COL FINANCIAL DAILY NOTES (23 MAY 2018)
Maintaining BUY rating. We have a BUY* rating on AP with a FV estimate of Php49.9/sh. We continue to like AP given its vertically integrated structure which will allow it to expand its power generation portfolio despite concerns of oversupply in the market. Furthermore, valuations have become increasingly attractive after the stock’s recent sell-off. Note that AP’s share price is down 4.2% in the past twelve months, underperforming the PSEi which declined 2% during the same period. Moreover, AP is now trading at only 11.0X 2018E P/E, a discount relative to the 12X average P/E of industry peers. Based on AP’s current market price of Php38/ sh, upside to our FV estimate of Php49.9/sh is significant at 31.25%.
*BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the next six to 12 months.
HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the next six to twelve months.
SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.
