Foreign research firm says RP stocks still undervalued

By Doris Dumlao Philippine Daily Inquirer Most Read MANILA, Philippines—The Philippine stock market remains undervalued and should benefit more from a domestic consumption and overseas Filipino workers’ remittance play in the years ahead, according to a research by foreign stock brokerage CLSA. In a report titled “People, People and More People” dated Aug. 23 and written by CLSA Asia-Pacific Markets head of research Alfred Dy, the country’s population base is seen swelling to 147 million by 2040 based on a conservative growth rate of 1.5 percent a year. But over the past 51 years, Dy noted that population grew at a faster rate of 2.4 percent a year. Assuming such rate is sustained, he said the population could more than double to 192 million in 2040. The Philippines has a population base of 94 million, which is already the 12th biggest in the world, Dy noted, adding that 47 percent of these people were below 21 years old. “Simply put, more people in the coming years should mean more consumption,” said Dy, who heads a team that was recently ranked as the number one All-Asia Research Team for 2010 by global finance magazine Institutional Investor. Based on this strategy, CLSA recommended a “buy” on nine publicly listed companies that it considered “winners” in a domestic consumption and OFW play: SM Investments Corp., Universal Robina Corp., Alliance Global Group Inc., Ayala Land Inc., Megaworld Corp., Filinvest Land Inc., Vista Land & Lifescapes Inc., Metrobank and Banco de Oro. UNIVERSAL ROBINA CORP.: Labor Productivity Benchmarks and International Gap Analysis (Labor Productivity Series) Consumption is the biggest component of the Philippines’ $160.9-billion gross domestic product (GDP), broken down as follows: consumption (70 percent), investments (16 percent), government (10 percent) and net exports (4 percent). “It is also worthy to highlight that the country’s per capita GDP and national savings rate have been rising since 1987,” Dy said. Per capita GDP was at $1,818 from only $536 in 1986. National savings rate, on the other hand, was now estimated at 30.3 percent from only 22.7 percent in 1986. “On both counts, these figures clearly are strong foundations for higher consumption ahead. Of course, more Filipinos in the coming years mean more supply of OFWs,” Dy said. “This scenario becomes more realistic given the aging population in the developed markets. Simply put, the aging population around the globe should create gaps in the global labor market, which would be filled by the OFWs,” he said. In the stock market, Dy said the best way to play the domestic consumption theme would be through SMIC, AGI and URC, respectively led by tycoons Henry Sy, Andrew Tan and John Gokongwei Jr. “Of course, more people in the coming years would require more housing units and the best way to play this theme would be via ALI, Megaworld, Vista Land, and Filinvest Land. In fact, we consider these property companies as quasi-consumer plays,” Dy said.

Published in Phillippine Daily Inquirer August 30, 2010.