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OUTLIER: BDO Unibank, Inc.

By Mark T. Amoguis, Researcher
THE SY-LED BDO Unibank, Inc. was one of the most actively traded stocks last week as market players reacted to its flat first-half earnings report.
A total of P1.896 billion worth of 14.149 million BDO shares exchanged hands on the trading floor from July 30 to Aug. 3, data from the Philippine Stock Exchange showed.
On a week-on-week basis, its share price was lower by 0.15% to P136.80 last Friday from its July 27 closing price of P137 apiece. Year-to-date, the bank’s share price was down by 16.59%.
“The activity [last week] on BDO was driven mainly by the earnings result,” said Rachelle C. Cruz, research analyst at AP Securities, Inc., in a phone interview last Friday.
“The market was looking at [BDO’s] core earnings rather than earnings that has been affected by — not one-time but more of especially — non-recurring gains or non-interest income,” she added.
Based on its unaudited consolidated financial statements disclosed to the bourse, BDO’s net interest income rose by almost a fifth to P45.975 billion in the first semester from P38.616 billion last year.
Its net income for the period was at P13.113 billion amid “solid” results of its core lending and deposit-taking businesses. This figure, however, was down by 1.26% from P13.281 billion a year ago.
In a statement, BDO said its earnings for the six months to June “would have increased by 13%” had it not been due to the implementation of a new accounting standard (Philippine Financial Reporting Standards 9) on the investment portfolio of its insurance unit BDO Life Assurance Co., Inc. and the ongoing expansion of its rural banking arm One Network Bank, Inc.
Justino B. Calaycay, Jr., head of research at Philstocks Financial, Inc., said BDO, as well as other listed banks, might pick up in the latter half of the year as this is where spending levels tend to go up.
“Hopefully they should be able to post high single digits or even in the low double digits [by yearend],” he said in a separate phone interview.
For her part, AP Securities’ Ms. Cruz expects BDO to take in P31.7 billion in net income this year against the bank’s P31-billion profit guidance for 2018.
For this week, AP Securities’ Ms. Cruz said the focus will be on other companies that will report second-quarter figures, hence BDO’s value turnover will experience “some sort of tapering.”
AP Securities gave BDO a price support ranging from P129.50 to P134.80 and a resistance P142.50 to P146.10.
Philstocks’ Mr. Calaycay, on the other hand, pegged a support for BDO at P128 to P132 and a resistance at P137.50 to P140.
“If the earnings pick up, we see a push towards P147 to P150 levels for BDO,” he said.

Brow grooming expert’s expansion driven by demand for services, available mall space

IT MIGHT be a new name in the brow business but Happy Brows is planning to grow to 100 branches by 2020, with the aggressive expansion attributed to the growing grooming market and the move of retail to digital rather than physical spaces.
Happy Brows opened its first space in 2017 in SM City Lipa, Batangas.
“Before, malls primarily focused on retail but…, now shopping can now be done online so there are more spaces in malls for services like ours. We are now requested by malls to open as many stores as we can,” Arvin A. Amaro, marketing head of R2 group of companies, told BusinessWorld during the opening of its Gateway Mall branch in mid-July.
Happy Brows, he said, offers competitive pricing for its services, making it accessible to anyone aged 20 to 45. According to its Facebook page, brow cleanup costs P130 while brow shaping is P160.
“[Our brow services] sells like peanuts… [because] we’re more value for money,” said Mr. Amaro.
Aside from brow services, Happy Brows also offers hair removal services and lash enhancements.
Currently, the brand has 10 branches, with the another branch set to open on Aug. 8 at SM San Pablo in Laguna. The brand also has branches in Cagayan de Oro and Cebu.
“People like to take care of themselves and look good,” said Mr. Amaro, which explains aggressive expansion of the company’s other grooming services, Hey Sugar, which focuses on waxing and hair removal, and Nail-a-holics, which offers nail services.
Hey Sugar, which first opened in 2013, has 30 branches nationwide as of July and sees this number growing to 100 by 2020, while Nail-a-holics has 63 branches as of July and expects to have 150 branches by 2020. — Zsarlene B. Chua

Court rules against Smithfield Foods unit in North Carolina case

A FEDERAL JURY in North Carolina has awarded $473.5 million to six residents near a North Carolina hog farm run by Murphy-Brown LLC, a unit of U.S. pork producer Smithfield Foods Inc., after they sued the company over management of the animals.
The jury in the U.S. District Court for the Eastern District of North Carolina awarded $3 million to $5 million in compensatory damages and $75 million in punitive damages to each of the six people, according to a court filing on Friday.
The company did not respond to a request for comment outside regular business hours.
The lawsuit had accused Murphy Brown of not taking adequate steps to manage the number of hogs on the farm, leading to odor and the possibility of disease, according to an amended court complaint filed in May.
Murphy Brown is part of Smithfield Foods Pork segment.
The complaint said the hogs caused noise and periodic swarms of flies and pests.
The Wall Street Journal earlier reported that this was the third lawsuit in a row that the company has lost over noise and odor caused by hog farming.
Smithfield, bought by WH Group Ltd. in 2013 for $4.7 billion, is one of the world’s largest pork processors and hog producers. — Reuters

Debt yields end week mixed

By Christine J.S. Castañeda, Senior Researcher
YIELDS on government securities (GS) saw mixed movements last week as investors await the central bank’s monetary policy rate action and as the market priced in trade war concerns between the US and China.
On average, GS yields — which move opposite to prices — were down by 4.53 basis points (bps), data from the Philippine Dealing & Exchange Corp. as of Aug. 3 showed.
“In general, the market has been anticipating the ‘strong response’ by the BSP (Bangko Sentral ng Pilipinas) and rein in inflationary pressure,” said Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines. “A more hawkish BSP is pushing yields down as the market waits for a monetary policy rate action.”
For his part, Land Bank of the Philippines (LANDBANK) market economist Guian Angelo S. Dumalagan said: “GS yields fell [last] week due to renewed concerns over the trade war between the US and China, with both countries threatening to impose more tariffs on each other.”
“There was also some market reaction to the BoJ’s (Bank of Japan) dovish stance, which was contrary to hawkish expectations of some tweaks to the BoJ’s target yield for the benchmark 10-year bond,” Mr. Dumalagan added.
Last month, central bank Governor Nestor A. Espenilla, Jr. said that the BSP is considering a “strong follow-through” policy action at its Aug. 9 meeting to temper rising inflation.
Meanwhile, on the external front, US began imposing 25% tariffs on $34 billion worth of Chinese goods last month. US President Donald J. Trump threatened doubling tariff on additional $200 billion worth of Chinese imports.
In the secondary market, the short-end of the curve saw yields on the 91- and 182-day Treasury bills (T-bill) drop by 3.64 bps (3.2409%) and 4.92 bps (4.2014%), respectively. On the other hand, yield on the 364-day T-bill climbed 4.48 bps to fetch 4.8685%.
In the belly, yields on the two-, three- and four-year Treasury bonds (T-bond) rose by 0.29 bps, 0.93 bps and 4.82 bps to 5.0456%, 5.1220% and 5.9839%. Meanwhile, the rates of the five- and seven-year bonds lost 22.91 bps (5.9048%) and 6.67 bps (6.2333%), respectively.
At the long end, 10-year T-bond saw its yield go down by 20.00 bps to 6.4500% while yield on the 20-year tenor was up by 2.32 bps to 7.4750%.
Going forward, LANDBANK’s Mr. Dumalagan said: “[This] week, yields are expected to rebound after [last] week’s unexpected drop. Main drivers include bets of higher inflation readings from the Philippines and the US, upbeat Philippine GDP (gross domestic product) growth as well as expectations of another rate hike from the BSP.”
“Trade concerns may continue to temper the increase in GS yields,” he added.
For UnionBank’s Mr. Asuncion: “I expect the market to wait and position themselves as the BSP is expected to increase rates [this] week.”
Official second-quarter GDP data will be released on Thursday by the Philippine Statistics Authority while July inflation figures will be reported tomorrow.
BusinessWorld poll of 15 economists and analysts yielded a median GDP forecast of 6.8% for the second quarter.
On the other hand, a poll among 14 economists yielded a 5.5% median inflation estimate for July, in the middle of the 5.1-5.8% estimate range given by the BSP Department of Economic Research last week.

PLDT works with UNICEF

PLDT, Inc. is partnering with the United Nations Children’s Fund (UNICEF) to support children’s welfare in the conduct of its business operations. PLDT is working with UNICEF on a multiplatform campaign to educate the public on promotion of children’s welfare and protection online. In the photo are UNICEF Deputy Representative to the Philippines Julia Rees and PLDT Chair and CEO Manuel V. Pangilinan.

Celebrity style the focus of bazaar

PEP.ph will offer a whole day of shopping at the aptly named Star Bazaar which features, aside from booths filled with star’s clothing, insightful talks with non-celebrity and celebrity entrepreneurs such as Shamcey Supsup, Neri Miranda, LJ Alapag, Janice de Belen, Candy Pangilinan, Arny Ross, Dianza Zubiri, Anna Luna, and RR Enriquez to name a few. The bazaar will be on Aug. 17, 10 a.m., at SM Megamall Event Center, Bldg. A.

DowDuPont ‘defers’ field trials to seek sale of GM corn seed in India

NEW DELHI — DowDuPont, Inc. has told India it is putting off trials needed for approval to sell a genetically modified variety of corn, taking a cue from U.S. rival Monsanto that has also pulled a similar application due to intellectual property concerns.
In a letter addressed to India’s environment ministry reviewed by Reuters, the Indian arm of DowDuPont said it had obtained permission to conduct trials growing a small crop of the corn in the northern state of Punjab but would like to “defer the undertaking.”
It did not give a reason for its decision.
“This is to confirm that we have deferred the Biosafety Research Level-I confined field trials with transgenic maize planned during the season of kharif 2018,” a DowDuPont spokeswoman told Reuters in an e-mail, referring to the summer planting season. “The company remains committed to advancing agricultural productivity in India.”
She declined to give details. The decision to put off trials is not public.
Monsanto, now a unit of Bayer AG, in 2016 withdrew an application seeking approval for its next generation of GM cotton seeds stung by a series of unfavorable government decisions.
Monsanto’s transgenic cotton seeds has revolutionized the cotton industry in India, but the government has yet to allow the sale of GM food due to concerns over human and soil safety.
But the trials of most GM crops are allowed, and DowDuPont’s trial for its insecticide-resistant and herbicide-tolerant GM corn was in advanced stages of a lengthy and time-consuming process that often takes more than a decade.
DowDuPont is a leading supplier of hybrid corns in India, Asia’s second-largest grower of the grain after China.
“It’s all about widespread infringement of intellectual property issues in agriculture,” said C.D. Mayee, president of the South Asia Biotechnology Center, a not-for-profit scientific society.
Mayee, also a top former government scientist said: “The companies with cutting edge technologies are worried about the ways they can protect their intellectual properties and innovations.”
Apart from worries related to intellectual property rights, India’s indecision on GM food crops is another reason behind the decision of Dow DuPont, industry officials said.
Permitting GM crops is a big call for India, a country that spends tens of billions of dollars in importing food, as dated technologies, poor yields, shrinking farms and unreliable weather patterns afflict the country of 1.3 billion people.
In 2016 a government panel cleared commercial use of what would be India’s first GM food crop, but politicians still have to give final approvals.
Most biotechnology companies are scaling back investments in India, said Ram Kaundinya of the Federation of Seed Industries of India, an industry body formed by the local units of foreign companies such as Monsanto, Bayer, DowDuPont and Syngenta.
“The decision of DowDuPont is just the latest example of biotechnology companies curtailing their products and investment in India,” Kaundinya said, adding a recent court order barring Monsanto from claiming patents on its GM cotton seeds have worried many companies.
Monsanto has appealed the decision of the Delhi High Court. — Reuters

Stocks to rise ahead of inflation data, BSP meet

By Arra B. Francia, Reporter
THE MAIN INDEX is expected to continue rising in the week ahead with chances of a pullback, as investors look forward to a busy week ahead with the release of second-quarter earnings reports, July inflation data and a policy meeting by Bangko Sentral ng Pilipinas (BSP).
The bellwether Philippine Stock Exchange index (PSEi) gained 0.77% or 59.84 points to close at 7,819.39 on Friday, ending the week up 1.53%. The index was lifted by the mining and oil sector which increased 5.4%, holding firms that went up 3.9% and services that gained 1.4% for the week.
Average turnover jumped 4.08% to P6.1 billion on a weekly basis, alongside a net foreign buying that reached P1.06 billion.
For the week ahead, analysts expect the PSEi to continue its upswing.
“We don’t want to see the market go up too far too fast as this can reverse and cause a big swing to the downside. However, the market will do what it wants to do. Based on the technicals, we may see the index continue to surpass resistances,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.
The Philippine Statistics Authority is set to release inflation data for July on Tuesday. The BSP sees the average rise in prices of widely used goods to have settled within the 5.1%-5.8% range. Should it hit the high end of this range, year-to-date inflation would reach 4.53%, way beyond the government’s 2-4% target.
The BSP will likewise hold its policy meeting on Thursday, where economists are predicting as much as a 50-basis-point hike as the regulator seeks to temper inflation.
The central bank already raised interest rates by 25 basis points each during its policy meetings last May and June amid accelerating inflation.
“Players would weigh the chances for adjustment in local interest rates, to narrow-down the differential with the US Fed’s anticipated rate hike in 4Q. Regardless of the move, the market will heed for clues if economic momentum is still strong to warrant an upward adjustment in rates, & aid in tempering the peso’s weakness,” 2TradeAsia.com said in a weekly market note.
A number of listed firms will also be reporting their second-quarter earnings this week, including Ayala Land, Inc., 8990 Holdings, Inc., Robinsons Land Corp., Megaworld Corp., Filinvest Land, Inc., SM Investments Corp., San Miguel Corp., Puregold Price Club, San Miguel Food and Beverage, Inc., Alliance Global Group, Inc., Globe Telecom, Inc., and PLDT, Inc.
These firms comprise 38% of the PSEi-member basket, according to 2TradeAsia.com.
Eagle Equities’ Mr. Mangun placed the main index’s support from 7,650 to 7,530, while resistance is at 7,880 to 7,960.
“We will continue to see investors flood in to blue chips that were laggards last year. Watch out for the Aboitiz companies and the Gokongwei companies,” Mr. Mangun said.

How PSEi member stocks performed — August 3, 2018

Here’s a quick glance at how PSEi stocks fared on Friday, August 3, 2018.

 
Philippine Stock Exchange most active stocks by volume turnover
July 30 — August 3, 2018 (Closing price as of August 3,2018)

Barangay Ginebra defeats San Miguel in close game to go up 3-2

By Michael Angelo S. Murillo
Senior Reporter
FOR a change the best-of-seven Philippine Basketball Association Commissioner’s Cup finals had a close game, with the Barangay Ginebra San Miguel Kings beating the San Miguel Beermen, 87-83, in Game Five on Sunday at the Smart Araneta Coliseum.
Following four straight games of big-margin victories, averaging 30 points, PBA fans, numbering 16,958 at the Big Dome, finally saw a tightly fought match between the Kings and Beermen with the former going on a strong finish on both ends to notch the victory and move 3-2 up in the championship series.
The match started with the two teams making runs and counterruns with hardly any team establishing full control.
Barangay Ginebra held a seven-point cushion, 17-10, midway into the opening frame before San Miguel finished the period strong with a 16-7 run to claim a two-point lead, 26-24, after the end of the first 12 minutes.
In the second period, the two teams held each other in check.
The Beermen would race to a 38-29 lead at the six-minute mark only for the Kings to make a flurry of a finish to level the count at 40-all by the halftime break.
In the third period, import Justin Brownlee and Greg Slaughter would jump-start the Kings to a fast start, holding a 55-50 advantage in the early part.
Towed by June Mar Fajardo and Alex Cabagnot, however, the Beermen would rally back.
The count stood at 62-60 in Barangay Ginebra’s favor with two minutes remaining in the quarter.
Both teams battled the rest of the way with the score eventually settling in a stalemate at 66-all heading into the final canto.
The fourth period saw the two teams in a tight race early to establish control.
San Miguel held a slim one-point lead, 71-70, with 10 minutes remaining.
The lead swang back-and-forth thereafter until San Miguel pushed ahead to a three-point lead, 79-76, with 5:41 to go.
The Beermen continued to hold sway, 83-80, entering the last two-minute mark.
Barangay Ginebra tried to inch its way closer but its initial attempts at the basket failed to connect.
But two free throws by Scottie Thompson pulled the Kings within one point, 83-82, with 1:07 left on the clock.
In the ensuing play, Mr. Fajardo got fouled off a rebound play but failed to hit his free throws.
That led to Mr. Thompson giving the go-ahead basket to the Kings, 84-83, with 36 ticks to go off a pass from Mr. Brownlee.
San Miguel sued for time after but Renaldo Balkman’s jab at the basket was foiled by the Barangay Ginebra defense which led to another Thompson basket with 23 seconds remaining to extend their lead to three, 86-83.
The Beermen had several attempts from beyond the arc but none of which hit the mark.
They were forced to foul LA Tenorio with 2.9 seconds left but the Barangay Ginebra guard only buried the Beermen further by splitting his charities for the final score of 87-83.
Mr. Thompson led the Kings with 20 points and 11 rebounds with Mr. Brownlee adding 18 points.
For San Miguel it was Mr. Balkman who led with 34 points and 20 rebounds while Mr. Fajardo finished with 23 points and 11 boards.
“I guess everybody got the game they wanted. It was as close as it could get,” winning Kings coach Tim Cone opened at the postgame press conference.
“We just talked about stepping up our defense in the end and that made a difference. But it’s not yet over and we have to do it again on Wednesday,” he added.
Game Six of the finals is on Wednesday at the Mall of Asia Arena.

Automakers hope second-half performance will improve

THE auto industry is hoping for an improved performance in the second half of the year after a lackluster first semester due to higher excise taxes, with estimates for the rest of the year currently favoring a slight year-on-year gain.
“Maybe the parameters of the first semester are not available in the second semester. Things might improve. First semester was pretty bad,” Dante C. Santos, president of the Truck Manufacturers Association, Inc. (TMA), told reporters Thursday in Taguig City during the 30th anniversary celebration of Toyota Motor Philippines, Corp.
“Conditions can’ be bad forever, so we need to analyze thoroughly how the second semester will play out. That’s what we want to project. Because we’re not very comfortable if we start by saying things will fall.”
Mr. Santos, also the first vice-president of Mitsubishi Motors Philippines, Corp., said negative impact of tax reform came amid a depreciating peso, though the industry does not expect the currency to weaken further.
He added that the executive committee of both the TMA and the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) is now reviewing the industry’s outlook for the year.
“We don’t feel there will be big growth as before. Little changed, a little bit higher,” Mr. Santos added.
The industry has been signalling flattish growth for 2018 vehicle sales.
In an earlier phone interview, CAMPI President Rommel C. Gutierrez confirmed that adjustments were made to this year’s targets but declined to disclose details.
The auto sector was hit hard by the first package of the Tax Reform for Acceleration and Inclusion (TRAIN), which raised excise tax rates on vehicles.
Automobiles costing less than P600,000 were levied around 3% in excise tax, up from 2% average, while those selling for P4 million or above were taxed at a new rate of up to 50%, more than doubling the average of 22% previously.
Joint data from CAMPI and TMA show that vehicle sales in the first six months of the year dropped 12.5% year on year to 171,352 units.
The group attributed this decline to “gloomy” economic conditions for car buyers, including rising inflation.
He said the industry is struggling to maintain vehicle prices at current levels
“As long as we can maintain prices, we will. We are trying to protect the market from higher prices,” Mr. Santos added. — Janina C. Lim

Energy investors seek to retain perks amid TRAIN 2 streamlining

A NONPROFIT has asked legislators to modify certain provisions of a pending bill promoting energy efficiency to align it with the second phase of Republic Act 10963 or Tax Reform for Acceleration and Inclusion (TRAIN 2), which will repeal incentive provisions of an existing law.
“Given the parallel legislative process for TRAIN Package 2, which considers the repeal of incentive provisions of Executive Order No. 226, we now see the need to modify Section 20 on Fiscal Incentives of the EE&C (Energy Efficiency and Conservation) Bill,” said the Philippine Energy Efficiency Alliance, Inc. (PE2) in its letter to the House of Representatives’ committee on ways and means.
In the letter, PE2 President Alexander Ablaza said the pending bill should specify the recommended incentives for projects that will be needed to ensure the financial viability of energy-efficienct investments.
The energy efficiency bill should also remove its express reference to Executive Order No. 226, or the 1987 Omnibus Investments Code, he said.
It should also identify the Board of Investments (BoI) as the lead investment promotion agency to administer the fiscal incentives for energy efficiency projects, while removing restrictions on ownership by nationality.
PE2 also wants the bill to specify a minimum 15-year period to avail of the recommended fiscal incentives.
“To effectively address these needs, PE2 respectfully forwards our proposed rewording of Section 20 of the EE&C Bill,” it said.
Its proposed rewording of Section 20 states that during the first 15 years from the passage of the law, energy efficiency projects should be included in the Strategic Investments Priorities Plan (SIPP) of the government.
It also says that the application by a project proponent for registration of such project should be duly acted upon by the BoI on the basis of the endorsement issued by the Department of Energy (DoE).
A certified project should also be entitled to receive a certificate of entitlement from the Fiscal Incentives Review Board.
It said that a Filipino natural person or partnership or any other association, cooperative, or corporation organized under Philippine law, whether Filipino or up to 100% foreign-owned, which is a proponent of an energy efficiency project, as duly endorsed by the DoE, should be entitled to the following incentives: income tax holiday; zero percent value-added tax (VAT) rate; tax and duty exemption on imported capital equipment.
Specifically, for the first six years of its commercial operations, the project proponent is sought to be exempt from income taxes levied by the National Government.
The selling price, remuneration or consideration received by a project proponent is proposed to be subject to zero percent VAT, pursuant to the National Internal Revenue Code of 1997, as amended.
All project proponents should also be entitled to zero-rated VAT on its purchases of local supply of goods, properties and services needed for the development, construction and installation of its plant facilities.
Within the first 10 years upon the issuance of an endorsement by the DoE, the importation of technologically energy-efficient machinery, equipment, vehicles, spare parts and materials is to be exempt 100% from customs duties and national internal revenue tax payable.
At the end of the 15-year period, the Fiscal Incentives Review Board may suspend or cancel the grant of such incentives upon a joint recommendation of the DoE and the BoI that they are no longer required in order to ensure the financial viability of energy efficiency investments.
PE2 earlier said that energy efficiency and conservation should be treated as the “first fuel” of the economy to slow down the rise in energy prices by deferring around 45,900 megawatts (MW) of energy infrastructure upgrades through 2040.
It said consistent with the DoE’s road map, the economy will have to proactively shave off at least 182 metric tons of oil equivalent in energy demand in the next 22 years to meet the 2040 targets and save the economy around P36 trillion in energy purchases.
PE2, which describes itself as a nonprofit, nonmarket, non-state civil society organization, said the Philippines is the only country in the region without a mandatory energy efficiency and conservation policy framework or mainstreamed fiscal incentives for related investments. — Victor V. Saulon

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