Market to watch COVID, Q2 figures

Published July 19, 2020, 10:00 PM

by James A. Loyola

Aside from the latest medical updates, investors this week will be looking at the performances of early birds that will herald the start of the second quarter earnings season.

Listed companies expected to release their quarterly financial reports this week include Manila Electric Company, Aboitiz Equity Ventures, Aboitiz Power Corporation, and Union Bank of the Philippines.

While second quarter results are expected to be ugly as the economy ground to a halt due to the lockdown, said “The next frontier should be on third quarter indicators, with most sectors just restarting in late second quarter.”

It noted, investors would be asking guidance for recovery prospects, and the speed at which management can turnaround from the second quarter.

“However, the more pressing concern will be on firms’ ability to sustainably fund working capital, assuming current conditions persist,” said.

If these are answered, “Investor expectations can be reasonably recalibrated, in lieu of very low visibility still of an inflection point.”

With macro-economic data pointing towards a recession, advises investors to exercise “extra prudence in trades, in the face of a potential break from the critical 6,000 zone.”

“In that regard and applying fundamentals, the PSEi’s trajectory should move inversely to the coronavirus curve; that is, efforts to flatten the COVID-curve will be key to ‘bend’ share prices upwards,” the firm noted.

Amid this not-so-rosy backdrop, Abacus Securities Corporation is rating Robinsons Land Corporation a trading buy as it “appears significantly mispriced.”

“It is down 43 percent year-to-date despite the fact that its residential business is small relative to total and it has the biggest proportion of earnings coming from office leasing,” noted Abacus.

It added that, RLC’s EBITDA has grown nearly 200 percent over the past 10 years while its cash interest paid has actually declined by more than a quarter.

“This means the company is probably the best positioned to weather the effects of the pandemic,” Abacus said.

Meanwhile, COL Financial has a BUY rating on AC Energy Philippines Inc. saying “it is in an excellent position to expand its power generation portfolio following parent firm AC Energy’s plans to inject into ACEPH all of its domestic power assets.”

AC Energy has also announced it will inject all of its international renewable energy assets into ACEPH.

COL said the combined attributable capacity of these assets could boost ACEPH’s capacity by 2,780MW.