EXPECTATIONS of better earnings this year led San Miguel Food and Beverage, Inc. (SMFB) shares to be among the most active last week.

This as investors see the listed food manufacturer as one of the stocks to benefit from the softening inflationary environment this year, according to analysts interviewed by BusinessWorld.

From April 15 to 17, Philippine Stock Exchange data showed a total of P543.33 million worth of 4.85 million SMFB shares having exchanged hands on the trading floor, making it the ninth most actively traded stock during the period.

SMFB shares closed at P113.8 apiece on Wednesday, up P1.8 or 1.61% from the previous day and April 12’s closing share price of P112. Year to date, it is up 38.78%.

“We think that investors are closely watching…the inflation data that has been easing down since the start of 2019… [investors] think that inflation will continue to go down thus margins for consumer companies like [SMFB] will recover this 2019,” said Philstocks Financial, Inc. Client Engagement Officer and Research Associate Piper Chaucer E. Tan in an e-mail.

“Year-to-date net foreign buying transaction [amounted] to P793.67 million, meaning that foreign funds are quite bullish on SMFB going forward.”

Timson Securities, Inc. equity trader Jervin S. de Celis noted that as of Dec. 31, 2018, SMFB was trading at 27.89x its price-to-earnings ratio, making it a cheaper choice compared to Jollibee Foods Corp.’s 38.08x and Universal Robina Corp.’s 30.41x.

Mr. De Celis also pointed out that investors were already expecting the company to post good bottom line figures, but it reported a better-than-expected net profit of P18.2 billion versus 2017’s P17.3 billion.

Cristopher Adrian T. San Pedro, technical analyst at Unicapital Securities, Inc., noted the stock’s price reached as high as P115 per share on April 15 when the company’s annual report was disclosed, marking a 52-week high.

SMFB’s net income attributable to equity holders of the parent company rose to P18.25 billion last year, up 5.43%. The company’s consolidated net income after taxes also increased by 8.17% to P30.53 billion in 2018 from the previous year’s P28.23 billion, driven by higher sales volume and gross profit across all segments.

The company has three primary operating segments, namely: beer and non-alcoholic beverages, spirits and food. Net profit of the beer and non-alcoholic beverages segment increased by 15.08% to P23.84 billion, while the spirits segment’s earnings rose 74.92% to P1.05 billion. Meanwhile, the net income of the food segment slid 18.38% to P5.64 million.

For this year, Mr. San Pedro expects SMFB’s net income to reach P36 billion, citing the lower inflation expectations, the increased consumer spending amid the election season, and a possible rate cut by the central bank as drivers for consumer-focused companies.

Timson Securities’ Mr. De Celis said he expects the company to post a P21-billion net income amid a “calmer inflation environment” as well as lower import costs from a stable peso.

Philstocks’ Mr. Tan expects SMFB’s bottom line to reach P22 billion this year, citing renewed strength in household consumption and the company’s expansion plan that would reduce logistics costs.

Mr. Tan placed primary and secondary support at P108 and P100, respectively, and primary and secondary resistance levels at P115 and P116.10.

“The stock remains bullish and I expect the company to consolidate between P104.50 support and P115.00 resistance, with the possibility of testing P120.00 and P130.00 if it stays above P106.00 in the short term,” Mr. San Pedro said.

For Timson Securities’ Mr. De Celis: “I think [SMFB] has to retrace and form a strong support level at least above P100 because [SMFB] was last seen at P112 in 2011, so I think we can consider this current market price as a short-term resistance level.” — Christine Joyce S. Castañeda