FREE Stock in Focus: GLO (16 Apr 2018) by Regina Capital Dev’t Corp.

PinoyInvestor’s “Stocks in Focus” summarizes our partner brokers’ Fundamental Analysis of a company and explains the rationale for the stock’s long-term Target Price and broker’s recommendation. Learn how you can use this report in the PinoyInvestor guide.

 

Summary of Broker’s Recommendation
BROKER RECOMMENDATION TARGET PRICE ISSUED ON
Regina Capital Development Corp. BUY 1805.00 16 April 2018

 

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Our Partner Broker’s Analysis

Overall we are still considering GLO as a potential investment on account of dividend yields. At an average of 4.5%, this beats the average index’s performance at around 1.5% and is almost even at par with TEL’s current yield.

Although competitor TEL has a higher dividend yield, the latter’s payout has been reduced to 60% for the past 2 years (and we expect it to be maintained as is, if not reduced), as compared to GLO’s historical 75% dividend payout ratio.

GLO’s continuing expansion is another aspect that we will be anticipating in a couple of years. With the increase in capex by $100 million, this will more or less improve the company’s service to its customers. We view this as a potentially defensive capital expansion in order to maintain its lead against TEL.

As to the lower bottom line of the company this year, we attribute this to a higher contribution of the SMC asset depreciation attributable to the method of accounting used. Looking at their EBITDA will show that they were able to garner positive and constant growth. By 2018, we expect the depreciation coming from the SMC asset to be lower.

 

Our Partner Broker’s Recommendation

On account of adjustments based on latest disclosures, company guidance and estimates, and significant decline of the share price in the market, we upgrade GLO to BUY, even taking into account that we reduced our Target Price to PHP 1,805.00 (this represents an upside of 14.2% based on latest price).

Upside risks include maintenance of dividend payouts, lower than expected depreciation expenses and a significant improvement in infrastructure. Downside risks include the fiercer competition between TEL, the moving forward prospects of a new entrant (which we think will take more years before they could generate decent bottom line), and government pressures to improve on internet capabilities of the country.

 

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Regina Capital Development Corporation
Regina Capital Development Corporation

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