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OUTLIER: Investors load up on PLDT shares on expectations of sustained growth

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REUTERS

INVESTORS bought PLDT, Inc. shares last week given the attractiveness of the company’s growth prospects.

Data from the Philippine Stock Exchange showed a total of P959.62 million worth of 762,895 PLDT shares exchanged hands on the trading floor from May 6 to May 10.

The stock price closed on Friday at P1,240 apiece, down 3.9% from the previous trading day. Prior to this, PLDT’s stock price has been on an uptrend most of the week — increasing to as high as P1,290 per share on Thursday.

PLDT’s share price last Friday was up 1.6% from its closing price of P1,220 per share on Friday the week before. Meanwhile, it is up 2.9% year to date.

“Anticipation over [first-quarter] results, on the back of a strong full-year 2018 earnings, pulled investors to the stock riding on hopes and expectations of a sustained trend,” said Philstocks Financial, Inc. Research Head Justino B. Calaycay, Jr. in an e-mail.

“Traditionally, telecoms were seen as among those benefitting from the first round effects of the election cycle…,” he added.




However, investors unloaded the stock after the release of PLDT’s first-quarter earnings report.

“PLDT was one of the actively traded stocks last week prior to the release of its [first-quarter] results. However, investors reacted negatively at the end of the week as most might have digested the report of PLDT,” Unicapital Securities, Inc. Research Head Wendy Estacio said.

PLDT reported telco core income reached P7.2 billion in the first quarter, up 6% from last year. This takes into account adjustments for the net effect of gains/loss on foreign exchange, derivative transactions, manpower rightsizing program, accelerated depreciation, and Voyager Innovations, Inc.

Consolidated service revenues went up seven percent to P38 billion, primarily due to the continued recovery of the individual wireless business which grew 18% to P16.9 billion. This came on the back of rising data usage and the addition of 3.4 million subscribers for the quarter, for a total of 63.4 million subscribers by end-March.

PLDT is optimistic that it can hit the P26-billion target for telco core income this year.

For his part, Philstocks’ Mr. Calaycay expects a “high single-digit growth” for PLDT this year “given the lingering challenges in the industry.”

“[Although] the third-telco player narrative has receded to the background, it remains a ‘threat’ to the current players going forward. As such, both will have to push its strategies a notch higher, e.g., the shift to 5G, which requires increased costs and outlay. There will still be pressures on the numbers,” Mr. Calaycay explained.

“By historical reference and from a price-point perspective, current trading levels are relative bargains — and already reflects currently available info. We will wait for fresh catalysts going forward,” he added.

For Unicapital’s Ms. Estacio: “I am cautious about PLDT’s free cash flows as capital expenditures level is expected to remain elevated in the next three years.”

“However, I still like the company due to its initiatives to improve its network coverage. For me, a higher capex (capital expenditures) budget is necessary to future-proof its business. It’s just a matter of how efficient PLDT is in using its allotted budget,” said Ms. Estacio, who expects PLDT to hit the top line and profit growth rates of 6.4% and 5.5%, respectively.

The company declared a record-high allocation of capex in 2019 at P78.4 billion, an increase of 34% or P20 billion from the P58 billion realized last year. The aggressive capital spending allows the telco giant to expand its network amid the impending entry of a new player.

Ms. Estacio pegged the stock’s support and resistance in the short term at P1,220 and P1,290 per share, respectively.

Meanwhile, Mr. Calaycay placed the stock’s support at between P1,150-P1,210 per share and resistance at P1,290 apiece.

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. — Lourdes O. Pilar