WHAT HAPPENED LAST WEEK

Last week, the Philippine Stock Exchange index (PSEi) rose by 0.33% week-over-week to close at 6,942.21 (+22.62 points). The market pulled back early in the week amid the hotter-than-expected February 2024 Philippine consumer price index (CPI) of +3.4% year-over-year (estimates: +3.0% year-over-year; January 2024: 2.8% year-over-year).

Nevertheless, losses were capped as bargain hunters emerged, following three consecutive days of market decline. The local bourse inched higher mid-week, buoyed by the positive sentiment from foreign markets, as investors were bullish on the comments of US Fed Chair Jerome Powell, who hinted at the possibility of rate cuts this year.

Furthermore, on the local front, investors also assessed the Philippine unemployment rate for January of 4.5% (vs. December 2023: 3.1%) and the rise in bank loans by 7.8% year-over-year (vs. Dec 2023: 7.1% year-over-year).

WHAT TO EXPECT THIS WEEK

This week, we expect the market to pull back as the PSEi’s technical indicator RSI hovers near overbought conditions at 60.5. However, the market may take its cue from the mixed US labor market, with a higher-than-expected US unemployment rate (February 2024: 3.9%; estimates: 3.7%), and an increase in nonfarm payrolls (February 2024: +275k; estimates: +200k), boosting the odds of the Fed cutting rates by June 2024.

Furthermore, investors will keep an eye on US CPI (estimates: 3.1%; February 2024: 3.1%), US initial jobless claims, and Philippine overseas cash remittances (estimates: 2.8%; December 2023: 3.8%).

Investors may also position ahead of the FTSE Global Equity Index rebalancing, with several names to be removed and downgraded effective after the close of business on Friday, March 15, 2024 (i.e., Monday, March 18, 2024).

Resistance: 7,000/7,100

Support: 6,900/6,700

ANALYSIS

The PSEi rose by +0.33% week-over-week to end at 6,942.21 (+22.62 points). The benchmark index once again retested the 7,000 resistance level, reaching an intraday high of 7,021. After failing to decisively break above the 7,000 resistance level, the market dropped, only to recover its losses at the end of the week.

Despite a volatile week, the PSEi continued to trade above key moving averages (50-day, 100-day, and 200-day) indicating that the bulls are still in control. If the bulls continue to dominate, the PSEi could once again retest the next resistance levels around 7,000 and 7,100. Otherwise, if the bears take over, it can retrace the next support levels at 6,900 to 6,700.

STOCK CALLS FOR THE WEEK

AyalaLand Logistics Holdings Corp. | BUY ON PULLBACKS | CONSENSUS TARGET PRICE: No data

AyalaLand Logistics Holdings Corp. (ALLHC) plans to expand its cold storage footprint nationwide with the completion of its cold storage facilities in Batangas and Pampanga by the 1st half of 2024.

In addition, ALLHC plans to unveil three more facilities in Luzon, Visayas, and Mindanao within the year. The ALogis Artico Santo Tomas in Batangas and ALogis Artico Mabalacat in Pampanga — both targeted to be completed by the 1st half of 2024, are slated to add 10,000 pallet positions to ALLHC cold storage unit ALogis Artico’s current total pallet capacity of over 20,000.

At present, ALLHC has a presence in seven growth areas nationwide through its industrial parks, warehouses, cold storage facilities, and commercial leasing. In recent developments, the Cold Chain Association of the Philippines (CCAP) has projected a notable expansion of 8%-10% per annum in the local cold storage capacity. It is expected to reach approximately 750,000 metric tons by 2024.

Such developments are promising for ALLHC, which intends to increase its exposure in the cold storage sector through the inauguration of its new ALogis Artico facilities. Should ALLHC sustain its current trajectory and replicate its price action from 2021, we anticipate a viable recovery in its share prices. Accumulating ALLHC once it pulls back at around PHP 2.00 is advisable. Set stop-limit orders below PHP 1.84 and take profits at around PHP 2.30.

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 emphasized that the MFPA will result in an expanded coverage and increased redundancies, while generating cost savings and reducing capex requirements.

This will effectively allow CNVRG to shift its focus to customer acquisition and retention to help them achieve their four-year target of 4 million subscribers. In addition, we continue to forecast CNVRG with the highest core income growth among telcos under our coverage at 7.3% growth in 2024 and 7.1% growth in 2025.

Traders can accumulate on pullbacks at the identified support around PHP 9.00. Take profits at PHP 10.35 and set stop-limit orders below PHP 8.28. For long-term investors, we have a target price for CNVRG at PHP 13.30 (+39.56% upside from the recent close).

Ayala Land, Inc.* | BUY ON PULLBACKS | FMSEC TARGET PRICE: PHP 34.20

As highlighted in our previous company report, we still hold the view that ALI’s bread-and-butter business (residential) continues to face challenges. We note the lower-than-expected presales logged in 2023 as a signal of still-weak demand, especially amid higher ready-for-occupancy (RFO) units, unfavorable affordability dynamics, and elevated non-performing loans (NPLs).

Amid these developments, ALI intends to launch PHP 100 billion worth of residential products in 2024, 80% of which will come from the premium segment, where demand is more stable, while 20% will from the core segment.

Meanwhile, for offices, the vacancy rate remains above pre-COVID levels. Mall renovation plans are expected. However, these could put a drag on the segment’s momentum. On ALI’s commercial leasing segment, the office portfolio posted a better-than-industry average occupancy rate of 92%.

ALI allocated over PHP 100 billion for its capex budget. Of the figure, 34% is allocated to its residential segment, 24% to estate development, 19% to land acquisition, 10% to malls, 8% to offices, and 5% to hotels and resorts.

ALI is poised to retest its resistance at PHP 36. However, for a more favorable risk-reward ratio, wait for a technical pullback around the 50-day MA or PHP 33.40 before accumulating.

KEY DATA RELEASES

1. US CPI year-over-year for February 2024 on Tuesday, March 12, 2024 (estimates: 3.1%; January 2024: 3.1%)

2. PH exports year-over-year for January 2024 on Tuesday, March 12, 2024 (estimates: 6.9%; December 2023: -0.5%)

3. PH imports year-over-year for January 2024 on Tuesday, March 12, 2024 (estimates: -4.6%; December 2023: -5.1%)

4. US Initial Jobless Claims as of March 9, 2024, on Thursday, March 14, 2024 (previous: 217k)

5. Overseas Cash Remittances year-over-year for January 2024 on Friday, March 15, 2024 (estimates: 2.8%; December 2023: 3.8%).