OUTLIER: Jollibee Foods Corp. (JFC)

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“We look forward to tapping into JFC’s market expertise to grow the Panda Express brand into a household name in the Philippines," said Panda Express Co-Founder Andrew Cherng

JOLLIBEE FOODS CORP. (JFC) was one of the most actively traded stock in the local stock exchange last week with analysts pointing to the rebalancing of a global equity index that increased the stock’s weight, as well as expansion and solid sales.

However, analysts also cautioned that elevated consumer prices remains a major headwind for the fastfood giant.

JFC was the tenth most traded stock last week, with P886.7 million worth of 3.1 million shares exchanged hands on the trading floor from Aug. 28 to Aug. 31 based on the data by the Philippine Stock Exchange.

Its shares closed at P288 apiece on Friday, up 0.7% from the previous day and was unchanged on a week-on-week basis. Year-to-date, JFC shares are up 13.8%.

Luis A. Limlingan, managing director of Regina Capital Development Corp., said some funds “decided to go heavier” on JFC following the rebalancing of the MSCI Philippines Standard index.

The rebalancing saw the index weight on JFC, along with Alliance Global, Inc., at the MSCI Philippines Standard index increase by 0.003% and 0.016% respectively, while those of Ayala Land, Inc. and SM Prime Holdings decreased by 0.002% and 0.003%.

Meanwhile, the Philippines saw its index weight in the MSCI Emerging Markets index decrease by 0.007%. The MSCI world equity index tracks large and mid-cap equity performance across 23 developed markets. The index covers approximately 85% of the country’s stock universe.

“Jollibee is expanding internationally and the sales are still solid, although there is margin erosion,” Regina Capital’s Mr. Limlingan said.

He also noted the issue on the company’s regularization of employees is “a bit of concern,” although it may not have much of an impact in terms of its financials.

JFC was one of the 20 companies with the most number of workers affected by labor-only contracting according to a list by the Department of Labor and Employment. Since then, JFC pledged to ramp up efforts to regularize their workers.

Meanwhile, JFC said in a regulatory filing that its net income attributable to equity holders of the parent company jumped 15% to P2.25 billion during the April to June period. This brought the first half figure to P4 billion, up 16% year on year.

Basic earnings per share for the second quarter rose 14.4% to P2.071 and by 15.1% to P3.728 for the first six months.

As of end-June, JFC had a total of 4,279 stores, 20% higher compared to the number of stores at the end of June 2017. Smashburger increased the JFC store network by 349 stores or 10%.

Aside from Jollibee, JFC’s brands include Chowking, Greenwich, Red Ribbon, Mang Inasal and Burger King in the Philippines. In China, JFC operates Yonghe King, Hong Zhuang Yuan and Dunkin’ Donuts.

Going forward, Regina Capital’s Mr. Limlingan expects JFC to finish “rather flat up to August” depending on the upcoming Philippine inflation report on Wednesday.

“I think if [inflation] reaches above six percent, it might see some sell-off,” he added.

Philstocks Head of Research Justino R. Calaycay, Jr. was of the same assessment, adding that while JFC may have caught investors’ attention last week, it may not be sustainable given the worries over rising food prices that may affect its earnings.

“The market is getting concerned over inflation and the food retail sector may take a hit in terms of a possible decrease in sales as patrons become more circumspect in their spending,” he said.

Mr. Calaycay noted that even if food items are “the last to go” when households “redefine” the allocation of their budgets, the rising input costs and the inflation-induced easing of demand may put a dent on both JFC’s top- and bottom-line figures.

“If the domestic market poses a drag, [then] JFC may find some temperance in its overseas sales. The aggressive expansion to foreign markets, including the acquisition of leader brands, should provide some buffer,” he said.

Mr. Calaycay gave JFC an initial support range at between P270-P275 and first resistance at the P300 mark: “We think the stock may move sideways ahead of the August inflation report.”

Regina Capital’s Mr. Limlingan, meanwhile, pegged the stock’s support at P280 and resistance at P295 this week. — Lourdes O. Pilar