How PSEi member stocks performed — June 20, 2019
Here’s a quick glance at how PSEi stocks fared on Thursday, June 20, 2019.
Cebu Pacific renews fleet with order of 31 brand-new Airbus NEO aircraft
Cebu Pacific (PSE: CEB), the leading carrier in the Philippines, announces that it has ordered a total of 31 next generation aircraft from Airbus. The investment accelerates the carrier’s plan to introduce more fuel-efficient and eco-friendly aircraft to replace its current fleet.
The order is comprised of 16 A330neo and 15 A320neo family aircraft. The aircraft are scheduled for delivery between 2021 and 2026.
Based on list price, the deal is worth an estimated USD6.8 Billion. The agreement was made during the 2019 Paris Air Show in Le Bourget, France—the global aerospace industry’s biggest trade event. The latest order is in addition to the 32 A321neo aircraft ordered in 2011, for delivery until 2022.
The 16 A330neo will be fitted with 460 seats, having 5.5% more capacity than CEB’s current fleet of A330ceo aircraft. The additional seats were made possible through a more efficient layout of cabin interiors and new generation seats.
The new A330neo will replace the A330ceo, which will be progressively retired. Using the new Rolls Royce Trent 7000 engine and a more aerodynamic wing design, the A330neo is more efficient, providing a range of up to 7,200 nautical miles with as much as 12% less fuel burn per trip. On top of a reduced environmental footprint, the A330neo also has a quieter cabin for an improved passenger experience. As part of the transaction, Rolls Royce has also been selected for engine maintenance and support.
“The A330neo will give us the lowest cost per seat and allow us to continue offering the lowest fares. Moreover, the lower fuel burn matched with higher seat density will allow CEB to address growing demand for leisure and business travel, by upgrading aircraft and maximizing available airport slots in Manila and other megacities we serve,” said Lance Gokongwei, President and CEO of Cebu Pacific.
CEB also ordered 15 A320neo family aircraft, including 10 A321 XLR (Xtra Long Range) and five (5) 194-seat A320neo. The increased capacity of the A320neo will result in a 7% reduction in cost per seat; and a reduction of fuel burn and emissions of as much as 15%.
Scheduled to start delivering in 2024, the A321 XLR is designed to have a range of up to 4,000 nautical miles and can potentially fly 220 passengers for up to 11 hours. This new and unique capability gives CEB the opportunity to develop new markets from key cities other than MNL.
As the new A320neo enter into service, the older A320ceo aircraft will be subsequently retired.
“Our strategy is to replace our fleet with bigger and more fuel-efficient aircraft to fly more passengers utilizing our existing slots while reducing our environmental footprint per passenger. We will be operating an all Airbus NEO fleet by end-2024 and retiring our older generation jets.”
Currently, CEB has a 72-aircraft fleet comprised of two (2) Airbus A321neo, seven (7) A321ceo, one (1) A320neo, 33 A320ceo, eight (8) A330ceo, eight (8) ATR 72-500s and 13 ATR 72-600s. CEB boasts of one of the youngest fleets in the world, with an average fleet age of five (5) years.
CEB was advised by Plane View Partners on the new transactions with Airbus and Rolls Royce.
DoF to continue pushing tax, retail reforms in next Congress
THE Department of Finance (DoF) said the government’s legislative priorities in the next Congress include the remaining packages of the tax system overhaul and measures reforming the foreign investment regime and retail industry, as well as amendments to the Public Service Act.
Speaking to incoming lower house members of the 18th Congress, Finance Secretary Carlos G. Dominguez III said the DoF is reorganizing its personnel and assigning directors and staff to engage full-time with legislators on a weekly basis.
“Together, we can ensure the sustainability of the high and inclusive economic growth rate we enjoy today,” Mr. Dominguez said Tuesday during a forum.
At the 18th Congress, which opens on July 22, Mr. Dominguez said it will seek to pass the remaining tranches of its comprehensive tax reform program (CTRP), which were not passed by the previous Congress.
They include measures reducing corporate income tax, rationalizing fiscal incentives, reforming the property valuation system, and increasing the government’s share of mining revenue. The DoF also wants a “fair” general amnesty law that covers relaxation of the deposit secrecy law and the automatic exchange of information with foreign tax authorities.
“Completing this (tax) reform will further secure our fiscal stability and help fulfill our shared goal of a decent and comfortable life for all law-abiding Filipinos,” Mr. Dominguez said.
The government is pushing for comprehensive tax reform to simplify the regime and generate more revenue to support its infrastructure program and expand social services.
Signed into law in December 2017, the Tax Reform for Acceleration and Inclusion (TRAIN) Act — the first package — imposed excise taxes on certain commodities and updated income tax brackets which raised take-home pay for many taxpayers.
Meanwhile, package 1B or the Tax Amnesty Act was passed on Feb. 14, providing relief for delinquent accounts up to 2017. The President subsequently vetoed the law.
The economic program for legislation has been cited by the National Economic and Development Authority (NEDA) as key policy reforms that will help improve the investment climate. However, these measures failed to pass during the 17th Congress.
In particular, modifications to the Foreign Investments Act of 1991 sought to reduce the threshold for foreigners investing $100,000 in small to medium enterprises to 15 direct employees from 50 and to allow other laws to govern foreign nationals practicing their profession in the Philippines.
Meanwhile, the bills amending the Retail Trade Liberalization Act were positioned to eliminate barriers to foreign investment by setting minimum paid-up capital at $200,000 and scrapping the minimum investment requirement of $830,000 per store.
On the other hand, amendments to the 82-year-old Public Service Act sought to lift foreign ownership limits in certain sectors.
Mr. Dominguez also thanked the outgoing 17th Congress for passing several “game-changing” laws such as the TRAIN Law, the Universal Health Care program, a new sin tax reform law as well as the rice tariffication law.
“Disciplined management brought us to where we are now. We can secure a progressive and stable future if we work together at this critical juncture,” he said. “In the service of these shared goals, we are always ready to support your legislative work with both data and briefings.” — Karl Angelo N. Vidal
Gov’t disbursements decline in first 5 months after budget delay
FUNDING releases backed by Notices of Cash Allocation (NCAs) fell 13.48% to P1.136 trillion in the first five months, the Department of Budget and Management (DBM) said.
In the five months to May, P1.050 trillion of the releases was utilized, down 3.22% from a year earlier, the DBM said.
However, DBM said the utilization rate on NCAs was 92% in the first five months, up from 83% a year earlier.
“This is an improvement from the NCA utilization rate in the same period last year at 83%, although total NCA releases was lower this year by P177.4 billion with the delayed passage of the 2019 General Appropriations Act (GAA),” the DBM said in a statement.
NCA refers to the disbursement authority issued by the DBM to government servicing banks such as the Development Bank of the Philippines, Land Bank of the Philippines, and the Philippine Veterans Bank to cover the cash requirements of agencies’ programs, activities and projects.
NCAs are valid up to the last working day of the quarter covered.
Asked to comment, Ruben Carlo O. Asuncion, chief economist of Union Bank of the Philippines, said, “In terms of the potential improvement of the NCA utilization, UnionBank’s Economic Research Unit (ERU) thinks that the second half of 2019 has a higher probability of higher utilization rate. This is also in line with the view that government spending will improve and be higher in the second half since the passage of the 2019 General Appropriations Act last April.”
Robert Dan J. Roces, Chief Economist of Security Bank, meanwhile said, “The higher NCA is tied to the delayed budget signing, as agencies play catch up with expenditures programmed for the year that went unreleased. Most of this might constitute the MOOE (Maintenance and Other Operating Expenses) and wages of government offices.”
“Moving forward, we expect utilization to improve to initiatives tied to the infra programs for the second half of the year, as the touted infra spending program gets underway,” Mr. Roces added.
Meanwhile, Nicholas Antonio T. Mapa, senior economist of the ING Bank NV Manila, said he is not sure whether utilization rate will improve in the coming months.
“It’s unclear if NCA will improve in the coming months even if government attempts to conduct ‘catch-up’ spending… 1Q NCA was close to 99% as government focused on the projects that could be funded. With the budget suddenly passed, unless the government doubles efforts to get warm bodies to enact all that spending, we could see actual NCA slip despite government’s shift to the 2019 budget,” Mr. Mapa said.
According to the DBM data, the Commission on Audit (CoA) was able to post the highest utilization rate, using P4.655 billion out of P4.672 billion. The Commission on Elections (Comelec) used P7.382 billion out of its P7.384 billion in NCAs.
The Department of Foreign Affairs (DFA) had the lowest budget utilization ratio of 59%, using only P3.711 billion of its P6.260- billion allotment.
Line departments had an average NCA utililzation rate of 90%, using P784.49 billion of the P868.85 billion NCA releases, the DBM said.
The DBM noted that unused NCAs amounted to P85.340 billion as of the end of May, which is equivalent to 8% of total NCA releases, which may still be utilized in June as the cash authority is valid until end of the quarter. — Reicelene Joy N. Ignacio
DoTr to increase penalties for airport slot misuse
THE Department of Transportation (DoTr) said it will increase the penalties on airlines that “misuse” their airport takeoff and landing slots in a bid to decongest Ninoy Aquino International Airport, (NAIA) the country’s main gateway.
In a statement, the DoTr said in a new joint memorandum circular that regulators will penalize airlines that fail to use their slots or reserve slots for the purpose of denying competitors the use of those slots.
It said the penalties include denial of slot precedence for airlines that operate services without corresponding timeslots and loss of priority in future slot allocations for misuse or inefficient use of slots.
JMC 2019-01, the DoTr said, was signed by the Manila International Airport Authority (MIAA), the Civil Aviation Authority of the Philippines (CAAP), and the Civil Aeronautics Board (CAB).
The Timeslot Committee has been authorized to review the slot coordinator’s findings on airlines’ slot performance. The coordinaor is also empowered to initiate disciplinary action against airlines.
“Landing at an airport is a privilege,” Transport Secretary Arthur P. Tugade said in the statement. “To intentionally disregard the value of these airport slots is unethical, and an aggravation to the current state of congestion at NAIA. We have to recognize the domino effects of slot misuse, which ultimately result in massive inconvenience to our air passengers.”
The DoTr said NAIA handled 45 million passengers in 2018, up 23%.
PHL’s resiliency projects not fairly distributed — WB
THE World Bank said the government needs to adopt a new method for estimating disaster damage that goes beyond asset losses, because the current approach tends to highlight the value of projects in or near the National Capital Region (NCR).
In its “Lifelines: The Resilient Infrastructure Opportunity” report, the World Bank said: “the most important interventions will take place in the Manila area if asset losses are the main measure of disaster impacts.”
“Assessments of national risk and identification of critical infrastructure need to account for multiple policy objectives and therefore, use a set of metrics that goes beyond asset losses,” it added.
The World Bank noted that the Philippines was able to save more than $1 billion because of natural systems that protect the coastlines against flood and storm surges. It said that nature-based solutions for flood protection reduce the need for hard infrastructure such as dikes.
“In the Philippines, mangroves, reefs and other natural system prevent more than $1 billion in annual disaster losses,” the bank said.
Other countries that benefit from the protection provided by reefs are Cuba, Indonesia, Malaysia and Mexico, the World Bank said, noting that these countries save an estimated $400 million each from flood damage annually.
The World Bank also noted the importance of service providers having contingency plans in case of power interruptions.
“In the Philippines, after a typhoon, water tankers (have been) contracted to ensure service continuity despite infrastructure damage.”
The World Bank said it is necessary for resilience measures to be fairly distributed across populations and backed by metrics based on socioeconomic impacts on the affected population.
In a separate statement, World Bank Group President David Malpass said, “Resilient infrastructure is not about roads or power plants alone. It is about the people, the households and the communities for whom this quality infrastructure is a lifeline to better education and better livelihoods.” — Reicelene Joy N. Ignacio
JICA still has 900B yen to fund rail expansion in Philippines
THE Japan International Cooperation Agency (JICA) said 900 billion yen worth of funding remains unreleased from allocations to support the development of the Philippine railway system.
“Just (in) the railway sector… we project to commit about 1.3 trillion yen for railway project. In total, actually, we have only committed about 400 billion yen, so far, so at least for the railway sector, 900 billion yen (will go towards completing) the ongoing railway projects,” Kiyo Kawabuchi, senior representative of JICA, said during a briefing on Thursday.
Currently, JICA is funding various railway projects with a total of 595 billion yen in loan funding, including the unreleased portions of the loans.
These include the first tranche of the Metro Manila Subway Project to be operational by 2025, the North-South Commuter railway (NSCR) Project, the first tranche of its Extension project to be completed by 2022, Rehabilitation of the Metro Rail Transit Line- 3 (MRT-3) to be completed by 2022, the Light Rail Transit Line 1 (LRT-1) Cavite Extension Project due for completion by 2021, and the LRT-2 East Extension Project due for completion by 2020.
The Department of Transportation (DoTr) said the projects will expand the country’s railway lines to about 244 kilometers from the current 79 kilometers.
These projects are some of the transport interventions listed in the JICA 2014 Road Map for Transport Infrastructure Development for Metro Manila, which was adopted by the government. The road map also includes the improvement of the country’s roads, expressways, and traffic management as priorities to decongest traffic, and to fuel economic activity.
On a follow up survey in 2017, JICA said that the Build, Build, Build program of the government could help address the P3.5 billion lost to road congestion.
“Really the vision anchors on the statement of the President which is to deliver a more comfortable life to the Filipinos…. What part of it? The transport part because you may have livelihood opportunities, you may have education opportunities, you may have health services, but if these government services are not within reach of the people in a convenient manner then it somehow reduces the benefits or the value of all these government services,” Timothy John R. Batan, DoTr undersecretary for railways, said during the briefing.
“There is a basket of solutions. Rail plays a major role in that basket… and what we have really been pushing together with… our implementation partners and our development partners is to find the appropriate role of rail in that basket because really the objective is not to build rail for building’s sake. The objective is for us to achieve a certain level of convenience, predictability,” he added. — Vincent Mariel P. Galang
Sugar industry pushing for faster release of dev’t funding
THE Confederation of Sugar Producers (CONFED) said it will seek revisions to the implementing rules and regulations of the Sugar Industry Development Act (SIDA) to make project approvals faster.
Which will leave sugar development projects with a greatly reduced 2020 budget of P67 million, from P500 million in 2019.
“I think (we will seek a) review of the SIDA IRR to streamline the process in order to fast-track the projects,” Raymond V. Montinola, spokesperson of CONFED, told reporters.
“We cannot feel the impact of the program now… Some are also frustrated by the slow pace of approval especially when giving out the funding,” he said.
He said applications do not go ahead due to the slowness of the process of orders to re-submit requirements.
He also said the sugar development budget might fall to P67 million in 2020 from P500 million in 2019. Mr. Montinola said the industry plans to appeal to Congress to increase the allocation to about P1 billion.
“They are trying to re-negotiate the program to increase it to P1 billion… with Congress… mostly (for) scholarships, socialized lending,” he said. — Vincent Mariel P. Galang
China could build 30 ‘Belt and Road’ nuclear reactors by 2030
SHANGHAI — China could build as many as 30 overseas nuclear reactors through its involvement in the “Belt and Road” initiative over the next decade, a senior industry official told a meeting of China’s political advisory body this week.
Wang Shoujun, a standing committee member of the China People’s Political Consultative Conference (CPPCC), told delegates on Wednesday that China needed to take full advantage of the opportunities provided by “Belt and Road” and give more financial and policy support to its nuclear sector.
“‘Going out’ with nuclear power has already become a state strategy, and nuclear exports will help optimize our export trade and free up domestic high-end manufacturing capacity,” he was quoted as saying in a report on the CPPCC’s official website.
He said China needed to improve research and development, localize the production of key nuclear components, and grow both the domestic and foreign nuclear markets to give full play to the country’s “comprehensive advantages” in costs and technology.
Mr. Wang, also the former chairman of the state-owned China National Nuclear Corp. (CNNC), said “Belt and Road” nuclear projects could earn Chinese firms as much as 1 trillion yuan ($145.52 billion) by 2030, according to more details of his speech published by BJX.com.cn, a Chinese power industry news portal.
He said 41 “Belt and Road” nations already had nuclear power programs or were planning to develop them, and China only needed to secure a 20% market share to create five million new jobs in the sector, according to the news portal.
CPPCC did not immediately respond to a request for comment.
China is in the middle of a reactor-building program it hoped would serve as a shop window to promote its homegrown designs and technologies overseas, especially its own third-generation reactor design known as Hualong One.
But the pace of construction at home has slowed down amid technological problems and delays at some key projects, as well as a suspension of new approvals that lasted over three years.
Mr. Wang, according to BJX.com.cn, said there was currently overcapacity among local nuclear manufacturers, but the domestic market value for nuclear equipment could reach more than 48 billion yuan a year within two years. He didn’t say how much it was worth currently. — Reuters
China plastics packaging firm signs industrial zone lease in Panabo City
A CHINESE plastic packaging company has signed a location agreement with an industrial zone operator in Panabo City, Davao del Norte, the industrial zone’s operator said.
Damosa Land Inc. said Davao Zhenzhi Corp. “leased a 2,000 square meter warehouse for plastic processing at the Anflo Industrial Estate in Panabo City, Davao del Norte.
“Their products are plastic packaging for agriproduce like bananas,” Damosa Land, which signed the agreement Wednesday, said.
The company becomes the 12th locator in the industrial zone.
Earlier, Japanese company Packwell Inc. also signed a lease agreement with the company for a packaging plant.
Arturo M. Milan, Davao City Chamber of Commerce and Industry, said representatives of both locators are attending the Davao Investment Conference.
Mr. Milan said half of the 600 delegates are foreigners. Twelve of them are ambassadors and six of them are from the European Union.
He added that the entry of foreign investors is an indication of the demand for industrial zones.
“Industrial zones are important for both local and foreign companies to get attracted,” he added. — Carmelito Q. Francisco
President signs four laws extending various broadcast franchises
PRESIDENT Rodrigo R. Duterte signed laws renewing the franchises of four broadcasting companies, including El Shaddai’s Delta Broadcasting System, Inc. (DBS) and Ultrasonic Broadcasting System, Inc. (UBSI), which is owned by the SYSU Group of Companies, a food importer and distributor, officials said.
Mr. Duterte signed on April 17 Republic Act (RA) No. 11303 renewing for another 25 years the franchise granted to DBS “to establish, maintain, and operate radio and television broadcasting stations” in the country.
He also signed RA 11301 for the renewal of the UBSI franchise.
Other franchises renewed on April 17 include Filipinas Broadcasting Network, Inc. or FBN (RA 11300) and Peñafrancia Broadcasting Corp. or PBN (RA 111302).
DBS, which is owned by El Shaddai leader Mariano Z. Velarde, is based in Makati City. The company has been operating DWXI 1314 kHz AM, a radio station, since 1981. It also runs the television station DBS TV Channel 35.
UBSI operates at least 10 Energy FM radio stations, with operations in Davao City, Cebu City, Naga City in Camarines Sur, and Dagupan before expanding to Metro Manila in 2003.
FBN is a provincial network, which opened its first station DZGE-AM in Naga City in the 1960s, and followed by DZRC-AM in Legazpi City. The company, which was organized by the late Bicol Rep. Edmund B. Cea, also opened several radio stations outside the Bicol region.
PBN, formerly affiliated with TV5 Network, is a Bicol-based radio/television media network.
Their franchises, according to the law, takes effect for a period of 25 years “unless sooner revoked and cancelled.”
A franchise will be deemed “ipso facto revoked in the event the grantee fails to operate for two years.”
The grantees’ responsibilities include providing free of charge “adequate public service time which is reasonable and sufficient to enable the government, through the broadcasting stations or facilities of the grantee[s], to reach pertinent populations… on important public issues and relay important public announcements and warnings concerning public emergencies and calamities, as necessity, urgency, or law may require.”
They should also “promote audience sensibility and empowerment… and not use [their] stations or facilities for the broadcasting of obscene or indecent language, speech, acts or scenes; or for the dissemination of deliberately false information or willful misrepresentation, to the detriment of the public interest; or to incite, encourage or assist in subversive or treasonable acts.” — Arjay L. Balinbin
Bank investments in tech not yet seen driving significant revenue growth
NEW YORK — The $1 trillion invested by traditional banks globally over the past three years to improve their technology has not yet delivered the revenue growth that had been expected, according to an Accenture report released on Thursday.
The consultancy analyzed more than 160 of the largest retail and commercial banks in 21 countries to determine whether those making the most progress on technology were achieving better financial performance.
It found that banks that had advanced the most on digital were the most profitable and highly valuable, but that the higher profitability was driven by having reduced costs rather than revenue growth.
Banks had hoped that by creating better digital products and experiences for customers they would have achieved the same fast user and revenue growth as new tech-savvy competitors or large technology firms, Alan McIntyre, a senior managing director at Accenture and head of its global banking practice, said in an interview.
“Having a good digital offering is not enough to move customers,” McIntyre said. “If it doesn’t change, the industry is going to end up looking more like a utility.”
The study comes as incumbent banks continue to dedicate vast amounts of funding to overhaul their old technology systems and offer more digital services to customers.
Banks are seeking to meet the higher expectations of customers who have grown accustomed to the user-friendly products and services offered by consumer technology companies and new financial services entrants.
Accenture did not discount investments in technology, but noted that reducing costs was only the first step banks needed to make to become more competitive in the changing landscape.
The move to digital is likely to reduce banks’ income from fees, such as those customers pay for advice or transactions, according to the report.
It recommends that moving forward banks focus on making more income from taking risks linked with running the balance sheet, such as interest rate and credit, or by creating new revenue streams in areas not in their traditional domain. — Reuters