By Christine Joyce S. Castañeda
Senior Researcher
AYALA Corp.’s (AC) growth prospects, coupled with macroeconomic concerns led foreign investors to sell their shares in the stock while local investors took positions, making it one of the most actively traded stocks last week.
AC was the fourth most traded stock last week in terms of value turnover, totaling P1.233 billion from Sept. 24 to 28, data from the Philippine Stock Exchange showed.
Shares closed at P928 apiece on Friday, down P22 or 2.32% from the previous day, but gained 3.34% week on week. For the year, it is down 10.77%.
Philstocks Financial, Inc. Research Associate Piper Chaucer E. Tan attributed the stock’s performance last week to the depreciating peso and the widening of the country’s current account deficit that led to foreign investors unloading their shares. At the same time, he said local investors positioned themselves on the stock as growth prospects were “intact with AC moving forward.”
For IB Gimenez Securities, Inc. Head of Research Joylin F. Telagen: “Basically, this is because of AC’s robust long-term growth trajectory.”
The country’s current account deficit stood at $2.9 billion in the second quarter, a reversal from the $157 million surplus posted a year ago. For the first half, current account deficit was at $3.1 billion from $133 million in the same period last year.
The current account provides a snapshot of the country’s overall economic interaction with the rest of the world covering trade in goods and services; remittances from overseas Filipino workers (OFW); profit from Philippine investments abroad; interest payments to foreign creditors; as well as gifts, grants and donations to and from abroad.
Meanwhile, the conglomerate announced last week that Aboitiz Power Corp. (AboitizPower) entered into a share purchase agreement with AC Energy, Inc. affiliate Arlington Mariveles Netherlands Holding BV and a shareholders’ agreement with AC’s energy investment arm. The proposed acquisition will give AboitizPower a 49% voting stake and 60% economic stake in AA Thermal, Inc., AC Energy’s thermal platform in the country.
The transaction comes about four months after AC Energy first announced it was selling as much as half of its thermal energy platform.
AC’s consolidated net income rose 13.16% to P14.75 billion in the second quarter from P13.03 billion in 2017. For the first half, the company saw its net income grow by 12.35% to P27.64 billion.
The company has a five-year target, which is to double its net income to P50 billion by 2020.
“In terms of its 2020 goals, we think that the company is on track given that net income growth and EPS (earnings per share) growth is averaging at 25.6% for the past five years,” Philstocks’ Mr. Tan said.
“Headwinds for AC would be the rising interest rates of which may affect sale reservations for ALI (Ayala Land, Inc.),” he added.
For this year, Mr. Tan said the company could take in P32.2 billion in net income for the year driven by holiday spending in AC’s hotel segment and ALI’s sales coming from OFWs in the second half.
For her part, IB Gimenez’s Ms. Telagen expects AC to bag P34.5 billion in net income driven by robust growth in its real estate business and power, and stable performance in its telecom and water segments.
“We also see sustainable future growth of its ventures to Mynt’s, Wave Computing and Zalora. However, despite higher interest income (due to higher interest rates), we think that its banking segment will drag AC income because of lower non-interest income (e.g. trading and investment) and higher funding costs and AC Industrials will continue to be affected by higher excise tax on automotive,” she added.
Mr. Tan placed primary and secondary support at P885 and P867, respectively, and primary and secondary resistance levels at P1000 and P1030.
For Ms. Telagen: “We see strong support at around P916,” noting that anything closer or lower than that price is a good opportunity to buy and hold AC shares.
“Resistance is seen at P1,100 or around 20 times its 2018 earnings based on our estimates,” she added.
