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Above
Inline
Below
Median
'15E EPS
growth
1Q
19.0%
41.4%
39.7%
17.1%
2Q
23.2%
37.5%
39.3%
8.8%
3Q
23.2%
42.9%
33.9%
7.5%
2000
Source: Bloomberg
4
45
2015
2014
2013
2012
6.8%
2011
2010
10
2009
12
2008
14
2007
16
2006
GDP growth
2005
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
65
60
55
50
49.7
40
35
2016
Four potential
rate hikes of
25bps each
DECEMBER 2015
25 bps rate hike
DECEMBER 2015
Deposit rate cut 10
bps, bond purchase
extended
6 mos.
105
+35.7%
100
95
550
500
90
450
85
400
80
70
2010
-35.0%
350
75
2011
2012
Source: Bloomberg
2013
2014
2015
300
2010
2011
2012
2013
2014
2015
USA
Russia
Canada
Europe
USA
Africa
Kazakhstan
Middle
East
China
India
Philippines
S America
Australia
NZ
71%
Value of
commodity
exports (09-10
to 12-13)
% of developing
countries that derive
>60% of export from
commodities
85%
-35%
Average drop in
commodity
prices since 11
% of least developed
countries that derive
>60% of exports from
commodities
-74%
*2012-13
**2014
Source: UNCTAD, IMF (for Russia only), COL estimates
CA/GDP**
-4.2%
3.1%
-1.4%
2.1%
-2.1%
-5.4%
-5.7%
-3.0%
7.1%
4.4%
3.5%
Month
January
February
March
April
May
June
July
August
September
October
November
December
Peso Depreciation
Source: BSP
2009
0.1%
4.9%
3.1%
2.2%
3.7%
3.3%
9.3%
2.8%
8.6%
6.7%
11.3%
11.4%
15.0%
2015
0.5%
4.2%
11.3%
5.1%
5.8%
6.1%
0.5%
-0.6%
4.3%
0.2%
4.6%
61%
OFWs deployed
in 14
(1.9 Mil land
based)
% of deployed land
based OFWs going to
the Middle East
23%
10%
CA/GDP of Saudi
Arabia (14)
Share of OFW
remittances from the
Middle East
Saudi Arabia
abandons its
currency peg
24%
Commodity net
export of Saudi
Arabia (%GDP, 13)
Peso is weakening . . .
Peso exchange rate
48
47.78
47
46
45
44
43
42
41
40
40.581
2011
Source: Bloomberg
2012
2013
2014
2015
-5.0
6.60
Jan-16
Dec-15
Nov-15
Oct-15
6.20
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
0.5
1.0
0.7
1.3
1.1
0.2
2.4
1.5
1.9
1.7
7.4
20.0
Feb-15
3Q15
1Q15
3Q14
1Q14
3Q13
1Q13
4.7
10.0
14.5
BoP/GDP (%)
Jan-15
-7.0
-10.0
3Q12
1Q12
3.3
0.7
2.2
0.1
0.0
3Q11
7.2
15.0
1Q11
7.3
10.0
3Q10
1Q10
4.6
5.4
4.1
2.8
4.3
1.2
5.0
3Q09
1Q09
6.70
6.58
6.50
6.40
6.30
6.21
6.10
6.00
5.00
4.42%
4.50
4.00
3.50
3.00
2.50
2013
2014
Source: Bloomberg
2015
2016
Peso vs PSEi
9000
54
8000
52
7000
50
6000
48
5000
12
10
46
Source: Bloomberg
2016
2015
2014
2013
2012
2011
2
2010
2016
2015
2014
2013
2012
Php:US$
2009
PSEi
2011
2010
2009
40
2008
1000
2007
42
2006
2000
2008
3000
2007
44
2006
4000
34%
26%
22%
Source: Pulse Asia Nov 2015 presidential candidate preference survey results
11%
105
100
95
90
85
80
75
70
2015
2015
2015
Philippines
2015
2015
Indonesia
Source: Bloomberg
2015
2015
2015
Thailand
2015
2016
Malaysia
2013
OFW Remittances
25,000
18,900
28,900
24,768
2012
24,768
2011
24,768
2010
24,348
15,305
13,450
22,984
21,391
10,000
20,117
20,000
10,058
30,000
12,074
40,000
21,200
50,000
18,763
Combined OFW
remittances & BPO
revenues can still grow by
8.3% in 2016E and 7.8% in
2017E
+185%
Equivalent to 11.8% of
consumer spending
OFW remittances increased
by 185% in dollar terms but
only 126% in peso terms the
last 10 years
+126%
Cory Aquino
Ave:4.2%
1986
1988
1990
Ramos
Ave:3.6%
1992
1994
1996
1998
2000
PNoy
Ave:5.3%
Arroyo
Ave:4.3%
Estrada
Ave:4.5%
2002
2004
2006
2008
2010
2012
2014
48.2
45
40
35
30
2008
2009
Source: Bloomberg
2010
2011
2012
2013
2014
2015
Government debt/GDP
65
74
60
72
70
68
66
64
62
60
Source: Bloomberg
68.1
55
50
45
40
45.4
Most leveraged
companies have defensive
businesses
Minimal unhedged US
dollar debt exposure
1.3
1.0
1.0
1.1
1.0
1.1
0.9
Unhedged
US$ Debt
(US$Mil)
700
262
-
% of total
debt
100.0%
23.4%
-
Risks
Steep decline
Significant gains
Long duration
Nobody knows the
bottom
Recommended strategy
1. Invest only LT money Bear markets take long to finish.
2. Dont use margin Using margin exposes you to the risk of
a margin call, which in turn forces you to sell at a low price.
3. Spread out your buying Nobody knows when or where
the bottom will be. Deploy your capital using peso cost
averaging over 18 months to improve your average cost.
4. Set conservative buying prices Remember its a buyers
market. Theres no need to be aggressive.
Global
Historical
Average*
Shortest &
Shallowest**
Longest &
Deepest**
Peak to trough
55.9%
22.5%
84.8%
40 months
5 months
153 months
Duration
Global
Historical
Average
Asian
Financial
Crisis
Global
Financial
Crisis
Today
Peak to trough
55.9%
71.6%
56.8%
22.6%
NA
2/97-10/01
10/07- 10/08
4/15 to ?
40 months
56 months
12 months
9 months
Date
Duration
Source: This time its different by Reinhart & Rogoff, COL estimates
Recommended strategy
5. Be defensive - We recommend buying a basket of more
defensive companies that have strong balance sheets. You
can also choose to buy an index fund which is
automatically diversified and less volatile, or you can
combine an index fund with a few stock picks.
Stock picks
Power Sector
Stock picks
Property Sector
Stock picks
Property Sector
One of the largest property
companies in the country
Due to significant expansion,
leasing businesses now
account for 43% of EBIT
Stock picks
Property Sector
Most defensive property
company in the Philippines
deriving 78.6% of EBT from rental
income, predominantly from
malls which is the most resilient
Net D/E is only 0.47X
SMPH (Php19.18, FV: Php21.70)
Stock picks
Property Sector
Stock picks
Consumer Sector
Stock picks
Consumer Sector
Stock
Price
FV
Power
FGEN
SMPH
ALI
MEG
RLC
DNL
CNPF**
18.24
19.18
27.95
3.17
23.05
7.10
15.12
32.70
21.70
41.67
5.58
29.60
8.30
21.50
Properties*
Consumer
28.40
18.90
36.20
4.70
25.70
7.20
17.20
16.50
12.22
24.00
3.05
19.50
6.60
14.28
XPEIF
Current
Level
6,135.38
4.091
3.729
Recommended strategy
5. Be defensive - We recommend buying a basket of more
defensive companies that have strong balance sheets. You
can also choose to buy an index fund which is
automatically diversified and less volatile, or you can
combine an index fund with a few stock picks.
6. Be mentally prepared to see losses in the short term This
is normal while the market is trending lower.
9.20%
8.00%
5.50%
6.00%
4.00%
0.90%
2.00%
0.00%
-2.00%
-4.00%
Stayed the
course
-6.00%
Missed best
10 days
Missed best
30 days
Missed best
60 days
Missed best
90 days
-4.40%
-8.00%
-10.00%
Source: Davis Advisors
-8.60%
44
45