OUTLIER: 5G rollout, Duterte threat on telcos drive PLDT’s stock movement

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By Jobo E. Hernandez, Researcher

MARKET PLAYERS reacted to news surrounding telecom giant PLDT, Inc. last week — namely, President Rodrigo R. Duterte’s renewed threats to close or expropriate telco firms if they do not improve on their services, and the announcement of PLDT subsidiary Smart Communications, Inc. to launch its fifth-generation (5G) service starting the end of July.

The telco giant was the fourth most actively traded last week with a total of 540,055 shares worth P713.78 million having exchanged hands on the trading floor from July 27-30, data from the Philippine Stock Exchange showed.

On a week-on-week basis, the share price of the Pangilinan-led company remained unchanged at P1,340 apiece last Thursday from its July 24 finish. For the year, however, its share price is up 34.8%.

“Earlier [last] week, the telco industry was one of the things heavily talked about in President Duterte’s State of the Nation Address (SONA). This put both Globe Telecom, Inc. and PLDT in the limelight for a few days, as investors digested the President’s statements,” Anna Corenne M. Agravio, equity analyst at Regina Capital Development Corp., said in an e-mail.

“Nevertheless, investors right now are more forward-looking than anything. They’re focusing on how the demand for PLDT’s services will likely continue to be strong on the back of shifting global telecommunication trends,” she said.

China Bank Securities Corp. Research Director Rastine Mackie D. Mercado also noted Globe and PLDT being among the most volatile following Mr. Duterte’s SONA, but noted price action in the succeeding days shows the market “has largely shrugged off these pronouncements” with PLDT’s stock price closing unchanged from last week.

In his SONA last Monday, Mr. Duterte gave the telco providers until December to improve their services.

The day after the pronouncement saw PLDT’s stock price at an intraday low of P1,272, 3.6% down from the previous day’s close at P1,320. It bounced back later that day to close at P1,327.

The day after also saw Smart — PLDT’s mobile subsidiary — announcing its 5G service will be made commercially available to its subscribers in key commercial districts of Metro Manila starting last Thursday.

In June, PLDT Spokesperson Ramon R. Isberto said the 5G service will be rolled out by the fourth quarter of the year.

“This most probably contributed to the buy-up during the latter half of the week,” Regina Capital’s Ms. Agravio said.

Moreover, Smart noted that despite the slowdown in network rollout due to the nationwide lockdown, the PLDT group’s capital expenditure this year will reach P70 billion from a record P72.9 billion in 2019.

PLDT’s first-quarter net income had declined by 12% to P5.91 billion from P6.71 billion due to losses on its investment in German-based Internet company Rocket Internet and ramped-up investment in its digital arm Voyager Innovations, Inc. Likewise, its core income was down 5% to P6.9 billion from P7.2 billion.

In PLDT’s annual stockholders’ meeting held on June 9, PLDT Chairman and Chief Executive Officer Manuel V. Pangilinan said service revenues for the first six months this year would “likely” improve over last year’s despite the pandemic.

“Over the next few days, PLDT will be releasing its [second-quarter] earnings. Investors will likely be watching out for that, as it would be more telling of how the telco is fairing amid the pandemic,” Regina Capital’s Ms. Agravio said.

For China Bank Securities’ Mr. Mercado, the “heightened regulatory risk will likely put downward pressure on sentiment, offsetting potential upside, and spurring volatility.”

“Note also that PLDT’s current stock price is already near target valuation (based on consensus forecasts),” he said.

Mr. Mercado placed the stock’s support and resistance at P1,280 and P1,386, respectively.

For Regina Capital’s Ms. Agravio: “It looks like PLDT will maintain a consolidation range between its support at P1,280 and resistance at P1,372 for the coming days.”

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls.