Inflation back on track at one-year low

March 6, 2019 | 12:32 am

By Christine Joyce S. Castañeda
Senior Researcher
INFLATION eased for the fourth straight month and on to target in February to post the lowest reading in 12 months, helped by milder increases in the prices of food and beverages, the Philippine Statistics Authority (PSA) reported on Tuesday.
Preliminary PSA data showed inflation last month at 3.8%, slower than January’s 4.4% and matching February 2018’s pace.

The February reading was lower than the 4.1% estimate median in BusinessWorld’s poll of 13 economists late last week. The latest figure also fell within the 3.7-4.5% estimate which the Bangko Sentral ng Pilipinas’ (BSP) Department of Economic Research gave for the month.
The better-than-expected pace marked the fourth straight month of deceleration from the nine-year 6.7% peak recorded in September and October last year.
The preliminary result brought the year-to-date average to 4.1% — still above the BSP’s 2-4% target band and 3.1% forecast average for the year, which compares to 2018’s 5.2%.
Core inflation, which strips volatile prices of food and energy items, clocked 3.9% last month slower than January’s 4.4% albeit faster than the 3% in the same period last year.
The latest inflation figure, however, will not necessarily lead to monetary policy easing when the Bangko Sentral ng Pilipinas (BSP) Monetary Board conducts its second policy review on March 21, Deputy Governor Diwa C. Guinigundo told reporters in a mobile phone message after data were released. It maintained policy in its first 2019 review on Feb. 7.
The data showed lower increments in the heavily weighted food and non-alcoholic beverages at 4.7% last month from 5.6% in January and 4.8% in February 2018.
Food-alone inflation eased to 4.2% versus the previous month’s 5.1% and 4.8% a year ago.
With the exception of education and communication, the rest of the subindices posted slower upticks during the month as well.
Economists attributed the better-than-expected reading to the slower increase in the prices of food and non-alcoholic beverages.
“The basket-heavy food index, the bane of 2018 inflation, helped keep price gains in check in 2019…With [food and non-alcoholic beverages] inflation at 4.7% from 5.6% in January, the headline print slid as well, this time back within target after almost a year,” said Nicholas Antonio T. Mapa, senior economist at ING Bank N.V. Manila.
“Food prices are now tamer given improved weather and supply conditions while the waning effects after the tax on sugar drinks fade on non-alcoholic drinks.”
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc. (UnionBank), likewise cited the prices of food items as the main drivers of inflation’s slowdown, in particular, the prices of rice and corn.
The rice and corn indices in February stood at 2.9% and -0.3%, respectively, compared to 4.7% and 0.9% in January.
With the exception of fish, whose inflation rate steadied at 7.8%, the rest of the food items recorded slower annual mark-ups.
“With inflation now back within target, we expect the BSP to factor this in as the inflation path forecasted by the BSP continues to pan out,” ING’s Mr. Mapa said.
“If this trend continues, this could give the central bank the leeway to ease back on policy by way of RRR [reserve requirement ratio] cuts as early as [the first quarter] and a possible policy rate cut by May.”
In a report, economist Noelan Arbis at HSBC Global Research, said: “We expect monetary accommodation to first come in the form of RRR cuts,” adding that he expects “a 100-[basis point] cut in banks’ RRR in the second quarter.”
On the other hand, economists Mustafa Arif and Sanjay Mathur of ANZ Research said in a report that they expect the BSP to keep rates unchanged in its next meeting.
REDUCTION OF INTEREST RATES PREMATURE?
Despite market expectations of loosening monetary policy, BSP’s Mr. Guinigundo said that the lower-than-expected inflation will not necessarily trigger interest rate cuts or reduce bank’s required reserves.
“We continue to consider our current monetary settings as appropriate given the emerging risks both here and abroad. However, the Monetary Board will be meeting this month precisely to review the stance of monetary policy given the expected new data that would be available from now until the next meeting against the backdrop of a softening global economy,” he told reporters.
“It may be premature to talk about a possible reduction in either the policy rate or the RRR [reserve requirement ratio] at this time considering that the year-to-date inflation remains above the target of 2-4%. More important, our latest forecasts for the next two years are anchored on the current policy rate of 4.75%,” he added.
“But these policy issues will remain on the table. Timing is the crucial issue.”
In a separate statement, the central bank said: “The latest inflation outturn is consistent with the BSP’s expectation of the continued easing of price pressures.”
“Inflation will likely settle within the target range in 2019 and 2020 as previous monetary and non-monetary policy actions work their way through the economy. The recent enactment of the rice tariffication act will further temper rice prices in the near term and help raise long-run productivity in the agricultural sector. The BSP continues to keep a close watch over price developments in the country and shall consider all relevant information at its next monetary policy meeting on [March 21, 2019] to ensure that the monetary policy stance remains consistent with the BSP’s primary mandate of safeguarding price stability.”
OUTLOOK
In a joint statement, the Department of Finance, National Economic and Development Authority and the Department of Budget and Management said that inflation is starting to become more manageable.
“With these developments, we are optimistic that the downward path of inflation will continue for the rest of the year. This will be backed by the recent enactment of the Rice Industry Modernization Act (Republic Act No. 11203), which is expected to bring down rice prices and cut inflation by 0.5-0.7 percentage point this year and 0.3-0.4 percentage point next year,” the statement read.
The rice tariffication law, which liberalizes the import process for the staple while taking away the role in importing of the National Food Authority, took effect yesterday.
“We must ensure that the change to a rice tariff regime — from government-led to market-led — is seamless and fast,” the statement further read.
The country’s economic managers flagged the expected onset of El Niño, which could last until June.
All in all, economists expect inflation to continue its deceleration in the coming months.
“Inflation will continue to trend lower and remain within target, barring any supply-side shock from El Niño and or oil price shock,” said ING’s Mr. Mapa.
“The rice tariffication law will help ensure that the food basket sees less volatile price movements as we can import to augment local supplies.”
Similarly, UnionBank’s Mr. Asuncion anticipates inflation to continue to decline, especially as food price increases slow further.
“With global oil prices expected to decline further in the longer-term due to supply issues and US shale production, local headline inflation is expected to thread the government’s target of 2-4%,” he said.
HSBC’s Mr. Arbis expected headline figure to be “closer to the target midpoint” in the second quarter and fall below the 3% mark in the third quarter, averaging 3.3% for the year. — with Melissa Luz T. Lopez

Headline inflation rates in the Philippines (Ferbruary, 2019)

March 6, 2019 | 12:32 am

INFLATION eased for the fourth straight month and on to target in February to post the lowest reading in 12 months, helped by milder increases in the prices of food and beverages, the Philippine Statistics Authority (PSA) reported on Tuesday. Read the full story.

Financial industry awaits Diokno’s first signals

March 6, 2019 | 12:31 am

By Melissa Luz T. Lopez
Senior Reporter
THE COUNTRY’S financial sector awaits clear cues from newly appointed Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno, with expectations that his outsider view will make monetary policy more supportive of the state’s growth goals by way of lower interest rates.
Malacañang made the surprise announcement on Monday night, naming the two-time Budget secretary as head of the central bank and chairman of the policy-setting Monetary Board.
Mr. Diokno, 70, has been sitting as part of President Rodrigo R. Duterte’s economic team since assuming office mid-2016. He holds a doctorate degree in economics and has been professor emeritus at the University of the Philippines Diliman. His career was spent mostly in the academe and in government, having served as budget undersecretary under former Pres. Corazon C. Aquino and later on, as budget chief of former Pres. Joseph E. Estrada.
Observers generally took the news as a surprise, given that Mr. Diokno wasn’t among the names floated to replace the late Gov. Nestor A. Espenilla, Jr. who passed away on Feb. 23 after battling tongue cancer for over a year.
Mr. Diokno will serve Mr. Espenilla’s remaining term until July 2023. He is yet to take his oath as BSP governor as of press time, although Executive Secretary Salvador S. Medialdea said that the appointment took effect yesterday.
‘EVIDENCE-BASED’
Pressed for comments about his term at the BSP, Mr. Diokno said it was “too early to make any policy statement” for now.
“Policy statements will be evidence-based and it should be the outcome of deliberations by the seven-man Monetary Board,” Mr. Diokno said in a mobile phone message.
In a statement, the Bankers Association of the Philippines said it was “optimistic” about Mr. Diokno’s leadership given his “reformist” image.
Alfonso L. Salcedo, Jr., president and chief executive officer at Security Bank Corp., said Mr. Diokno’s appointment was “not expected,” but that the new BSP chief is “competent and smart.”
Prior to this, there were calls to appoint a career central bank official to succeed Mr. Espenilla to follow tradition at the BSP.
The last “outsider” who took the governor’s seat was Rafael Carlos B. Buenaventura in 1999, who was then the president of a private bank.
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said markets seek assurance about policy continuity at the central bank.
“The last Governor Espenilla talked about ‘Continuity++,’ and the markets took it well. It would be good to be in line with this particular focus at the start,” Mr. Asuncion said.
“If the markets sense that it seems that ‘Continuity++’ will stay and in fact be upgraded further, I think, we will be fine moving forward.”
Several economists took Mr. Diokno’s appointment as a sign of more “pro-growth” measures from the central bank, given his vast experience on the fiscal front.
“Since being appointed, Gov. Diokno has already noted that the BSP’s monetary policies must be ‘in sync’ with fiscal policy, in addition to its considerations for inflation and financial stability. Given the Duterte administration’s expansionary fiscal policy stance, this signals a bias for more monetary accommodation from the new governor,” said Noelan Arbis, economist at HSBC Global Research.
BDO Unibank, Inc. chief market strategist Jonathan L. Ravelas added that the Mr. Diokno’s solid grasp of the economy will allow him to “fine-tune” policies to push growth beyond six percent, adding that he is a “good communicator and advocate of transparency.”
“After all, he is the chief architect of Build, Build, Build… He has to play the balancing act,” Mr. Ravelas said when sought for comment.
Mr. Diokno led the shift to a cash-based budgeting scheme designed to speed up public spending and delivery of projects and services. State disbursements also beat the P3.37-trillion program for 2018, leading to a wider budget gap equivalent to 3.2% of gross domestic product.
At the BSP, Mr. Diokno will inherit benchmark interest rates at a decade-high 4.25-5.25%, as inflation cools from a nine-yea peak of 6.7% in September and October 2018.
He also faces clamor from thew banking industry for further cuts in the reserve requirement ratio, a move that will unleash billions of pesos to the system and bring down the cost of money.
“With the price goal seemingly in hand, it may be time for the BSP to consider possibly reducing the reserve requirement ratio in the near term and eventually lower policy rates to help chase the 7-8% growth target,” said Nicholas Antonio T. Mapa, senior economist at ING Bank NV Manila. — with Karl Angelo N. Vidal

Jan. factory output down for 2nd straight month

March 6, 2019 | 12:30 am

By Mark T. Amoguis
Researcher
FACTORY output posted its second consecutive month of decline in January, the Philippine Statistics Authority (PSA) reported on Tuesday.
Preliminary results of the PSA’s latest Monthly Integrated Survey of Selected Industries showed its volume of production index contracting by 4.1% year on year in January versus the December’s revised 11.9% decline and the 10.8% growth logged in January 2018.
The PSA reported that production of 12 out of the 20 major industry groups fell, namely: furniture and fixtures (-31.1%), basic metals (-12%), machinery except electrical (-8.3%), food manufacturing (-4.3%), chemical products (-4.1%), non-metallic mineral products (-8.6%), fabricated metal products (-9.3%), footwear and wearing apparel (-3.3%), printing (-8.3%), miscellaneous manufactures (-3.6%), tobacco products (-1%), as well as wood and wood products (-3%).
In comparison, the Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) was 52.3 that month, slightly lower than December 2018’s 53.2, but higher than January 2018’s 51.7. A PMI reading above 50 signals improvement in business conditions from the preceding month, while a score below that point indicates deterioration.
Average capacity utilization — the extent by which industry resources are used in the production of goods — was estimated at 84.3%. Eleven of the 20 sectors registered capacity utilization rates of at least 80%.
“Manufacturing growth outturn in January 2019 showed a moderate improvement coming from December 2018. Nevertheless, with our recent progress in agricultural policy, we can expect manufacturing to recover further,” a press statement of the National Economic and Development Authority quoted its director-general, Socioeconomic Planning Secretary Ernesto M. Pernia, as saying.
Mr. Pernia noted the recent enactment of Republic Act No. 11203 — which is expected to cut retail prices of rice as it replaced quantitative restrictions with a tariff scheme when it took effect yesterday — may provide opportunities for factory expansion.
Meanwhile, Rizal Commercial Banking Corp. (RCBC) economist Michael L. Ricafort attributed manufacturing’s continued decline to higher base effects, spillover effects of higher inflation last year, as well as external factors such as the slower economic growth in developed economies and the ongoing US-China trade war that contributed to the decline in the country’s manufactured goods exports.
“With the easing trend of both inflation and interest rates, some manufacturers may find it more prudent to wait for borrowing costs to go down further… before borrowing more aggressively to fund new manufacturing facilities… Thus, this may have also led to the latest contraction in manufacturing,” Mr. Ricafort said.
For Federation of Philippine Industries (FPI) Chairman Jesus L. Arranza, the decline can be attributed to workforce shortage that led to a decline in the factory’s production output.
“There is a slowdown in production because it is so hard to get people…” Mr. Arranza said.
“This will be remedied, I’m sure. It cannot be a prolonged agony… This is just temporary,” he added.
“I’m confident that manufacturing will be more aggressive in the next few months. I don’t think it will have some problems.”
RCBC’s Mr. Ricafort shared this view, saying that the sector could pick up in the coming months on the back of easing inflation, lower interest rates, improving economic conditions abroad and “greater clarity” on the proposed rationalization of fiscal incentives that may have caused some foreign firms to put their expansion plans in the country on hold.
“Any further increase in the government’s spending — especially on major infrastructure projects — will lead to greater demand for allied/related manufacturing industries, especially those related to construction and construction-related inputs,” he added.
For NEDA’s Mr. Pernia, the government will have to pursue measures in order to attract investments and reduce the cost of expanding production capacity for existing firms. These include full implementation of the Ease of Doing Business-Efficient Government Service Delivery Act of 2018, the passage of the amendment to the Public Service Act that would foster competition in telecommunications, transportation and logistics, the proposed amendment to the Foreign Investments Act of 1991 that seeks to lower employment threshold to 15 direct employees from 50 for foreigners investing $100,000 in order to set up shop in the Philippines, and the amendments to the Retail Trade Liberalization Law that would ease equity and capitalization requirements.
“These measures are vital considering that manufacturing is expected to be dampened by less optimistic business and consumer outlook in the first quarter of the year. Higher domestic oil prices, rising adjustment in electricity rates and weather disturbances are expected to exert upward price pressures on the cost of inputs,” Mr. Pernia said.

Metro Pacific core profit jumps 7% to P15.1 billion

March 6, 2019 | 12:09 am

METRO Pacific Investments Corp.’s (MPIC) water business includes investments in Maynilad Water Services, Inc. and MetroPac Water Investments Corp.

By Arra B. Francia, Reporter
INFRASTRUCTURE conglomerate Metro Pacific Investments Corp. (MPIC) delivered a seven percent increase in core profit for 2018, thanks to its expanded power portfolio and steady volume from its toll roads and water units.
In a presentation on Tuesday, MPIC reported a core net income of P15.1 billion, higher than the P14.1 billion it posted in 2017.
“This growth was due to the increase in operating income, an increase of 10%, and this breaks down into contributions from each of our subsidiaries,” MPIC President and Chief Executive Officer Jose Ma. K. Lim said in a press briefing in Makati on Tuesday.
The power business accounted for the bulk of MPIC’s operating income at 55% or P10.8 billion, followed by toll roads which provided 23% or P4.4 billion. Water provided 19% or P3.8 billion, and the hospitals group generated 4% or P771 million.
On the other hand, the rail, logistics, and systems group incurred a net loss of P248 million.
Mr. Lim noted the power unit grew by 15% due to the increase in ownership in Beacon Electric Asset Holdings, Inc. to 45.5% from 41.2% in June 2017, giving them the benefit of full-year recognition for the larger stake.
Manila Electric Company (Meralco) booked a core profit of P22.4 billion, due to a 5% uptick in energy sales and slightly lower tariffs. The positive performance helped offset the 15% decline in Global Business Power Corp.’s core net income to P2.5 billion, dragged by depreciation costs for one of Panay Energy Development Corp.’s plants.
For the toll roads unit, core net income went up by 13% to P4.5 billion after Metro Pacific Tollways Corp. (MPTC) saw a system-wide vehicle entries record of 916,886 per day across its toll roads in the Philippines, Indonesia, Thailand, and Vietnam.
In the Philippines alone, average daily vehicle entries climbed by 7% to 478,315 across the North Luzon Expressway, Cavite Expressway, and Subic-Clark-Tarlac Expressway.
MPTC is currently waiting for the resolution of tariff adjustments, ranging from 20-48% on different parts of its network.
Meanwhile, MPIC’s water business, composed mostly of Maynilad Water Services, Inc., contributed P3.8 billion to the company’s core net income, thanks to higher volumes and a combination of basic and inflation-linked tariff increases during the period.
Maynilad saw a 5% rise in core net income to P7.7 billion. However, the company has yet to see the resolution of two related arbitration awards. This includes the case against Metropolitan Waterworks and Sewerage System on the treatment of corporate income tax as an expense recovered through tariffs, as well as its claim against the government to recover foregone revenues due to delays in increasing tariffs.
The hospital unit through Metro Pacific Hospital Holdings, Inc posted a 15% core net income increase to P2.4 billion, after out-patient visits rose by 8% to 3.32 million people.
Light Rail Manila Corp. provided P394 million to the conglomerate’s core profit, while logistics unit, Metropac Movers, Inc. made no contributions as it is currently focusing on ramping up its warehousing projects to increase its customer base.
MPIC did not give a profit guidance for 2019. But sought for an outlook this year, MPIC Chief Finance Officer David J. Nicol said he sees all units sustaining their volume growth in 2019 except for power.
“In terms of power, overall we had a good year last year. The start of this year is looking a bit quieter, although it’s early days. But we will be below the 5% full-year (volume) growth last year,” Mr. Nicol said during the press briefing.
“Toll roads, we see it sustaining (growth). The hospitals, rails, water are sustaining (growth). The only area that is soft is power.”
MPIC is one of three Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc. — a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc. — maintains interest in BusinessWorld through the Philippine Star Group, which it controls.
Shares in MPIC jumped 2.63% or 12 centavos to close at P4.69 each at the stock exchange on Tuesday.

PHL’s 4G availability improves — report

March 6, 2019 | 12:08 am

By Denise A. Valdez, Reporter
A RECENT report said the availability of fourth generation (4G) network in the Philippines is getting better, but while video experience, broadband speed and latency experience has also shown improvement, these still lag behind the rest of the world.
The latest Mobile Network Experience Report of wireless coverage mapping firm OpenSignal showed Smart Communications, Inc. and Globe Telecom, Inc. both successfully expanded in more locations in the country, increasing the chances of finding a long term evolution (LTE) connection to 70% of the time.
The report covered 270,433 devices from Nov. 1, 2018 to Jan. 29, 2019 with total measurements reaching 933.2 million.
Smart Communications, Inc. is now closing the gap with Globe Telecom, Inc. in terms of 4G availability in the country, scoring 70.8% next to Globe’s 71.7%. Comparing to the same period in 2017, Globe’s 4G availability score then was at 55.3%, and Smart was at 40%.
“The rapid rise in their scores in just two years shows that their LTE services are maturing as more consumers have access to 4G services more often,” OpenSignal said.
“We found that the increasing 4G availability we’re tracking in the country as a whole is amplified in urban areas. In Cebu, Davao and Manila all three operators had 4G availability scores at least 10 percentage points higher than their national averages,” it added.
In terms of video experience, Smart beat Globe with a score of 44.4 against 28.4 (out of 100), which puts it in the “fair” range (40-55) against Globe’s “poor” score (0-40).
“Video experience in the Philippines is definitely in need of improvement,” OpenSignal said, adding that even the country’s top provider Smart “needs to gain a lot of ground” to bump up its rating to “good” or “very good.”
Both providers also improved their average download speeds. Smart jumped to 9.0 megabits per second (Mbps) from 7.5 Mbps in OpenSignal’s August 2018 report. Globe also moved up to 5.5 Mbps from 5.0 Mbps previously.
“Mobile broadband speeds are improving in the Philippines, though average connections are still well below most of the developed world,” OpenSignal said.
It added that it is not the improvement of their network connections that has been driving the two companies’ network speed, but their expanded 4G availability.
“[T]he big boost in Download Speed Experience isn’t the result of more powerful network connections…. Rather, Globe and Smart’s improved 4G availability is causing overall download speeds to rise. While the speed of 4G connections may not have changed, our users on Filipino networks are finding those connections more often,” it said.
Latency experience, or the lag time to transmit a command, also put Smart on top of Globe with an average response time of 69.4 milliseconds versus 74.6 milliseconds.
In a statement, Smart said it continues to ramp up its rollout of LTE and LTE-advanced network with a budget of $5 billion from 2016 to 2020. PLDT, Inc.’s wireless unit added that it is increasing its fiber broadband service to support its mobile network expansion.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls.

MRC Allied starts work on mall’s solar rooftop

March 6, 2019 | 12:07 am

MRC ALLIED, Inc. has broken ground on a 1.1 megawatt (MW) solar photovoltaic rooftop project in one of the malls in Mindanao through its subsidiary Menlo Renewable Energy Corp. (MREN), the listed company said on Tuesday.
“Under the MoA (memorandum of agreement), MREN will be the project developer and owner of the solar facility while a private entity, owning and operating the mall, will be the power off-taker,” MREN said in a statement.
It did not identify the mall except to say that it is one of the “major” malls in southern Philippines.
The solar power project will have an estimated investment of P67.4 million through a 20-year cooperation among the parties from the issuance of the acceptance certificate, MRC said citing the MoA.
MRC previously said that its renewable energy subsidiary had signed a memorandum of agreement for the development, design, construction and installation of at least 1.1-MW solar photovoltaic (PV) rooftop system as part of the pilot project of its ambitious solar PV program.
The company, which was previously focused on property development, is expanding its solar energy footprint through the development of the solar PV rooftop project as part of its 200-MW target capacity for the next two years, MRC said.
In December last year, MRC said it expected to push through in early 2019 the issuance of new shares amounting to around P1 billion to fund its renewable energy development projects.
The fund raising was previously stalled because of issues with the Securities and Exchange Commission relating to the use of the proceeds.
In October, MRC announced that it was reorganizing by consolidating under the listed company all its assets and portfolio while its operating subsidiaries will be implementing the projects.
On Tuesday, shares in MRC were unchanged at P0.405 each. — Victor V. Saulon

DNL targets double-digit earnings growth this year

March 6, 2019 | 12:06 am

LISTED plastics and oleochemicals manufacturer D&L Industries, Inc. (DNL) looks to continue its double-digit profit growth this year, after increasing its earnings by 10% in 2018.
DNL disclosed on Tuesday that net income reached P3.19 billion in 2018, higher than the P2.91 billion it posted the year before. This came amid a four percent decline in revenues to P26.54 billion due to lower coconut oil prices.
“Coconut oil prices are still down. Selling prices have come down a lot because of the lower average selling price,” DNL President and Chief Executive Officer Alvin D. Lao said in a press briefing in Makati City yesterday.
DNL said average prices of coconut oil declined by 39% last year, while palm oil prices also shed 14%.
High margin specialty products accounted for 63% of the company’s revenues, while commodities, or refined vegetable oils and biodiesel, provided the remaining 37%.
Meanwhile, exports contributed 24% to revenues, but there was an eight percent decline in peso terms due to the lower commodity prices.
DNL’s net income was flat at P785 million in the fourth quarter, after a 19% decline in revenues to P6.37 billion due to accelerating inflation during the period.
Despite the lower revenues, blended gross profit margin hit a high of 22% for the fourth quarter, bringing its full-year margin to 19%. Mr. Lao attributed this to the company’s ability to pass on price changes to customers.
“We have elections this year, so that will be positive for our business…We should see better results this year 2019,” Mr. Lao said.
“Our target is double-digit growth in net income, so the minimum is 10%….We don’t see coconut oil prices remaining low for long. When prices recover, then revenues should go up as well,” he added.
The company is also banking on inflation easing as well as improving trade relations between the United States and China to lift its business this year.
DNL will push through with its P8-billion expansion at its facility in Tanauan, Batangas this year, which will triple its capacity in the next two to three years. This is seen to ramp up the company’s export business, since it will have to export half of total production as per rules for Philippine Economic Zone Authority zone locators.
It will further give the company space to increase its production in the following years, as its utilization rate is now at about 70% across five plants in Metro Manila and one in Laguna.
Shares in DNL rose 0.36% or four centavos to close at P11.30 each at the stock exchange on Tuesday. — Arra B. Francia

AirAsia launches venture capital fund to back start-ups in Southeast Asia

March 6, 2019 | 12:05 am

MALAYSIAN budget carrier AirAsia Group said on Monday it was launching a venture capital fund in the United States to invest in start-ups seeking to enter or expand in Southeast Asia.
The fund, called RedBeat Capital, will focus on post-seed-stage startups in travel and lifestyle, financial technology, artificial intelligence and cybersecurity.
AirAsia is partnering with San Francisco-based 500 Startups, which invests in young fast-growing companies.
RedBeat Capital will have a base in San Francisco and access to 500 Startups’ deal flow, AirAsia said.
The airline group has initially allocated about $10 million, and the fund has already invested in a couple of companies, Aireen Omar, deputy chief executive, told Reuters.
AirAsia, which pioneered budget air travel in Asia, is broadening its reach to include a payments company, logistics, food and beverages brands and a loyalty program.
A year ago, it placed these lifestyle assets including the BIG Loyalty scheme and a Wi-Fi service, in which it typically has stakes of 80-100%, under RedBeat Ventures.
The new fund RedBeat Capital will house smaller investments in start-ups of anything up to around 20%, Ms. Omar said.
Together, these could be listed separately in future.
“We don’t have a timeline (for a listing) yet because our focus is to build a business fast,” she said in an interview.
AirAsia has been trying to re-invent itself as a travel and technology firm to exploit data and offset cyclical volatility in airline earnings.
The group last week posted a fourth-quarter net loss, its first quarterly loss in over three years, citing higher fuel prices and lease costs.
Non-flying ancillary revenues currently make up about 20% of group revenue.
The digital drive can improve ancillary revenues by using machine learning to better understand consumer trends, Ms. Omar said, adding that investments via the new fund should also help the core business.
“I would imagine that with what we are building here, the ancillary part will be increasing to more than 20% and it is not impossible for it to reach 50% at some point in the future,” Ms. Omar said.
Southeast Asia, with a young population and more internet users than the United States, but relatively little exposure in Silicon Valley so far, is among the fastest-growing tech markets, according to 500 Startups.
“We have noticed our own partners turning an eye towards Southeast Asia. It seems like a greenfield,” the start-up accelerator’s Chief Executive Christine Tsai told Reuters.
Some network carriers such as Singapore Airlines are also ramping up investments in digital technology. — Reuters

PSBank books flat net earnings in 2018

March 6, 2019 | 12:04 am

PHILIPPINE SAVINGS Bank’s (PSBank) net income was steady in 2018 as its lending and deposit-taking businesses continued to expand.
In a regulatory filing on Tuesday, the savings arm of Metropolitan Bank & Trust Co. reported that it booked a net income of P2.7 billion last year, flat from the previous year’s level.
This translated to a return on equity of 11.4% and a return on assets of 1.2%.
The bank’s net interest income grew by 2.3% year-on-year to P11.3 billion in 2018.
Total loans reached P156.7 billion at 2018’s close, up 7.1% from P146.3 billion in the comparative year-ago period.
On the funding side, deposits expanded 6.2% to P200.7 billion last year from 2017’s P188.9 billion.
Overall, PSBank’s assets stood at P237.7 billion in 2018, up 6.4% from the P223.3 billion recorded the previous year.
The lender’s capital adequacy ratio stood at 13.9% while its common equity Tier 1 ratio was at 11.3%, well above the central bank’s minimum requirements.
“PSBank proactively responded to last year’s challenges brought about by higher interest rates and inflation by focusing on sales and improving on its operating efficiencies, without compromising its commitment in providing excellent customer service,” PSBank President Jose Vicente L. Alde was quoted as saying in the statement.
The Bangko Sentral ng Pilipinas fired off five consecutive rate hikes last year totalling 175 basis points (bp) to arrest surging inflation, which averaged 5.2% in 2018. This was marked with back-to-back 50-bp tightening moves just as prices were surging to multi-year highs.
Easing inflation — which stood at a better-than-expected headline print of 3.8% in February — is seen to spur consumer spending.
In September, the bank announced it will issue P10 billion worth of medium-term notes to “give PSBank an opportunity to access medium-term and stable funding as the bank further expand its consumer banking business.”
Prior to this, it raised P5.08 billion in August through the issuance of long-term negotiable certificates of time deposits, which carry a 5% coupon.
In January, it also raised P8 billion via a stock rights offer, selling 142.9 million common shares priced at P56 apiece. — K.A.N. Vidal

Solaire operator nets P7.2 billion in 2018

March 6, 2019 | 12:04 am

BLOOMBERRY Resorts Corp. grew its attributable profit by 18% in 2018, driven by higher revenues across both gaming and non-gaming segments.
In a regulatory filing, the owner and operator of Solaire Resort and Casino reported a net income attributable to the parent of P7.19 billion, higher than the P6.07 billion it delivered in 2017.
This came on the back of a 14% uptick in consolidated net revenues to P38.22 billion.
“I am pleased to report that Bloomberry continues to be a trailblazer in the Philippine gaming and entertainment scene with our world-class integrated resort offering, Solaire Resort and Casino, delivering record revenues and profits in 2018,” Bloomberry Chairman and Chief Executive Officer Enrique K. Razon, Jr. said in a statement.
Total gross gaming revenues (GGR) at Solaire climbed 14% to P50.97 billion, as VIP volumes hit a record high of P810.23 billion. VIP win rate stood at 2.69%, resulting to a VIP GGR of P21.82 billion, five percent higher year on year.
With this, promotional allowances and contra accounts as percentage of GGR went down to 32%, from 34% in 2017, even as the cost increased by 10% to P16.63 billion.
The mass market segment also recorded higher volumes for the year, with mass table drops rising by 22% to P44.89 billion and electronic gaming machine coin-in climbing 15% to P211.88 billion.
With this, mass table revenues firmed up by 27% to P15.26 billion, while EGM revenue gained 27% to P13.9 billion.
For its non-gaming segment, Bloomberry clocked in an 11% increase in revenues to P6.62 billion. The company benefited from higher hotel occupancies at the Bay and Sky Towers at 92.6%, as well as more productions in the Theatre at Solaire and higher rental income from tenants at its retail strip called The Shoppes.
Meanwhile, Bloomberry’s operations in Korea through Jeju Sun Hotel & Casino delivered P484 million in gaming revenues, despite gambling prohibitions for locals.
“We look forward to 2019 and to sowing the seeds of our future growth, as we anticipate to break ground on our second integrated resort in Quezon City this,” Mr. Razon said.
Bloomberry will start the construction of its second integrated resort and casino in the country by the middle of 2019. Set to be located within Vertis North, Quezon City, the company expects to open the property by 2022.
Shares in Bloomberry soared 2.33% or 26 centavos to close at P11.40 each at the stock exchange on Tuesday. — Arra B. Francia

2 Lunas and a Hidalgo

March 6, 2019 | 12:03 am

“PHILIPPINE art history is never static. It remains in constant flux,” remarked Salcedo Auctions director Richie Lerma, speaking about the emergence of three works by classic Filipino artists.
Following the sale of the boceto for the Spoliarium in September last year, Salcedo’s first auction for 2019 — Important Philippine Art including Important Philippine Furniture and Important Philippine Tribal & Ethnographic Art — on March 9, will have as its centerpieces Juan Luna’s boceto for The Death of Cleopatra, the painting of The Hunting Party, and Felix Resurreccion Hidalgo’s Draped Nude, Reclining in a Forest Landscape.
THE DEATH OF CLEOPATRA
In 1887, Juan Luna was taken to Spain as an apprentice of his professor Alejo Vera. At the time of Cleopatra’s creation, Luna was enrolled at the Real Academia de Bellas Artes de San Fernando (Royal Academy of Fine Arts of San Diego) in Madrid. Inspired by French painter Jean-Andre Rixen’s artwork of the same title (in French) from 1874, The Death of Cleopatra was Luna’s silver prize-winning entry at the Madrid Exposition in 1881. The prize came with the work’s acquisition by the Spanish government. The painting is currently part of the permanent collection of the Museo del Prado in Madrid.
The boceto — a preliminary sketch — for The Death of Cleopatra belonged to the late Filipino art collector Dr. Eleuterio “Teyet” Pascual. According to Mr. Lerma, its inclusion in the Luna Hidalgo retrospective at the Metropolitan Museum of Manila in 1988 and publication in the exhibition catalogue establish its authenticity.
“[It is] further validated by the National Museum through a Certificate of Authenticity that it issued [and] signed by National Artist [for Visual Arts] Jose Joya, then chairman of the authentication panel. The certificate’s control number is 94-1058,” Mr. Lerma wrote in an e-mail to BusinessWorld.
According to Mr. Lerma, the boceto was acquired from Dr. Pascual by the current owner in 1990, who contacted Salcedo Auctions late last year. The current owner offered Cleopatra after the successful of the sale of the Spoliarium boceto.
“The boceto is the missing art historical link between the painting, according to Prado Museum historian Carlos Navarro, influenced Luna’s 1881 award-winning work,” Mr. Lerma wrote, referring to the relationship between the pose of Luna’s Cleopatra and Rixen’s La Mort de Cleopatre.
As written in the Revelations: Important Philippine Art booklet by Salcedo Auctions, Mr. Navarro wrote in his report: “… the departed queen’s arm dangles from the edge of her bed, which is marked in contrast to the elegant placement of her arms to her side in Luna’s 1881 entry to the Madrid Exposition.”
Mr. Lerma mentioned that the boceto, unlike the two other paintings, Luna’s The Hunting Party and Felix Resurreccion Hidalgo’s Draped Nude, was not among those works examined in the Art Analysis and Research in London.
THE HUNTING PARTY AND DRAPED NUDE
Luna’s The Hunting Party (1890) — which depicts two men, one on horseback and the rider’s groom, surveying a field from a hill — came from the estate of the late Doña Maria Nuñez Rodriguez (1911-1992), widow of Don Francisco Vazquez Gayoso. It specifically came from the branch of her family that formerly owned Luna’s painting España y Filipinas (1886) which is currently part of the collection of the National Gallery of Singapore. Don Goyoso inherited the paintings from his father, Don Jose Vazquez Castiñeira, then mayor of Sarria, a northern Spanish town, in the late 19^th century, who is also connected to the providence of the Spoliarium bocetto.
Felix Resurreccion Hidalgo’s Draped Nude, Reclining in a Forest Landscape — a painting of a nude maiden laying on a rock with her lower half covered by a red cloth — also came from the same family.
In Salcedo Auctions’s pamphlet Revelations: Important Philippine Art is a photo of the reception area of the home of one of Doña Rodriguez’s heirs where one can see Hidalgo’s painting hung adjacent to Luna’s España y Filipinas.
The descendants of Doña Maria Nuñez Rodriguez contacted Salcedo Auctions regarding the ownership of the two other paintings at the same time that they were discussing the ownership of España y Filipinas and the Spoliarium boceto.
“They requested Salcedo Auctions to keep the [existence of the] two other paintings confidential until after the sale of the boceto for Spoliarium,” Mr. Lerma wrote.
THE IMPORTANT DETAILS
Mr. Lerma wrote that the laboratory report from London’s Art Analysis & Research compared the brush strokes, style, and subject matter of both paintings with other acknowledged works of the painters.
The Draped Nude was compared with the freehand sketch of a similar image in a studio setting from 1880, a work that is part of the BPI art collection.
Dr. Jilleen Nadolny, principal investigator at Art Analysis and Research, noted in her report: “The figure and the lighting are very much the same as the present painting, as is the way the forms are modelled. As seen in the cross-sections taken in the present picture (freehand sketch), the artist was working in a layered manner, building up colors and form by the super-positioning of thin layers, as well as by using thick painterly applications.”
As for The Hunting Party, pentimenti or “changes of significance in the composition or orientation of the painting” show that the painting is by Luna. It was compared to Luna’s Los Voluntarios (1896) and España y Filipinas.
Ms. Nadolny noted that “Observations using the naked eye show the riders in each piece to be very closely hewn… each one donning gun straps across their chests, the only difference being the raised arm and the bare head of the rider of The Hunting Party…”
The paintings were examined under UV light and hyperspectral imaging in order to establish the age of the paints used. Mr. Lerma wrote: “the paintings were examined not only under UV light, but also through hyperspectral imaging, which is essentially imaging the short-wave infrared whereby different color images are obtained to show details of the painting not seen by the naked eye but that reveal the artist’s brushwork, and use of pigments and their distribution,” he explained.
“The Hunting Party and Draped Nude have never been transported to the Philippines until today,” he wrote. In a subsequent interview with BusinessWorld last week at the Salcedo Auctions showroom, Mr. Lerma mentioned that both paintings arrived in the country in January this year.
THE AUCTION WEEKEND
Aside from those three paintings, the auction on March 9 includes artworks by other Filipino artists such as Bencab’s Sabel (2008), an untitled marble sculpture by Napoleon Abueva, and Philippine Folk Dances by Carlos Botong Francisco.
Also up for bid are antiques and furniture from the 19^th and 20^th century include a kamagong and narra tambol aparador (dresser) from the second quarter of the 19^th century, a late-19^th century baroque and rococo-inspired designed bishop’s chair, and an early to mid-20^th century hagabi bench carved out of a single tree trunk.
On March 10, Salcedo will conduct an auction focusing on jewelry and timepieces. Its 67 lots will include a De Capricho three-strand seed pearl, cabochan ruby, diamond, sapphire and emerald necklace set in 14-karat yellow gold; a Rene Boivin 18-karat yellow gold ring and bracelet set; a Patek Philippe Cabriolet Gondolo 18-karat two-color gold square wristwatch; a Dubey & Schaldenbard “Grand Dome” Limited Edition No. 2 wristwatch (a very rare 18-karat rose gold chronograph wristwatch with an elaborately engraved skeletonized open case back); and a 39mm Rolex Daytona “F Series” produced in 2004.
The auctions will be held at the Salcedo Auctions showroom in Makati City.
The online catalogue is available at www.salcedoauctions.com. Auction pieces are on preview at the showroom at Three Salcedo Place, Makati City daily from 10 a.m. to 6 p.m. until March 8. For inquiries, e-mail info@salcedoauctions.com or call 659-4094, 823-0956, or 0917-894-6550. — Michelle Anne P. Soliman

1...9,8039,8049,805...12,767 Page 9,804 of 12,767