FREE Special Report on Consumer Sector Update, with Target Prices for PGOLD, JFC, URC

PinoyInvestor’s Special Reports cover our partner brokers’ expert analysis on a range of topics affecting the stock market. These may include economic updates, sector analyses, upcoming IPOs, and more! Learn how you can use this report in the PinoyInvestor guide.

 

Our Partner Broker’s Analysis

Higher disposable income to increase consumption

The proposed income tax cut will mostly affect income earners with a gross salary per month of PHP 25,000 to PHP 100,000 and we estimate a 16% to 10% increase in their take-home pay (Figure 1).

We believe that overall consumption will grow and this is a potential opportunity for the consumer companies in our coverage.

However, not all consumer stocks will benefit the same way. This is because the tax reform will also impose higher excise taxes on sweetened beverages, causing a potential drag on sales of these products.

 

Our Partner Broker’s Recommendation

Puregold Price Club (PGOLD) as our top consumer stock pick. We like PGOLD since it is a net beneficiary of the tax reform. As a super/hypermarket, it can more than offset a potential decline in sales of sweetened beverages with higher consumption coming from its non-beverage product offerings. At its last traded price of PHP 45.00/share, it is trading at a 2017E and 2018E P/E of 20.3x and 17.9x, a bargain compared to its peers. We reiterate our BUY rating on PGOLD with +22% upside.

As for Jollibee Foods Corp. (JFC), higher take-home pay will support the overall sales per store of JFC, coinciding with its aggressive expansion program of hitting 4,000 stores by 2020. We reiterate our BUY rating on JFC with +24% upside.

The sugar tax, however, imposes an overhang on Universal Robina Corp. (URC) since a substantial amount of its domestic revenues come from such products. This may offset any sales boost coming from its non-beverage consumer food segment. We recommend a HOLD on the stock of URC.

 

Summary of Recommendations and Target Prices:

Puregold Price Club (PGOLD) – Buy, Target Price of PHP 55.01

Jollibee Foods Corp. (JFC) – Buy, Target Price of PHP 261.36

Universal Robina Corp. (URC) – Hold, Target Price of PHP 173.00

 

This report is prepared by PinoyInvestor’s partner broker below. Sign up to this stock broker to avail of their complete trading brokerage services:

Unicapital Securities
Unicapital Securities

Unicapital Securities is one of PinoyInvestor’s partners in delivering superior and reliable stock research reports that help Filipino investors make smart stock investing decisions! Learn more about them here.