Unicapital Group, a prominent independent financial services provider and investment house, is bullish in its outlook for the Philippine equities market and has recommended for investors to take an “overweight” position in, among others, SM Prime Holdings, AREIT Inc., and Metropolitan Bank & Trust Co.
In the securities brokerage arm’s “Outlook 2024: Picking Up Steam” note, Unicapital highlighted a favorable view of the stock market and the property sector, with the anticipated reduction in interest rates to further fuel improvements in the country’s macroeconomic landscape.
Unicapital expects rising consumer confidence and moderating inflation to drive positive developments in the consumer sector while faster loan growth and stable asset quality should present undervalued bank stocks as compelling investment opportunities.
Meanwhile, the power sector is likely to benefit from reduced capital costs for expansion while the resurgence of travel to pre-pandemic levels is expected to boost the tourism and gaming industries, it added.
The investment report covers 18 companies across the banking, property, real estate investment trust, power, and gaming sectors. SM Prime, AREIT and Metrobank were particularly highlighted.
It noted SM Prime trades at a 45 percent discount to its 1-year forward net asset value despite the highest return on equity among peers while AREIT enjoys a 1-year forward yield of 6.2 percent and total return potential of 18 percent comprising 11.6 percent share price upside plus 6.2 percent yield this year.
Unicapital said its overweight view of Metrobank is based on its high dividend yield and high earnings growth among banks, making it a prime candidate for more re-rating.
The investment house underscored the positive outlook of the cited sectors and stocks, suggesting the investors should consider these opportunities as they navigate the improving economic environment.
Unicapital anticipates substantial improvement in the macroeconomic environment seen boosting business activity and stimulating economic growth.
The report suggests that a notable easing of key policy rates is imminent “as early as the next Monetary Board meeting in October,” driven by a decline in inflation rates.
Wendy B. Estacio-Cruz, Unicapital head of research, said the inflation rate is anticipated to drop further in the coming months due to the recent rice tariff reduction to 15 percent from 35 percent. She expects the central bank to deliver at least another 25 basis-point cut in the overnight rates before 2024 ends.
The investment house also forecasts modest gross domestic product growth, estimating an increase of 5.8 percent to 6.0 percent this year, near the low end of the government’s 6.0 percent to 7.0 percent target range.
“This is a clear, visible silver lining… as we move towards stabilization, recovery, and sustained growth,” said Jaime Martirez, president and chief executive officer at Unicapital.
Unicapital projects the Philippine Stock Exchange Index, the key barometer of the local stock market’s performance, rising to the 7000 level by year-end, down from its previous forecast of 7,200. The report also predicts an EPS growth rate of 11 percent for 2024, with a P/E ratio of 12.6 times.
“The equity capital markets have always been highly dependent on ever-changing local and global market and economic conditions. Our house view’s findings for the market all point to a gradual, but eventual recovery back to pre-pandemic level,” said Unicapital Securities president and CEO Ben Thomas Panares.
