{"id":325903,"date":"2023-12-02T23:18:02","date_gmt":"2023-12-02T15:18:02","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=325903"},"modified":"2023-12-02T23:28:29","modified_gmt":"2023-12-02T15:28:29","slug":"stock-in-focus-dmci-holdings-inc-dmc-2-dec-2023-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-dmci-holdings-inc-dmc-2-dec-2023-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: DMCI Holdings Inc. (DMC) – 2 Dec 2023 by RCBC Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>DMC<\/td><\/tr>
Company Name<\/strong><\/td>DMCI Holdings Inc.<\/td><\/tr>
Broker<\/strong><\/td>RCBC Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>2 Dec 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 11.09<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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DMC is now trading at a 29% discount to our net asset value (NAV) estimate versus the 15% historical average and with its share price down 23% year-to-date, underperforming the PSEi by 18%, we believe the market is currently recognizing only SCC (at current price), DMCI Homes, and Maynilad. <\/p>\n\n\n\n

The potential upside of SCC plus the whole of D.M. Consunji (construction arm) comes free. DMCI Power and DMCI Mining (while expanding by opening two new mine sites in 2024), may remain relatively small to consider. Its P\/E is also very attractive at 5.0x prospective 2024 EPS versus market P\/E of about 12x. Reiterate BUY.<\/p>\n\n<\/div>\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

Earnings and dividend forecasts<\/h3>\n\n\n\n

On profitability and resulting dividends, we highlight our forecast core net income
dropping by ~14% year-on-year (y\/y) to Php26.7 billion this 2023F, something inevitable given the high base effects on the revenues of its coal unit Semirara Mining and Power Corp. (SCC, 56.7%-owned). Despite the decline, we believe it can sustain a dividend payout ratio of more than 60% (well above the 25% dividend policy), translating to a potential 2024 dividend yield of 13.4%, among the highest in our coverage.<\/p>\n\n\n\n

Normalizing coal unit<\/h3>\n\n\n\n

We expect the normalization of coal and spot market prices to continue to bring SCC\u2019s earnings lower y\/y until 2025. Even with an estimated annual decline, our 2025 core net income (CNI) forecast for SCC of Php16.5bn is still 62% above the pre-pandemic 2019 level. Recall that in 2021\/2022, SCC posted a CNI of Php16.3bn \/ Php40 billion, the highest in its 41\/42-year history.<\/p>\n\n\n\n

The geopolitical crisis\/policy interventions in 2021 and the Russia-Ukraine war in 2022 triggered the robust coal demand\/shipments and the spike in coal ASP. SCC accounted for 64% of DMC\u2019s CNI in 9M23, down from 73% in 2022, and we forecast this to drop further to 55%\/43% in 2024\/2025.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>