the country, which had been a negative contributor to earnings in previous years. Among these initiatives include the launch of its three new instant coffee products last January to address gaps in the market.

“From our perspective, [JG Summit] could sustain its strong financial performance for the rest of the year. Its macroeconomic environment provides advantages: the decelerating inflation gives boost to food segment URC; the declining oil prices could also help its air transportation segment [Cebu Air]; [and] finally, the loosening monetary policy could provide boost its property arm [Robinsons Land],” Philstocks’ Mr. Tantiangco said.

Despite improving fundamentals, Mr. Tantiangco noted that JG Summit may be “moving sideways as the overall market picture remains clouded with global economic slowdown fears.”

Mr. Tantiangco set the stock’s support at P63 and resistance at P66.6.

“In the medium to long run, however, its share price could rally back to the P70 [per share] level so long as it would be able to maintain its strong fundamentals,” he added.

For Regina Capital’s Mr. Limlingan, support and resistance levels are pegged at P62.8 and P65 per share, respectively. — Lourdes O. Pilar