By Jesi Bondoc RFP®, CIS
The economic slowdown being battled by developed countries in the West has made most investors in those countries veer away from the stock market. Ongoing crisis on debt, revenue and unemployment have been plaguing their economies for some years now making their stock market less and less attractive for investors. Interestingly, the Philippines has been showing resiliency over the global crisis and continue to shed light and hope for people who want to make money from the stock market.
Backed by strong fundamentals, the Philippines is slowly gaining the attention of both local and foreign investors as a haven for capital growth. The economic outlook in our country remains rosy despite the lingering threat in the West. The prospect of improving GDP, strong consumption supported by government spending, better credit rating, rising OFW remittances and continuing growth in the BPO sector are some of the reasons why investors cash in their money in the Philippine stock market.
Understanding the sectors and industries that will benefit from the Philippine growth can assist you in choosing the right stock that will meet your investment goals.
We offer you some sectors that have strong fundamentals that we feel will benefit from the country’s domestic demand growth as well as the opportunities and threats that can affect their performances:
Opportunities: Property sector continues to enjoy the demand coming from the booming BPO industry and remittances from OFWs on which a sizable portion is being spent on property investments. Additionally, the lower and more relaxed mortgage rates from banks and lending institutions are making property purchases more affordable.
Threats: Oversupply is always a concern in the property sector. This threat however has yet to be seen as more and more developers still launch projects continuously indicating their confidence in the property market.
Megaworld Corp. (MEG ) – Megaworld Corporation announced that its 1H 2012 core net income has reached P3.69B, which is 15% higher from their previous year’s performance. The continued booking and leasing growth of MEG plus its active positioning to service the growing BPO sector makes this stock attractive and encouraging. The stock’s current price moving between P2.20- 2.30 is still trading at a discount from its fair value.
Filinvest Land Inc. (FLI) – Filinvest reported that its 2012 first half income grew by 19%, which is better than expected. FLI’s move to lower their exposure to in-house financing by encouraging buyers to seek financing from banks that offer low interest rates can increase their available cash that can be used in their capital expenditures for other projects. With FLI targeting to launch 20% more projects it had last year and backed by strong performance for 1H12, this stock remains attractive.
Opportunities: With attractive growth prospect and healthy balance sheet, this sector has potential in trading at a higher level. Banks’ lower non performing loans and prospects of increasing lending growth are seen to propel and sustain the upside performance of this sector. With the low interest rate environment in the country, loan growth should remain strong.
Threats: The country’s GDP growth should be sustained to support bank’s lending growth. Another round of lowering policy rates may drive down the sector’s margin further.
Metrobank (MBT ) – MBT reported P7.4 B in consolidated net income for the first half of 2012, representing a 21% growth from the P6.1B earned in the same period last year. Despite lower trading gains, MBT has shown resiliency and was able to sustain its profitability. This company is seen to be in a good position to benefit from the growing lending demand because of its size, liquidity and stable balance sheet.
East West Banking Corporation (EW ) – The bank’s loan portfolio improved by 24% majority of which is coming from their consumer loans. With a sustained domestic demand and strong consumer spending, EW is poised for sustainable upside performance given its exposure to consumer loans. EW’s aggressive expansion plans are also seen as a good indicator of the bank’s commitment and expectation to service more clients.
Opportunities: Although this sector has been lagging behind YTD in terms of performance compared to other sectors, the growth opportunity is still very clear. The demand in energy especially in the Mindanao region can boost this sector’s performance in the future.
Threats: Delays in the construction of power plants caused by both internal and external factors.
Energy Development Corp. (EDC ) – Geothermal leader EDC posted a net income of P5.7B for the first half of 2012, reversing the P2.3B net loss registered for the same period last year. Despite the delays in the rehabilitation of its Bacman plant, EDC is expected to generate strong returns and cash flow from this project once fully operational. Rolling out of its Burgos wind project is also expected to further improve their portfolio’s performance. Because of EDC’s size and active participation on renewable energy, this company is favored with an upward bias in the long term.
Note that the analysis given is intended as a guide and not a silver bullet approach in making money from the stock market. A careful study of one’s investment objective, expertise, time horizon and liquidity is still the most prudent way to invest in the stock market. Educate yourself and ask assistance from your friendly stock brokers before cashing in your money in the stock market. Happy investing!