Stock Market Weekly: Short week, slow market

WHAT HAPPENED LAST WEEK

Last week, the local bourse was flat, higher by only 0.31% w-o-w to close at 6,903.53 (+21.6 pts). The PSEi traded mostly in the red, tracking foreign peers amid the shortened trading week. The benchmark index recovered on Wednesday on the back of late-buying activities and quarter-end window-dressing.

Top index performers were CNPF (+13.31%), CNVRG (+6.52%), and MONDE (+6.02%), while index laggards were JFC (-4.39%), DMC (-2.91%), and BPI (-2.80%). The index breadth was positive with 10 losers versus 19 gainers. Average Daily Turnover Value was PHP 5.3 billion. Foreigners were net sellers by PHP 2.4 billion.

WHAT TO EXPECT THIS WEEK

This week, we expect the PSEi to trade sideways with a downward bias ahead of major economic data releases and as speeches from key Fed officials take center stage. Investors will price in March 2024 local inflation, which is expected to come in higher at 3.8% from February 2024’s 3.4%. In addition, the US unemployment rate in March 2024 will also be released – with consensus estimates at 3.9% (February: 3.9%).

Nevertheless, downward pressure may be capped as several Fed officials, including Chairman Jerome Powell, will pick up from the prior month’s positive guidance on the direction of interest rates and the US economy.

Finally, market participants will also digest rising oil prices with Brent and West Texas Intermediate (WTI) hovering at elevated levels – at USD 87/barrel and USD 83/barrel, respectively. These are expected to result in mixed pump price movements, with diesel and kerosene rolling back by PHP 0.55/PHP 0.75 and PHP 0.80/PHP 1.20, respectively. Meanwhile, gasoline pump prices are seen to rise by PHP 0.30/PHP 0.50 per liter next week.

Resistance: 7,000/7,100

Support: 6,900/6,700

ANALYSIS

The PSEi inched up by +0.31% w-o-w to close at 6,903.53 amid the shortened trading week. The benchmark index traded sideways, hovering close to the 6,900 resistance-turned-support, indicating a period of indecision for the market. Positive momentum is still intact as the PSEi continued to trade above key moving averages (50-day, 100-day, and 200-day). If the bulls continue to dominate, the PSEi could once again retest next resistance levels around 7,000 and 7,100. Otherwise, if the bears take over, it can retrace next support levels at 6,900 to 6,700.

STOCK CALLS FOR THE WEEK

DoubleDragon Properties Corp.* BUY ON BREAKOUT | CONSENSUS TARGET PRICE: NO DATA

DoubleDragon Corp. (DD) announced that its subsidiary, Hotel101 Global, is on track to develop its Madrid hotel project, targeted to be completed by 4Q25. Located on a 6,593 square-meter (sqm) property along Avenida Fuerzas Armadas, Valdebebas, Madrid, Spain, the 680-room Hotel101-Madrid will commence construction in April 2024, led by Ferrovial Construction Group, one of Spain’s largest construction firms. Once completed, the hotel is slated to be one of the top five hotels in Madrid, Spain. Moreover, DD highlighted the strategic timing of the hotel’s opening, coinciding with the start of the Madrid F1 Grand Prix, owing to its proximity to the venue.

In terms of technicals, DD has been trading within an upward channel since early-2023 to register a fresh 52-week high at P9.19, following a breakout from its consolidation pattern. At current levels, the stock is trading above its long-term moving average (200-day) but below the shorter-term averages (20-day, 50-day, and 100-day). The current retracement in the share price presents an opportunity to enter or increase exposure, particularly with the RSI hovering around 38, indicating near oversold conditions. Therefore, considering accumulation around PHP 8.0/PHP 7.95 levels is advisable, given that the stock continues to adhere to its upward channel movement. Set stop-limit orders below PHP 7.30 and take profits at PHP 9.15.

DigiPlus Interactive Corp.* BUY ON PULLBACKS | CONSENSUS TARGET PRICE: NO DATA

DigiPlus Interactive Corp. (PLUS) surged to a new 52-week high at PHP 11.18, surpassing our technical target price of PHP 9.26 on the back of exponential gross gaming revenue growth for its online gaming business. PLUS’ FY23 net income surged by almost six-fold y-o-y to PHP 4.1 billion (FY22: PHP 686.9m) on the back of sustained growth of its digital retail segment, boosted by the introduction of new platforms and cost efficiencies. Meanwhile, revenues came in at PHP 27.3bn (FY22: PHP 8.91bn) on higher user traffic in its flagship bingo platform BingoPlus and sportsbook ArenaPlus, translating to an EBITDA of PHP 4.8bn. In 4Q23 alone, net income grew to PHP 2.0bn (4Q22: PHP 0.51m) boosted by the full quarter impact of the introduction of new digital offerings such as Color Game, a live streaming specialty game that mirrors the traditional Filipino carnival game.

On the technical front, PLUS broke above its consolidation pattern to post a new 52-week high at PHP 11.18, surpassing our last target price of PHP 9.26. The counter is currently above key moving averages (50-day, 100-day, and 200-day) with RSI at overbought levels at 88, signaling strong upward momentum but a possibility of a retracement. Thus, it is advisable to accumulate on pullbacks near psychological support at PHP 10.5/PHP 10.0 is advisable. Set stop-limit orders 8% below your average price.

Converge ICT Solutions Inc.* BUY ON PULLBACKS | FMSEC TARGET PRICE: PHP 13.30

Converge ICT Solutions, Inc. (CNVRG) and DITO Telecommunity Corp. (DITO Tel), the telecommunications arm of DITO CME Holdings Corp. (DITO), announced that they are signing a landmark Master Facilities Provisioning Agreement (MFPA) that will allow cross-utilization of select terrestrial and submarine fiber optic cable assets under mutually agreed terms and conditions. In our recent company report, we highlight that the MFPA will result in expanded coverage and increased redundancies, while generating cost savings and reducing capex requirements.

This will effectively allow CNVRG to shift their focus to customer acquisition and retention to help them achieve their four-year target of 4m subscribers. In addition, we continue to forecast CNVRG with the highest core income growth among telcos under our coverage at 7.3%/7.1% earnings growth in FY24F/25F. Traders can accumulate on pullbacks at identified support around PHP 9.00. Take profits at PHP 10.35 and set stop-limit orders below P8.28. For long-term investors, we have a target price for CNVRG at PHP 13.30.

KEY DATA RELEASES

1.) PH S&P Manufacturing PMI for March 2024 on Monday, April 1, 2024 (Est: 51.1; February 2024: 51).

2.) US ISM Manufacturing PMI for March 2024 on Monday, April 1, 2024 (Est: 47.8; February 2024: 48.3).

3.) PH PPI for March 2024 on Tuesday, April 2, 2024 (Est: 0.2%; February 2024: -1%).

4.) US Job Openings for March 2024 on Tuesday, April 2, 2024 (Est: 8.8 million; February 2024: 8.9 million).

5.) US ISM Services PMI for March 2024 on Wednesday, April 3, 2024 (Est: 52.4; February 2024: 52.6).

6.) US Initial Jobless Claims as of 29 March 2024 on Thursday, April 4, 2024 (Est: 214k; Prior: 210k).

7.) PH CPI Year-on-Year for March 2024 on Friday, April 5, 2024 (Est: 3.8%; February 2024: 3.4%).

8.) US Non-farm Payrolls for March 2024 on Friday, April 5, 2024 (Est: 200k; February 2024: 275,000).

9.) US Unemployment Rate in March 2024 on Friday, April 5, 2024 (Est: 3.9%; February 2024: 3.9%).