WED 10 JUL 2019 Top Stories URC: Intersnack Group acquires 40% of URC’s Oceania business Telecom Sector: Dito Telecommunity, formerly Mislatel, pushes back commercial operations to 2020 (AS OF JULY 09, 2019) INDICES Close Points % YTD% PSEi 8,042.04 -9.48 -0.12 7.72 Other Stories All Shares 4,900.74 -12.73 -0.26 8.48 Financials 1,733.42 5.33 0.31 -2.61 Holding Firms PCOR: PCOR defers expansion plans 7,699.22 -24.87 -0.32 4.87 Industrial 11,966.43 -6.74 -0.06 9.27 Mining industry: Government to conduct second round of mining audit Mining & Oil 7,503.10 34.51 0.46 -8.50 Property 4,345.68 -6.12 -0.14 19.78 Services 1,647.83 -28.17 -1.68 14.22 Market Summary Dow Jones 26,783.49 -22.65 -0.08 14.82 S&P 500 2,979.63 3.68 0.12 18.86 Nasdaq 8,141.73 43.35 0.54 22.70 The local stock market on Tuesday declined for the second straight session as investors look for clues on policy from the US Federal Reserve. Note that Powell will appear on Congress to talk about monetary policy and the state of the US economy on July 10-11. INDEX GAINERS Ticker Company Price % PGOLD Puregold Price Club 44.80 2.17 The PSEi slipped 9.48 points or 0.12% to close at 8,042.04. The main drags were SM SCC Semirara Mining 23.25 1.97 (-1.04%), ALI (-1.25%), URC (-1.12%), GLO (-2.91%), and MEG (-1.96%). On the other hand, SMPH SM Prime Hldgs Inc 38.45 1.72 these were partially offset by gainers such as SMPH (+1.72%), BDO (+0.99%), JGS (+0.66%), MER Manila Electric Company 387.00 1.04 BDO BDO Unibank Inc 142.50 0.99 JFC (+0.71%), and MER (+1.04%). INDEX LOSERS CEB (-37.90%) dropped, which was most likely caused by a trade error. Ticker Company Price % GLO Globe Telecom Inc 2132.00 -2.91 Value turnover increased to Php6.0bil from Php5.6Bil in the previous session. Meanwhile, MEG Megaworld Corporation 6.00 -1.96 ALI Ayala Land Inc 51.45 -1.25 foreigners turned net buyers, accumulating Php735Mil worth of shares. DMC DMCI Hldgs Inc 10.12 -1.17 URC Universal Robina Corp 176.00 -1.12 TOP 5 MOST ACTIVE STOCKS Ticker Company Turnover SM SM Investments Corp 725,006,900 ALI Ayala Land Inc 415,137,900 BPI Bank of the Phil Islands 369,278,300 AC Ayala Corporation 225,991,200 TEL PLDT Inc 177,772,700 Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside of the COL Financial website as these may be subject to tampering or unauthorized alterations. DAILY NOTES I PHILIPPINE EQUITY RESEARCH WED 10 JUL 2019 Top Stories Andy Dela Cruz URC: Intersnack Group acquires 40% of URC’s Senior Research Analyst Oceania business Universal Robina Corp HOLD Intersnack Group acquires 40% of URC’s Oceania business. In a disclosure, URC PHP142.00 said that it has sold 40% of its URC Oceania (New Zealand and Australia) business to Intersnack Group, a Europe-based snack company with around US$3.0 Bil worth of sales. Intersnack Group also has a presence in Australia through its Yarra Valley healthy snacks. The transaction will be completed in a mix of cash and shares of Yarra Valley Snack Foods Pty. Ltd. No further details were released. A long-term benefit to URC. We believe that the sale of 40% of URC Oceania will benefit URC given 1) less exposure of URC in mature and highly competitive markets (Australia and New Zealand), 2) fresh ideas from Intersnack Group who is more experienced in developed markets which could potentially catapult the segment into growth (alongside creating more synergistic opportunities), and 3) gives URC more room to focus more on its growing markets such as its domestic business. Note that URC Oceania accounts for around 15% of URC’s total sales. URC Oceania’s performance has been mixed for some time now as New Zealand operations in 2018 declined by 11% and Australian operations grew by only 4%. In 1Q19 alone, New Zealand sales grew by 2% while Australia declined by 1%. The mixed performance, as discussed earlier, is mostly due to the tough competitive environment, mature snacking segment in Oceania, and a shift in consumer preference towards healthier snacks. Note that most of URC Oceania’s business is salty snacks and sweet biscuits. Still, although we think that the strategic partnership could help URC Oceania gain back its ground in Oceania, benefits may take time to materialize given the execution risks amidst the tough market conditions and current position of URC Oceania’s product offerings. Maintain HOLD. We have a HOLD rating for URC with a fair value estimate of Php142.0/ sh. COL Financial Group, Inc. 2 DAILY NOTES I PHILIPPINE EQUITY RESEARCH WED 10 JUL 2019 Adrian Alexander Yu Telecom Sector: Dito Telecommunity, formerly Research Analyst Mislatel, pushes back commercial operations to 2020 According to Dito spokesperson Adel Tamano, although commercial operations was originally slated for September 2019, the target has been moved to the second quarter of 2020. The pushed back commercial operations will help ensure better network quality for the public as the company believes their first offer should be really good. By 2020, Dito will immediately offer LTE and 4G technology, while the customers can expect 5G network quality by 2021. Regarding competition, Dito believes it will be a war won by the company that provides the best quality instead of a price war, hence the decision to delay commercial operations to improve network quality. (Source: CNN Philippines) Other Stories Research Analysts PCOR: PCOR defers expansion plans Andy Dela Cruz John Martin Luciano PCOR said that it is putting its expansion plans in the Philippines on hold, as it waits for Frances Rolfa Nicolas global crude prices to stabilize. Note that the company is allotting US$600Mil to upgrade Justin Richmond Cheng its refinery. The said expansion will add 90,000 bbl per day, bringing the refinery’s total Adrian Alexander Yu capacity to 270,000 bbl per day. (source: Businessworld) Mining industry: Government to conduct second round of mining audit Government to conduct second round of mining audit. The Department of Finance said the inter-agency Mining Industry Coordinating Council (MICC) will start this month the second round of the mining industry audit. The second round audit, which will cover 17 mining sites across the country, will start at the end of July and be completed by January of next year. The first round of audit, which involved 26 mining sites in the country, was completed last year. COL Financial Group, Inc. 3 DAILY NOTES I PHILIPPINE EQUITY RESEARCH WED 10 JUL 2019 IMPORTANT RATING DEFINITIONS BUY Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the next six to 12 months. HOLD Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the next six to twelve months. SELL We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months. 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