Investor sentiment in the local stock market is more upbeat and analysts expect share prices to continue climbing this week following positive economic data released last week and as more companies announced third quarter results.
“So far, we’re seeing the bullish case for the local market building up on the back of the following positive factors: the Philippines’ strong third quarter economic growth; robust third quarter corporate results; the Peso’s strengthening; and the slowdown in the US’ inflation,” said Philstocks Financial Research Manager Japhet Tantiangco.
He added that, “Next week, the local bourse may extend its climb on the back of the aforementioned factors.”
“Earnings continue to support upbeat outlook, at least in the medium-term, for sectors we have been harping on in our past notes (banks, gaming, airlines),” 2TradeAsia.com said.
However, it warned that “We maintain that there may be non-core related items that may surprise in the fourth quarter, particularly those related to debt service and forex or inventory losses (hence, some quarter-on-quarter softness at the attributable earnings per share level).
Tantiangco also noted that, “Downside risks remain, however, primarily the Philippines’ inflation. Thus, investors are expected to watch out for the Bangko Sentral ng Pilipinas’ upcoming meeting this week.”
“While a 75 basis point rate hike is already anticipated, investors are expected to look out for clues on our inflation and monetary policy outlook,” he added.
For its part, 2TradeAsia.com said “The BSP's meeting later this month is likely to push another round of interest rate adjustments but, as this has been widely telegraphed already, capex and dividend movements in 2023 may have already accounted for this. In other words, forward 3-to-6-month cash flows is likely to be more predictable given capital costs are moderating, or at least, becoming less surprising.”
Aside from the BSP meeting this week, Tantiangco said “investors may watch out for our OFW remittance and Balance of Payment position data for cues.”
With the slew of positive earnings reports by publicly-listed corporation, stock analysts have upgraded their projections and recommendations for those that surprised on the upside and are seen to perform well in 2023.
COL Financial has a BUY rating on SM Investments Corporation “given its robust earnings growth despite global headwinds. There is strong momentum in consumer spending which will benefit SM Retail and the malls of SM Prime.”
“Meanwhile, the acquisition of PGPC has proved to be accretive to SM’s bottom line and looks to increase value contribution from its give new geothermal areas,” it added.
Abacus Securities Corporation also prefers SM among index heavyweights noting that SM Retail saw a bump from the return of face-to-face classes that pushed sales for several of its categories in its Department Store.
“This helped margins continue to improve and to its highest level since 2015 with strong sales and its cost management efforts. It is very much likely that it will surpass its consensus forecasts and should see the strongest quarter since the pandemic began in the fourth quarter,” it noted.
COL and Abacus also favors D&L Industries with COL raising its fair value estimate on DNL to P11.40 per share.
“We like DNL since it is in a prime position to capitalize on the reopening of the economy given its diversified portfolio of products catering to different consumer groups,” it ntoed.
COL added that, “We also expect that the significant capacity expansion from its upcoming Batangas plant will enable DNL to capitalize on the growing export demand for its products. The recovery of overall business activity should also result in a more favorable sales mix for DNL and drive margin expansion over the long term.”
Abacus pointed out that, “Even if DNL records flat earnings quarter-on-quarter in the fourth quarter, the full-year figure will still exceed consensus by a mile and analysts will have to significantly upgrade forecasts next year.”
“Eight of nine (89 percent) public analyst recommendations on Bloomberg for DNL are a Buy. We believe it should be 100 percent. There is no reason for the stock to be down 21 percent this year and it should be closer to P10.00,” it added.
COL has also upgraded its fair value estimates for Jollibee, Robinsons Land, Nickel Asia, Bloomberry, and Ayala Land and has a BUY rating for these stocks after they reported upbeat performances in the first nine months of the year.
It has also upgraded its recommendation for SM Prime from HOLD to BUY after raising the fair value estimate from P37.80 to P40.50.