Room for growth for ‘expensive’ mart

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The Philippine stock exchange index is seen to range from 7,500 to 7,700 points next year, better than the current level of 7, 200 points despite current apprehensions due to falling oil prices.

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Raul Ruiz, RCBC Securities vice president and head of research said while share prices are currently “expensive”, average PE ratio at past two years has been 15x , there would be more room for growth next year.

Ruiz said that corporate earnings next year will go as high as 15 percent. He also said earnings per share (EPS) and price-to-earnings (PE) ratio will still be stable next year from a 10 percent and a 20x PE this year.

Rizal Commercial Banking Corporation (RCBC) Securities Inc. President Gerard O. Florentino said that the brokerage firm expect the market to close the year at 7,200-7,300 range. Florentino said that with only four trading days left for the year, RCBC expects year-end dressing to pull up the index.

Ruiz said that the market next year will be boosted by the realization of the foreseen benefits of lower oil prices in the Philippines, higher corporate earnings back to back with more optimistic economic figures, as well as the upcoming election spending.

“The market has been down the last few days, a lot is due to the sell-off from the oil price turmoil. But we expect it to turn over next year as oil prices will benefit the Philippines, [and]there will be more election spending,” Ruiz said

Ruiz said that despite the massive foreign selling in the past few days, the market is projected to attract foreign buying next year as soon as benefits of lower oil prices are realized locally.

The RCBC official said the sunshine sectors for investors in next year include the consumer and gaming sectors, as well as the property, conglomerates, and a “brighter” banking segment, which should recover from the lower industry-wide trading gains in 2014.

Some of RCBC’s stock picks include Energy Development Corp (EDC) and First (FGEN) for power; Megaworld Corp. (MEG), SM Prime Holdings Inc. (SMPH), Vista Land and Lifescapes Inc. (VLL) for property; Robinsons Retail Holdings Inc. (RRHI), SSI Group Inc. (SSI), Puregold Price Club Inc. (PGOLD) and Universal Robina Corp. (URC) for consumer stocks.

For the whole RCBC group, RCBC Capital Corp. President and Chief Executive Officer Jose Luis Gomez said that the bank is expecting to grow its monthly transaction value entered to the stock exchange to P4 billion next year from the current P3 billion monthly transactions this year—loans, bonds and equities alike.

This is in line with the bank’s target to be able to enter the Top 20 brokerage firms by the end of next year from its current spot in 24th to 25th place.

Ruiz said that the bank will achieve this through increasing marketing to institutional and high net worth investors; ramping up its online transactions to 5 percent next year from the present 2 percent share in the total transactions; intensifying its partnership with Japan firm Okasan Securities to market local securities to Japanese investors; as well as the establishment of a Cebu trading desk next year.

The RCBC officials said the bank’s planned Cebu trading desk would tap the area’s large investor base, and that RCBC will eventually expand to other provinces with a high concentration of investors, such as Davao.

The bank recorded P3.01 billion in net income in the first nine months of the year, which is a decline from last year’s P4.71 billion on the lack of industry-wide trading gains.

Formerly Rizal Development Bank, RCBC was incorporated in 1960, and is a part of the Yuchengco Group. RCBC Capital and RCBC Securities are wholly owned subsidiaries of RCBC. As of last year, RCBC and its subsidiaries had 1,150 ATMs and 435 branch networks nationwide, including of 27 extension offices.

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