WED 02 FEB 2022

Top Story:

CREIT: First RE linked REIT in the country (AS OF JAN 31, 2021)

DITO: Trading of DITO shares to resume today at 10:30am INDICES

BPI: FY21 earnings up 11.5% y/y; above COL estimates Close Points % YTD%

UBP: 4Q21 net income down 32.6% y/y; in line with estimates PSEi 7,361.65 109.68 1.51 3.36
All Shares 3,904.20 48.12 1.25 2.25
ACEN: ACEN signs partnership to expand power generation capacity in Financials 1,703.86 8.97 0.53 6.08
Vietnam Holding Firms 7,184.84 121.77 1.72 5.55
Industrial 10,841.53 224.55 2.12 4.20
Mining & Oil 10,285.12 96.10 0.94 7.12
Property 3,227.59 101.59 3.25 0.25
Other News: Services 1,950.30 -2.66 -0.14 -1.82

MEGA GLOBAL: Mega Global targets market listing 3 years from now Dow Jones 35,131.86 406 1.17 -3.32
S&P 500 4,515.55 83.70 1.89 -5.26
Banking Sector: Bank lending in December expands faster at 4.6% y/y
Nasdaq 14,239.88 469.31 3.41 -8.98
Economy: Domestic liquidity (M3) expands by 7.7% y/y in December
Economy: OCTA sees daily COVID cases falling to 5,000 by end-February INDEX GAINERS
Ticker Company Price %
ALI Ayala Land Inc 35.90 4.97
COVID-19 Update: JGS JG Summit Hldgs Inc 62.50 4.60
AP Aboitiz Power Coro 35.30 4.44
Total Cases Total Deaths Total Recoveries MER Manila Electric Co 335.00 3.72
BLOOM Bloomberry Resorts 6.27 3.13
Philippines 3,569,665 (+9,493) 54,054 (+51) 3,339,558 (+24,210)

USA 76,462,560 (+212,407) 913,177 (+2,495) 46,630,255 (+388,033) INDEX LOSERS

Ticker Company Price %
Worldwide 381,718,207 (+2,787,221) 5,703,317 (+10,796) 301,546,162 (+2,678,762) GLO Globe Telecom Inc 3110.00 -4.01
RRHI Robinsons Retail Hldgs Inc 56.40 -2.76
BPI Bnak of the Phil Islands 98.10 -1.21
TEL PLDT Inc 1834.00 -0.81
SMC San Miguel Corp 112.50 0.00
Market Summary:
TOP 5 MOST ACTIVE STOCKS
The local equities market rose on Monday following the government’s decision to ease Ticker Company Turnover
restrictions in Metro Manila. BDO BDO Unibank Inc 458,631,600
GLO Globe Telecom Inc 457,944,200
ALI Ayala Land Inc 366,879,300
The PSEi advanced by 109.68 points or 1.51% to close at 7,361.65. The top movers were
AP Aboitiz Power Corp 345,899,900
ALI (+4.97%), JGS (+4.60%), AP (+4.44%), MER (+3.72%), and BLOOM (+3.13%). On the MBT Metrobank 287,136,700
other hand, the only decliners were GLO (-4.01%), RRHI (-2.76%), BPI (-1.21%), and TEL
(-0.81%).

value turnover declined to Php7.4Bil from Friday’s Php8.0Bil. Meanwhile, net foreign
buying declined to Php166Mil from Php689Mil in the previous session.

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.
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Top Stories:

George Ching CREIT: First RE linked REIT in the country

Senior Research Manager
High growth potential through acquisitions. Using the proceeds from the IPO, CREIT
Citicore Energy REIT Corp.
N/A will add the 25.4-hectare Bulacan property and the 8-hectare South Cotabato property
N/A to its portfolio. Combined, the two properties will boost the total area of land under
its portfolio by 20.2% to 198.7 hectares. In terms of revenues, the two properties are
expected to generate Php300.7Mil in revenues for 2022E, representing 22.2% of CREIT’s
projected revenues. Other than the two properties, management said that the Citicore
Group may infuse additional projects currently under development into CREIT in the
future, assuming that they satisfy the investment criteria of the Company. Using the
proceeds of the IPO, the Citicore Group plans to develop a total of 1,500MW of solar
power generation capacity by 2025.

CREIT’s tenants supported by reliable operations and attractive offtake contracts.

CREIT’s highly visible and stable revenue stream hinges on the ability of its tenants to
fulfill their lease obligations. CREIT’s solar plant tenants have an average availability rate
of 98.3%, while the average performance ratio is at 83.3%. The tenants’ cash flow stream
is also highly secured as 95% of its capacity is contracted to the National Transmission
Corporation (TransCo) and contestable customers across a diverse range of industries,
with an average contract life of 7.3 years. Furthermore, the 22.3MW Clark Solar Plant
(representing 18% of the group’s installed capacity) is covered by FiT at around Php8/
kwh for 14 more years based on its offtake contract with TransCo, thereby reducing the
group’s market price risk going forward. Also, note that the solar power plants in the
Bulacan and South Cotabato properties, which will be acquired after the completion of
the IPO, are also FiT-eligible. This would bring the total installed capacity covered by FiT
to around 30% post-acquisition.

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Kerwin Malcolm Chan DITO: Trading of DITO shares to resume today at

Research Analyst
10:30am
DITO CME Holdings Corp.
N/A The PSE announced that it will lift the trading halt on DITO shares later today at 10:30am.
N/A This comes after DITO provided a full report explaining its decision to cancel the offering
and detailing the schedule of repayments for subscriptions. However, the Exchange
noted that the lifting of the trading halt should not be construed as an approval of the
SRO deferment. The PSE, as a self-regulatory organization, may also pursue action over
the incident to ensure full compliance with the applicable rules.

Exhibit 1: Schedule of Repayments for Subscriptions

source: DITO

After much consultation with the Underwriter (China Bank Capital) and the Parent
Company (Udenna Corporation), DITO decided that the best course of action for the
company and its minority shareholders, amid the less-than-ideal market conditions, is
to preserve status quo and defer the SRO. They explained that the Philippine financial
markets started the year on a negative note due to the sudden Omicron surge and
hawkish pronouncements of the Federal Reserve.

In the report, management also said that it hopes to pursue options of relaunching
the SRO, a public offer, or other fundraising means as soon as market conditions have
improved. In the meantime, Dito Telecommunity will use its US$4Bil worth of long-term
debt which it secured from various foreign lenders for its network expansion. Recall that
DITO is planning to spend US$1Bil every year on its mass scale rollout for the next five
years. (Source: DITO, PSE, ABS-CBN News)

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John Martin Luciano, CFA BPI: FY21 earnings up 11.5% y/y; above COL
Senior Research Analyst estimates
Bank of the Phil Islands
BUY Lower provisions and higher revenues drive earnings growth. BPI’s net income during
Php112.00 the fourth quarter jumped 51.2% y/y to Php6.4Bil. Growth was mainly driven by lower
provisions which declined by -60.5% y/y. Meanwhile, revenues also expanded by 3.3% y/y
with net interest income rising by 2.2% y/y on the back of higher volume. This brought the
full-year earnings to Php23.9Bil, up 11.5% y/y. This ended slightly above our expectations
at 104.4%, but in line with consensus forecast at 100.1%. Earnings outperformed our
forecast on the back of stronger-than-expected non-interest income and lower-than-
expected provisions. The FY21 earnings translate to an ROE of 8.3%.

Exhibit 1: Results Summary

source: BPI, COL sstimates

Net interest income expands on higher volume. Net interest income in the fourth
quarter rose by 2.2% y/y to Php18.4Bil. This is a turnaround from the 5.6% decline in
the first nine months. Growth was primarily driven by higher volume as total assets rose
by 8.4% y/y. Meanwhile, the bank’s loan portfolio expanded by 4.9% y/y on the back
of higher mortgage, credit card, and microfinance loans. This is faster than the 0.9%
y/y growth seen in 3Q21. We expect loan demand to continue recovering as economic
growth rebounds. On the other hand, we estimate that net interest margin declined by
~11 bps y/y to 3.27%. Nevertheless, on a sequential basis, we estimate that net interest
margin ended slightly higher by 3 bps. We expect the rising interest rate environment and
faster loan growth recovery to support margin expansion going forward. For FY21, net
interest income reached Php69.6Bil, down 3.7% y/y. This ended in line with our forecast
at 99.9% of our full-year estimate.

Non-interest income rises. Non-interest income in the fourth quarter rose by 6.4%
y/y to Php7.4Bil. This brought non-interest income for the full year to Php27.8Bil, down
5.5% y/y. While the breakdown has not yet been disclosed, the bank mentioned that the
decline in trading income was tempered by a 23.2% boost in fee income. Compared to
our forecast, the full-year non-interest income ended above at 104.1% of our target.

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Provisions decline amid improving asset quality. Provisions during the fourth quarter
fell 60.5% y/y to Php2.9Bil. This brought the full year total to Php13.1Bil, down 53.1%
y/y. This translates to credit cost of 91 bps, lower than the previous year’s 194 bps. This
is within the bank’s guidance of 90-100 bps for 2021. Compared to our forecast, the
full-year provisions were lower than expected at 91.9% of our target. Going forward, we
expect provisions to further decline amid improving asset quality. Note that asset quality
sustained its improvement as NPL ratio further declined to 2.49% in 4Q21 from 2.73% in
3Q21. Meanwhile, the bank’s NPL coverage remained high, increasing to 136.1% from
130.7% in the previous quarter.

Reiterate BUY. We reiterate our BUY rating on BPI with a FV estimate of Php112/sh
based on a 1.60X 2022E P/BV. We expect BPI to be one of the major beneficiaries of the
economic growth after the effect of pandemic eases given its extensive branch network,
substantial low-cost deposit (CASA ratio of 77%), and high CET1 ratio (15.8% vs the BSP’s
10.5% minimum). Moreover, the bank has also been front-loading its provisions which
should allow the bank to forward quicker once economic growth resumes.

John Martin Luciano, CFA

UBP: 4Q21 net income down 32.6% y/y; in line
Senior Research Analyst
with estimates
Union Bank of the Philippines
HOLD Higher provisions drag 4Q21 earnings. UBP’s 4Q21 net income declined by 32.6% y/y
Php66.40 to Php1.9Bil. This was mainly caused by higher provisions which increased by 82% y/y to
Php1.7Bil. Nevertheless, the full-year earnings ended higher by 8.9% y/y to Php12.6Bil.
This was also in line with COL and consensus forecasts at 102.0% and 100.1%, respectively.
Earnings met our forecast as the higher-than-expected provisions was offset by stronger-
than-expected non-interest income. Meanwhile, net interest income in the fourth quarter
expanded by 6.8% y/y to Php7.8Bil, driven by higher volume and net interest margin. The
full-year results translate to an ROE of 13.5% (adjusted for goodwill).

Exhibit 1: Results Summary

source: UBP, COL estimates

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Faster loan growth and higher margins drive net interest income growth. Net interest
income during the fourth quarter rose by 6.8% y/y to Php7.8Bil. This is faster than the 2.7%
growth seen in the first nine months. The acceleration was driven by both higher volume
and net interest margin. In particular, the bank’s loan portfolio expanded by 6.0% y/y and
5.3% q/q to Php359.8Bil. Likewise, we estimate that net interest margin widened by 9 bps
y/y and 8 bps q/q to 4.17%. The sequential improvement was led by both higher asset
yield and lower funding cost. In our view, the increase in asset yield was likely driven by
the acceleration in loan growth while the decline in funding cost was likely caused by the
robust growth in CASA deposits (+32% y/y). We expect net interest margin improvement
to be sustained in 2022 as loan growth continues to recover amid steady funding cost.
More importantly, UBP’s acquisition of the retail segment of Citi will also increase the
bank’s margins once it is consolidated as this will boost the share of retail loans to ~46%
from the current ~36%. For FY20, net interest income reached Php29.8Bil, up 3.8% y/y.
This ended in line with our forecast, accounting for 99.8% of our full-year target.

Non-interest income increases sequentially. Non-interest income during the fourth

quarter declined 2.9% y/y to Php2.7Bil. However, note that non-interest income jumped
34.1% q/q. While the breakdown has not yet been disclosed, we think the sequential
improvement was driven by robust trading gains and fees. This brought non-interest
income for the full year to Php15.3Bil, up 14.4% y/y. This outperformed our forecast,
representing for 106.9% of our full-year target.

Provisions rose amid slightly higher NPL ratio. Provisions during the fourth quarter
jumped to Php1.7Bil from Php924Mil in the same quarter last year. This also increased
by 57.8% q/q. This brought the full-year provisions lower by 30.8% y/y to Php5.8Bil,
translating to credit cost of 166 bps, of which 48 bps have been booked in the fourth
quarter. Note that this is lower than the 229 bps booked in the full-year 2020. However,
provisions were above our forecast at 111.1% of our full-year target. In terms of asset
quality, the bank’s NPL ratio slightly increased to 5.0% from 4.9% in the previous quarter.
This is in line with the bank’s expectations that NPL ratio will settle at 4.9%-5.1% by the
end of the year. Going forward, we expect asset quality to continue improving as the
economy continues to reopen.

Maintain HOLD. We currently have a HOLD rating on UBP with a FV estimate of Php66.4/
sh based on a 1.0X 2022E P/BV (adjusted for goodwill). We expect loan demand to
continue recovering given the higher vaccination rate and declining COVID-19 cases.
The easing COVID-19 restrictions also bodes well for the outlook on asset quality as
more businesses are permitted to resume operations and operate at a higher capacity.
However, we believe that valuations are already expensive. At its current price, the bank
is already trading at 1.5X, the highest among all the banks

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George Ching ACEN: ACEN signs partnership to expand power

Senior Research Manager generation capacity in Vietnam
AC Energy Corporation
HOLD ACEN signs partnership to expand power generation capacity in Vietnam. ACEN
Php5.63 announced today that through its wholly-owned subsidiary, AC Energy Vietnam
Investments Pte. Ltd. (“ACEV”), it has signed an agreement to form a strategic partnership
with Super Energy Corporation Public Company Limited (“SUPER”), to develop, own
and operate renewable energy projects across ASEAN. ACEV signed a share purchase
agreement to acquire a 49% interest of Solar NT, owned by Super. SUPER is a Thai
renewable energy developer and investor. The transaction will be via secondary shares
acquisition for a total consideration of US$ 165 million. Post-restructuring, Solar NT
will own and operate nine solar power plants across Vietnam with a total capacity of
approximately 837MW.

The transaction will increase ACEN’s attributable capacity by 410MW, representing ~

14% of ACEN’s existing capacity. The impact of this transaction of ACEN’s profitability
still cannot be determined given ACEN has yet to disclose the details of the 9 solar
projects of Solar NT.

Reiterate HOLD rating. We have a HOLD rating on ACEN with a FV estimate of Php5.63/
sh. We continue to like ACEN given the rapid growth of its power generation portfolio
and its focus on renewable energy. From ~2,900MW currently, the company plans to
grow its attributable capacity to 5,000MW by FY25, and the capital raised from the recent
FOO should help the company achieve this goal. However, valuations are no longer
attractive as the positives are priced in. At Php9.54/sh, ACEN is trading at 38X FY22E P/E,
which is significantly above the 17X average 22E P/E of local power companies.

Research Analysts Other News:

John Martin Luciano, CFA MEGA GLOBAL: Mega Global targets market listing 3 years
Frances Rolfa Nicolas from now
Justin Richmond Cheng
Adrian Alexander Yu Mega Global Corp. said it is looking to go through an initial public offering on its 50th
Kerwin Malcolm Chan year anniversary, which is three years from now. The local sardine manufacturer sees
Denise Joaquin this as an avenue for future growth and will help extend Mega’s legacy. Mega sardines
foresees a healthy industry growth given the affordability of its staple product. It also
expects healthy competition from CNPF’s acquisition of Ligo as this would promote
more innovation. (Source: BusinessWorld)

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Banking Sector: Bank lending in December expands faster at

4.6% y/y

Bank lending in December rose 4.6% y/y, faster than the 4.0% y/y expansion in
November. According to the BSP, credit activity continued to improve due to a more
favorable economic outlook from businesses and households amid the sustained rollout
of COVID-19 vaccines and the easing of community restrictions during the month.
Broken down, outstanding loans for production activities grew by 5.8% y/y (vs +5.4%
y/y in November). This driven mainly by the expansion in loans for real estate activities
(+9.1% y/y); information and communication (+27.3% y/y); manufacturing (+9.4% y/y);
financial and insurance activities (+9.9% y/y); and transportation and storage (+9.1% y/y).
Meanwhile, consumer loans to residents fell at a slower rate of 5.7% y/y (vs -7.1% y/y in
November) amid the increase in credit card loans. (Source: BSP)

Economy: Domestic liquidity (M3) expands by 7.7% y/y in

December

Preliminary data from the BSP showed that domestic liquidity (M3) expanded by 7.7%
y/y to Php15.3Tril in December 2021, slower than the 8.3% expansion in the previous
month. Domestic claims grew by 8.0% in December from 8.1% in November mainly
due to the sustained expansion in net claims on the central government as well as the
continued improvement in bank lending to the private sector. Moreover, net claims on
the central government grew by 21.7% in December from 24.0% in November, on the
back of sustained borrowings by the National Government. Meanwhile, net foreign assets
(NFA) in peso terms expanded by 6.5% y/y in December, from 8.8% in November. The
NFA position of BSP reflected the decline in the country’s gross international reserves,
while the NFA of banks increased as banks’ foreign assets rose on account of higher loans
with non-resident banks. (source: BSP)

Economy: OCTA sees daily COVID cases falling to 5,000 by end-

February

According to OCTA Research, daily coronavirus infections in the country could fall to
about 5,000 by late February. The group cites the sharp decline in South Africa and now
in Metro Manila as infections continue to decline in most of Luzon and in some parts
of Visayas and Mindanao such as Cebu, Tacloban, Iloilo and Davao. About 28.8% of the
31,053 samples on January 30 tested positive for COVID-19, well above the 5% threshold
set by WHO. The ICU utilization rate in the country stands at 46%, with Metro Manila at
40%. The capital region has an average daily attack rate of 19.6% and is expected to be
classified as “low-risk” by mid-February. (Source: BusinessWorld)

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Changes in Shareholdings

Date of Acquired or Price per

Stock Volume Person (Designation)
Disclosure Disposed share
Lance Y. Gokongwei
02-Feb RLC 1,666,437 A n/a (Chairman & Director)
acquired via estate settlement
Robina Gokongwei-Pe
02-Feb RLC 1,666,437 A n/a (Director)
acquired via estate settlement
Source: PSE

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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

FIRST VICE PRESIDENT & CHIEF EQUITY STRATEGIST
[email protected]

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA

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

ADRIAN ALEXANDER YU JOHN MARTIN LUCIANO, CFA JUSTIN RICHMOND CHENG, CFA
SENIOR EQUITY STRATEGIST SENIOR RESEARCH ANALYST SENIOR RESEARCH ANALYST
[email protected] [email protected] [email protected]

FRANCES ROLFA NICOLAS KERWIN MALCOLM CHAN DENISE JOAQUIN

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

CO L F IN ANC IAL G R O UP, IN C.

24/F EAST TOWER, TEKTITE TOWERS,
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. 11