Stocks in Focus: MON 26 MAY 2020

FGEN: Singapore group plans to acquire

up to 9% of FGEN
Singapore group plans to acquire up to 9% of FGEN. According to news sources, (AS OFMAY 21, 2020)
Valorous Asia, a firm registered in Singapore, plans to conduct a tender offer for FGEN. INDICES
Valorous is seeking to acquire from 215.9Mil to 323.8Mil outstanding common shares of Close Points % YTD%
FGEN, representing 6% to 9% of FGEN’s outstanding common shares. A tender-offer report PSEi 5,539.19 -65.30 -1.17 -29.12
will be filed with the Philippines’ Securities and Exchange Commission and the Philippine All Shares 3,349.98 -24.98 -0.74 -27.95
Stock Exchange on May 26. Both FGEN and Valorous did not reply to questions regarding Financials 1,102.50 -20.79 -1.85 -40.84
the details of the transaction. Holding Firms 5,540.44 -51.68 -0.92 -27.02
Industrial 7,304.81 -42.56 -0.58 -24.19
4,465.27 -64.22 -1.42 -44.82
Maintaining BUY rating for FGEN. We have a BUY rating on FGEN with a FV estimate Mining & Oil
Property 2,785.90 -35.40 -1.25 -32.94
of Php23.6/sh. We continue like FGEN given its relatively stable cash flow since bulk of its
Services 1,322.13 -8.98 -0.67 -13.65
capacity is contracted. FGEN is also the only clean energy play in the PSE after its subsidiary
EDC was delisted. Finally, the projected power shortage in 2023 improves the feasibility of Dow Jones 24,474.12 -102 -0.41 -14.24
its LNG regasification project which will enable its gas plants to remain competitive after S&P 500 2,948.51 -23.10 -0.78 -8.74
the depletion of the Malampaya gas field. Based on FGEN’s market price of Php17.74/sh, Nasdaq 9,284.88 -90.90 -0.97 3.48
the stock is trading at only 7X 20E P/E, while upside to our FV estimate is significant at 33%.

INDEX GAINERS
Top Stories: Ticker Company Price %
LTG LT Group Inc 7.39 2.21
JFC: JFC to spend Php7Bil for Business Transformation AP Aboitiz Power Corp 26.50 1.15

Economy: NTRC touts ‘junk-food’ tax as potential revenue generator for the GTCAP GT Capital Hdgs Inc 372.20 1.14
JGS JG Summit Hldgs Inc 49.10 1.03
government SCC Semirara Mining 11.30 0.89
Economy: Government looking to impose additional tariffs on imported products

INDEX LOSERS
Ticker Company Price %
Other News: MPI Metro Pacific Inv Corp 2.67 -4.64
ALI Ayala Land Inc 30.90 -3.59
SECB Security Bank Corp 82.75 -3.55
Economy: Proposed 2021 budget set at Php4.335Tril
AC Ayala Corporation 666.00 -2.70
DD: DD sets REIT offering in 4Q20 BDO BDO Unibank Inc 89.60 -2.61

TOP 5 MOST ACTIVE STOCKS

COVID-19 Update
Ticker Company Turnover
BDO BDO Unibank Inc 513,961,100
Total Cases Total Deaths Total Recoveries SM SM Investments Corp 259,385,000
ALI Ayala Land Inc 249,316,800
Philippines 14,319 (+284) 873 (+5) 3,323 (+74) GLO Globe Telecom Inc 205,707,400
JFC Jollibee Foods Corp 183,927,100
USA 1,706,157 (+19,721) 99,804 (+504) 462,769 (+11,067)

Worldwide 5,582,370 (+87,915) 347,563 (+1,129) 2,361,043 (+61,904)

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

FRI 22 MAY 2020

Market Summary

The local stock market ended its three-day rally on Friday as concerns over the COVID-19
pandemic linger.

The PSEi declined by 65.3 points or 1.16% to close at 5,539.19. The main drags were ALI
(-3.59%), AC (-2.70%), BDO (-2.61%), SM (-0.84%), and MBT (-2.30%). On the other hand,
these were partially offset by gainers such as JGS (+1.03%), SMPH (+0.17%), LTG (+2.21%),
AP (+1.15%), and GTCAP (+1.14%).

Value turnover declined to Php4.0Bil from Php4.7Bil in the previous session. Meanwhile,
foreigners continued to sell stocks, liquidating Php742.1Mil worth of shares.

In the US, major stocks indices (DJIA -0.04%; S&P 500 +0.24%; NASDAQ +0.43%) were
mixed.

COL Financial Group, Inc. 2

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

FRI 22 MAY 2020

Stocks in Focus:

George Ching FGEN: Singapore group plans to acquire up to 9% of

Senior Research Manager
FGEN
First Gen Corporation
BUY Singapore group plans to acquire up to 9% of FGEN. According to news sources,
PHP23.60 Valorous Asia, a firm registered in Singapore, plans to conduct a tender offer for FGEN.
Valorous is seeking to acquire from 215.9Mil to 323.8Mil outstanding common shares
of FGEN, representing 6% to 9% of FGEN’s outstanding common shares. A tender-
offer report will be filed with the Philippines’ Securities and Exchange Commission and
the Philippine Stock Exchange on May 26. Both FGEN and Valorous did not reply to
questions regarding the details of the transaction.

The impact of the potential tender offer and whether or not it will be attractive to
shareholders of FGEN will depend on the final tender offer price. Given the maximum
tender offer size of 9% of outstanding common shares is smaller than FGEN’s existing
public float of 31%, the number of shares eligible to be tendered by minority shareholders
will also depend on whether FGEN’s controlling shareholder(FPH) will participate in the
tender offer.

Maintaining BUY rating for FGEN. We have a BUY rating on FGEN with a FV estimate
of Php23.6/sh. We continue like FGEN given its relatively stable cash flow since bulk of
its capacity is contracted. FGEN is also the only clean energy play in the PSE after its
subsidiary EDC was delisted. Finally, the projected power shortage in 2023 improves
the feasibility of its LNG regasification project which will enable its gas plants to remain
competitive after the depletion of the Malampaya gas field. Based on FGEN’s market
price of Php17.74/sh, the stock is trading at only 7X 20E P/E, while upside to our FV
estimate is significant at 33%.

COL Financial Group, Inc. 3

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

FRI 22 MAY 2020

Top Stories:

John Martin Luciano, CFA JFC: JFC to spend Php7Bil for Business Transformation
Senior Research Analyst

Jollibee Foods Corporation JFC is planning to spend Php7Bil to implement significant changes to its global business
BUY structure. These changes will be made under the assumption that consumers will not
PHP130.00 quickly revert to pre-COVID 19 behavior once lock downs and other forms of restrictions
are lifted in different countries. Overall, the changes will involve the rationalization of
its non-performing stores, store network, supply chain facilities and management and
support group structure. This will also include building drivers of revenue growth for
the future which includes food delivery-to-home and offices and take out and drive-
thru, even as it continues to open new stores on a selective basis. In fact, the company
expects to open a total of 171 company-owned new stores and renovate 96 existing
stores in 2020. Meanwhile, the expense provision for this transformation will be in the
2Q20 and will be incurred mostly within 2020. Moreover, the planned changes will take
place in JFC’s businesses around the world, most importantly in its largest markets - the
Philippines, China, and North America.

Ysmael V. Baysa, JFC Chief Financial Officer, noted that the company’s financial
performance in 2020 started strongly, but the COVID 19 caused the temporary closure
of a high number of stores and dramatically reduced or eliminated dine-in sales at our
restaurants. As such, sales and profit for 1Q20 were eventually not good. Even as lock
downs begin to be lifted over the next few months, the company expects sales to continue
being much lower than last year levels. In addition, it estimates that 2020 profit will not
be good at all due to the overall economic environment. (Source: JFC)

Justin Richmond Cheng Economy: NTRC touts ‘junk-food’ tax as potential

Research Analyst revenue generator for the government
According to the National Tax Research Center (NTRC), excise taxes on salty snacks and
fast food products could raise up to Php73Bil on average each year for the government.
The NTRC based its estimates on a projected growth assumption on snack products and
fast food chains of 8.5% as well as a 10-20% tax on the ‘junk-food’ category. The NTRC
added that the new tax would encourage consumers to make appropriate changes in
their diet. Bayan Muna Party-list Rep. Carlos Zarate is against the ‘junk-food’ tax being
proposed by the NTRC. He said that the measure is anti-poor and is a reworked version
of the salt tax that the government considered in the past. He also expects this to jack
up the price of street foods, which are a staple of the low-income class. (Source: BusinessWorld,
BusinessMirror)

COL Financial Group, Inc. 4

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

FRI 22 MAY 2020

Frances Rolfa Nicolas

Economy: Government looking to impose
Research Analyst
additional tariffs on imported products
Trade Undersecretary Ceferino Rodolfo said that the government is looking to impose an
additional 5% tariff on all imported products to raise revenues. The proposed tariff, which
could raise as much as Php245Bil, will be imposed if the finance department signals
that the resources are needed to respond to the effects of the COVID-19 pandemic.
Note, however, that there are concerns over keeping the country’s commitments under
international trade agreements. ASEAN member countries can only apply a tariff rate of
up to 5% for goods originating from member countries. (source: Businessworld)

Other News:

Research Analysts Economy: Proposed 2021 budget set at Php4.335Tril

John Martin Luciano, CFA The Department of Budget and Management (DBM) is proposing a Php4.335Tril cash-
Frances Rolfa Nicolas based budget for 2021, which is 5.8% lower than the initial spending plan of Php4.64Tril
Justin Richmond Cheng
for the year. The DBM mentioned that the government’s 2021 expenditure program will
Adrian Alexander Yu
be reviewed and reprioritized toward containing and mitigating the COVID-19 effects
Kerwin Malcolm Chan
while strengthening the economy in the new normal environment. Of the total cash-
based budget, around 40.7% or Php1.767Tril would be earmarked for the cost of ongoing
Tier 1 programs and projects. Meanwhile, about 39.8% or Php1.73Tril of the budget will
be used for automatic appropriations and special purpose funds. The remaining 841.7Bil
will be used to fund expanded and new programs and projects under Tier 2. For 2021,
the DBM expects a fiscal deficit of Php1.429Tril, equivalent to 6.7% of the GDP. (Source:
Philstar)

DD: DD sets REIT offering in 4Q20

DoubleDragon Properties Corp. (DD) is targeting to pursue its Php11Bil real estate
investment trust (REIT) offering in 4Q20 despite the on-going global pandemic. The
company is looking to offer around 200,000 square meters or one-fourth from its
portfolio of 803,000 square meter leasing assets. In January, DD mentioned that were
planning to do a REIT listing of about 200,000 square meters of its leasing assets in the
next six years until 2025 at an estimated cap rate of 6%. The company owns properties
such as CityMalls, DD Meridian Park, Jollibee Tower, Hotel 101, Jinjiang Inn Philippines,
and CentralHub. (Source: Bworldonline)

COL Financial Group, Inc. 5

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

FRI 22 MAY 2020

Change in Shareholdings:
Date of Acquired or Price per
Stock Volume Person (Designation)
Disclosure Disposed share
Isidro A. Consunji
22-May DMC 600,000 A 4.10
(Chairman and President)
Angelo Raymundo Q. Valencia
26-May NIKL 10,000 A 1.58
(Independent Director)
Source: PSE

COL Financial Group, Inc. 6

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

FRI 22 MAY 2020

I M P O R TA N T R AT ING 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.

I M P O R TA N T DISC L AIM ER
Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount invested.
Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said information may
be incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the report and are
subject to change without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of
a security. COL Financial and/or its employees not involved in the preparation of this report may have investments in securities of derivatives of the companies
mentioned in this report and may trade them in ways different from those discussed in this report.

CO L R E S EAR C H T EAM

APRIL LYNN TAN, CFA

VP & HEAD OF RESEARCH
[email protected]

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA

DEPUTY HEAD OF RESEARCH SENIOR RESEARCH MANAGER SENIOR RESEARCH MANAGER
[email protected] [email protected] [email protected]

JOHN MARTIN LUCIANO, CFA FRANCES ROLFA NICOLAS JUSTIN RICHMOND CHENG
SENIOR RESEARCH ANALYST RESEARCH ANALYST RESEARCH ANALYST
[email protected] [email protected] [email protected]

ADRIAN ALEXANDER YU KERWIN MALCOLM CHAN

RESEARCH ANALYST RESEARCH ANALYST
[email protected] [email protected]

C OL F INANC IAL G R O UP, IN C.

2402-D EAST TOWER, PHILIPPINE STOCK EXCHANGE CENTRE,
EXCHANGE ROAD, ORTIGAS CENTER, PASIG CITY
PHILIPPINES 1605
TEL NO. +632 636-5411
FAX NO. +632 635-4632
WEBSITE: www.colfinancial.com

COL Financial Group, Inc. 8