By Mariedel Irish U. Catilogo, Researcher
SHARES in Monde Nissin Corp. moved upward despite gloomy overall market sentiment brought by the proposed “junk food” and sweetened beverage tax.
Data from the Philippine Stock Exchange (PSE) showed a total of P369.56-million worth of 45.49 million shares of the company were traded from June 26 to 30, making the stock the 13th most actively traded last week.
Shares in the Betty T. Ang-led food manufacturer grew by 5.4% week on week to P8.01 per share on Friday from its P7.60 finish on June 23. Since the start of the year, the stock has declined by 27.7%.
Financial markets were closed on June 28 in observance of Eid’l Adha, also known as the Feast of Sacrifice.
Regina Capital Development Corp. Equity Analyst Jemimah Ryla R. Alfonso said that while the stock showed an increase week on week, market players were lukewarm to the company amid the lack of catalyst and its dismal first-quarter earnings report along with its elimination in the MSCI index.
In an e-mail, Ms. Alfonso said that considering the broader market’s weak demand, investors were “picky” and flocked to stable names with intact trends.
She said Monde Nissin could “potentially” take another downturn or “trade sideways as there are better options in the market with enough liquidity and demand.”
Mark Crismon V. Santarina, head of electronic trading at Globalinks Securities and Stocks, Inc., said among the factors that influenced Monde Nissin’s recent downward trend was the government’s proposal to impose new taxes on junk food as well as increased taxes on sweetened beverages.
“The government’s proposed tax plan targeting unhealthy foods has created uncertainty about the company’s future earnings and profitability,” Mr. Santarina said in a Viber message said, adding that “subdued market conditions and reduced investor participation have negatively affected the overall sentiment towards Monde Nissin.”
Last month, Finance Secretary Benjamin E. Diokno said the proposed tax measure is expected to add P76 billion to state coffers and reduce consumption of junk food by 21%.
For Mr. Santarina, the proposed junk food tax might pose challenges to Monde Nissin’s future expansion as it is crucial for the food maker to monitor the proposal’s impact on consumer behavior as well as adapt new strategies that will reduce possible drawbacks.
Ms. Alfonso, however, said the proposed higher tax does not have a material effect on the company, especially in its noodle product.
“The consumer sector is generally in a good position as macro headwinds become less intimidating,” she said.
Compared with the stock’s consensus estimate of P10.40, Monde Nissin is still trading at a discount, Ms. Alfonso said, adding that on this basis, the “potential upside is still at 30%.”
Monde Nissin — known for its Lucky Me! noodles, baked goods, and Quorn alternative meat products — recorded a net income attributable to parent firm equity holders of P1.94 billion in the first quarter, down 17% from P2.33 billion a year ago. Its gross revenues grew by 9.6% to P20.05 billion from P18.30 billion previously.
Meanwhile, Monde Nissin has tapped Aboitiz Construction, Inc. to build its expanded bakery plant in Davao City. The construction company is set to do land development including the site grading of more than 18,000 square meters of land, excavation, backfilling, hauling, and disposal.
Mr. Santarina expects Monde Nissin to post a net income of P1.8 billion in the second quarter and P7.2 billion for the full year.
Despite the declines and a challenging overall market condition, Mr. Santarina said Monde Nissin’s strong brand recognition and buoyant demand for its products are positive indicators.
Mr. Santarina placed the support and resistance levels at P8.00 to P7.65 and P8.40 to P8.80, respectively.
“Initial support is at P7.70, while we are plotting the resistance at the P8.50 psychological area,” Ms. Alfonso said.
