Colfinancial.com said listed holding firms are expected to continue reducing their discounts relative to the Philippine Stock Exchange index (PSEi) as the economy steadily recovers from the slump caused by the new coronavirus disease 2019 pandemic.
The online brokerage firm said the current discounts in a number of listed holdings firms are “unwarranted” given that these companies are expected to “significantly benefit from the reopening of the economy, making them attractive recovery plays.”
Colfinancial.com said as the PSEi continues to hold firm above the 7,000 -level, holding companies’ prices will also register a stronger price action going forward.
The PSEi closed Friday’s session at 7,192.17, which Colfinancial.com noted is nearing 2019 levels.
Colfinancial.com said some holdings firms like Alliance Global Group Inc. (AGI), GT Capital Holdings Inc., LT Group Inc. and Metro Pacific Investment Corp. (MPIC) are still trading far below their historical price-to-earnings (P/E) ratio levels, while the PSEi valuation has surpassed it five-year average P/E ratio of 16.8x.
“We think the current discounts for these companies is largely unwarranted as these four companies are also expected to significantly benefit from the reopening of the economy, making them attractive recovery plays. At their current prices, these four companies remain highly undervalued compared to consensus fair value estimates despite the sustained recovery in earnings,” it said.
In particular, Colfinancial.com said AGI’s real estate companies are anticipated to register higher earnings as the country’s reopening would mean stronger real estate sales and higher rental incomes. MPIC’s toll road business meanwhile is expected to enjoy higher profits as intra and inter-zonal transportation increases.
GT Capital’s automotive and lending businesses are expected to pick up further with the improvement in the economy.
LT Group’s two major earnings contributors — lending and tobacco — are continuing their upward momentum, Colfinancial.com said.
