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The
rally in the Asian stock markets yesterday does not
change the fact the global equity markets are in a very,
very bad mood.
On the
local front, two things are obvious. A slowdown in the
US economy is not going to have much effect on
Philippine economics, regardless of the gloom-and-doom
comments you have been reading. None—repeat, none—of
these comments has quantified what negative effects
might result.
Less
than 5 percent of our overseas workers are in the United
States, and even a 10-percent drop in export earnings
from there is a drop in the bucket of our overall export
earnings. I challenge any of the “experts” forecasting
major negative results for the
Philippines
to e-mail me with their analyses and numbers. It won’t
happen.
The
Philippines will competently and confidently weather any
global economic storm even better than we did during the
Asian crisis. That is, unless the world is going into a
major depression, as during the 1930s. I doubt that
scenario, though, as globalization does much more than
interconnect economies; it diversifies economies.
The
local stock market, though, is a touch-and-go situation,
and forecasting at this point what would happen next
week, month, or quarter is a fool’s game. However, there
is a basic investment strategy for times of significant
economic downturns that may apply in this case. The idea
is that “defensive” stocks would go against the general
trend. These shares traditionally have included food,
tobacco, oil, and utilities. These stocks hold up in
hard times because demand does not decrease as
dramatically as it may in other sectors.
For now,
there are at least three companies in the Philippine
Stock Exchange that deserve investor interest for buying
for appreciation for the rest of 2008.
My
selection parameters include selling at a price below
its 12-month high, either a leader in its sector or in a
downturn-proof sector, not dependant on the US economy,
and with very good growth prospects.
First on
the list, in no particular order, is Jollibee Foods
Corp. (JFC). The stock hit a high of P61 and is now
trading slightly above P45. JFC is now a very highly
diversified food company owning Greenwich Pizza, Red
Ribbon Bakery and Chowking. Several things stand out in
my mind for JFC. In 1997, and not as good a company
then, it prospered during the 1997 crisis. Further,
revenue and profit growth has been very good and very
stable. Revenues are growing at over 10 percent
annually, with profits up 15 percent. First target is
P55 with a good shot at the P70 high on projected 2008
income. Even if it misses its income goal for the year,
the stock is still a buy with P60-plus the target.
The
share price of DFNN Inc. (DFNN) has been all over the
place in 2007, ranging from P2.10 to P16.50. Trading is
now below P12. The wild price swings are due to
significant changes in the business outlook of the
company and the fact that there was not much shares in
the float. The stock is trading at about a 15 PER (price
earnings ratio) based on 2007 projections and is near 10
PER based on 2008 income forecasts. DFNN has three
subsidiaries that are scheduled to go public both here
and abroad by the end of the second quarter of 2008.
DFNN’s main focus is IT solutions for the
gaming/gambling industry, a sector not affected much by
economic problems. They recently entered into a
joint-venture agreement with PSE-listed firm Pacific
Online Systems Corp. (LOTO), which means that DFNN may
get some additional local business by way of LOTO.
DFNN’s Singapore 85-percent owned subsidiary Pacific
Gaming Investments, which is looking to list in London
or Hong Kong, is in the process of making deals all over
Asia in financial-spread betting and gambling. Stock
will reach well above the historic high (P18.50 plus) by
the second quarter.
Parts of
the property sector will continue to boom, and Vista
Land & Lifescapes Inc. (VLL) will be the winner here.
Stock was P7.50 and is now P5 plus. VLL is not concerned
about the United States as it has targeted the OFW
market in many other places, including a strong sales
presence in Italy. Further, VLL is not a condo builder,
which units are most favored by foreigners and
balikbayan. VLL’s inventory of townhouses and detached
homes has very little strong competition from other
developers. Also, the price range hits all kinds of
budgets with low, middle, high and elite projects almost
equally divided in their mix. VLL depends on local
purchasers, more than 50 percent, to sell their real
estate. Earnings growth for 2007 was very substantial
over 2006, and even a decrease in 2008 profits from
projections justifies a second-quarter 2008 target of P9
based on a PER of 20.
E-mail comments to mangun@email.com. |
