This document is private and confidential,

and may not be distributed without COL’s consent.

This document is private and confidential, and may not be distributed without COL’s consent.
 This document is private and confidential,
and may not be distributed without COL’s consent.
FUNDAMENTAL A combination of quantitative and
qualitative analysis that

ANALYSIS
determines a stock’s value by
focusing on a company’s actual
business and its future prospects

This document is private and confidential,

2
and may not be distributed without COL’s consent.

concepts

earnings valuation
OBJECTIVE
To determine whether the Company’s
story justifies its price at a certain point in
time This document is private and confidential,
and may not be distributed without COL’s consent.

If Price>FV, then SELL

If Price<FV, then BUY
 ECONOMY

Sales
PRODUCT

MANAGEMENT DCF

GROWTH POTENTIAL is private and confidential,

This document FUTURE FV
and may not be distributed EARNINGS
without COL’s consent.
ESTIMATES
COMPETITION

FUTURE INVESTMENTS RELATIVE

VALUATIONS
EFFICIENCY

STRATEGY
 CEB
CEB
120 15
HIGH OIL PRICES INDUSTRY
RATIONALIZATION
110
13
OVERCAPACITY DECLINING OIL PRICES
100
PRICE WARS
11
90

80
This document is private and confidential, 9

and may not be distributed without COL’s consent.

70
7

60

5
50

40 3

2011 2012 2013 2014 2015

PRICE EARNINGS
 RWM 0.6

11

SOLAIRE OPENS CITY OF DREAMS OPENS

10 CHINA CRACKDOWN 0.55

This document is private and confidential, 0.5

8
and may not be distributed without COL’s consent.
7
0.45

5 0.4

Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15

PRICE EARNINGS
 CNPF
19 ATTRACTIVE GROWTH PLANS
0.8

18 STRATEGIC ACQUISITIONS
0.75
17 BRAND BUILDING

16
0.7

15

14
This document is private and confidential, 0.65

and may not be distributed without COL’s consent.

13
0.6
12

11
0.55

10

9 0.5

Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16

PRICE EARNINGS
 TEL
INTENSIFYING COMPETITION
3500 220
LOSING MARKET SHARE

PRICE WAR 200

3000
DECLINING LEGACY BUSINESS
180

This document is private and confidential,

2500

and may not be distributed without COL’s consent. 160

2000
140

1500
120

1000 100
Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16

PRICE EARNINGS
 PSEi
8500 GDP GROWTH 480

DEMOGRAPHICS
7500 430
OFW REMITTANCES

6500 BPO JOBS AND REVENUES 380

LOW INTEREST RATES

This document is private and confidential,

5500 330

4500 and may not be distributed without COL’s consent. 280

3500 230

2500 180

1500 130

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

PRICE EARNINGS
 How do we develop
expectations?

This document is private and confidential,

and may not be distributed without COL’s consent.
 Checklist for Industry Analysis
Level of Concentration Concentrated Fragmented
Impact of Industry Capacity Overcapacity Just Right Shortage
Barriers to Entry High Medium Low
Market Share Stability Stable Unstable

Embryonic

Shakeout

Decline
This document is private and confidential,

Growth

Mature
Stage in the Life Cycle
and may not be distributed without COL’s consent.
Price Competition Low High
Demographic Influences Positive Negative NA
Economic Influence Positive Negative
Government Influences High Medium Low
Social Influences Positive Negative NA
Technological Influences High Medium Low
INDUSTRY
CONCENTRATION
Industries that are concentrated often enjoy strong
pricing power which is good for economic profits!
This document is private and confidential,
• Economies
and may not be of
distributed
scale without COL’s consent.
• Coordinated moves
INDUSTRY
CAPACITY
Tight capacity – more pricing power

Over capacity – lessispricing

This document private and confidential,
power
and may not
Ex. Power be distributed
generation in thewithout COL’s consent.
Philippines

How quickly can companies adjust to

fluctuations in demand? (Barriers to entry and
exit)
MARKET SHARE
STABILITY
Stable market shares typically indicate less
This document
competitive is private and confidential,
industries
and may not be distributed without COL’s consent.
• High barrier to entry
• High switching costs
• Infrequent product innovation
• Differentiated products
 Industry Life-Cycle Model

This document is private and confidential,

and may not be distributed without COL’s consent.

Source: CFA
PRICE COMPETITION
Are there significant differences between
products of different companies?

• Ex.This document
Clothes, is private
Bags, Oil and confidential,
and may not be distributed without COL’s consent.
EXTERNAL INFLUENCES
Macroeconomic conditions
• GDP growth
• Interest rates
This document is private and confidential,
and may not
Technological be distributed without COL’s consent.
changes

Demographics

Government regulations

Social influences
 Example of Industry Analysis:

250
URC
200

150 This document is private and confidential,

and may not be distributed without COL’s consent.
100

50

0
10/17/2013 10/17/2014 10/17/2015 10/17/2016 10/17/2017
 Example of Industry Analysis:
Coffee (URC)
Industry Coffee
Concentrated, but market share of #2
(Kopiko) & #3 (URC) are relatively close
Level of at 29.2% and 27.7% for total coffee,
This document is private and confidential,
Concentration while market share for coffee mixes are
and may not becloser
distributed without COL’s consent.
at 34.9%, 33.3% and 27.9% for
the three players
Stage in the
Mature
Life Cycle
High -
Price
Consumers very price sensitive, shift to
Competition
lower priced twin pack variant
 Example of Industry Analysis:
RTD Tea (URC)
Industry RTD Tea
Level of
Concentrated
Concentration
Stage in This document is private and confidential,
the Life
and may not be distributed without
Cycle COL’s consent.
Mature

Government Low, but negative -

Influences Excise taxes on sugary drinks
Negative -
Social Influences Shift in consumer preference
to flavored water
 Example of Industry Analysis:

16
DNL
14

12

10 This document is private and confidential,

8
and may not be distributed without COL’s consent.
6

0
12/11/2012 12/11/2013 12/11/2014 12/11/2015 12/11/2016
 Example of Industry Analysis:
Specialty Food Ingredients (DNL)
Major Companies Mostly foreign
High – Need a lot of R&D, strong
Barriers to Entry
relationship with clients
This document Stable – Ingredients and flavor
Market Share Stability is private and confidential,
specialized for specific clients
and may not be distributed without COL’s consent.
Price Competition Low
Partnership with Ventura which will
allow it to tap foreign markets bigger
Additional Comments
than the Philippines starting to bear
fruit
 Company Analysis:

Help determine
FINANCIAL
This document is privatewhether
and confidential,
and may not be distributed without
the
COL’s consent.
investment thesis
RATIOS based on industry
analysis is correct
 Company Analysis:
Financial Ratios
Commonly Used Ratios:

GROWTH
This document is private and confidential,
• Revenues
and may not be distributed without COL’s consent.
• Operating Profits
• Net Income
• EPS
 Company Analysis:
Financial Ratios
Commonly Used Ratios:

PROFITABILITY RATIOS
This document is private and confidential,
• Gross Profit Margin (Gross Profits/Revenues)
and may not be distributed without COL’s consent.
• Operating Profit Margin (Operating
Profits/Revenues)
• Net Profit Margin (Net Profits/Revenues)
 Company Analysis:
Financial Ratios
Commonly Used Ratios:

ACTIVITY RATIOS
This document is private and confidential,
• Inventory Days (365 X Average Inventory/Cost of
and may not be distributed without COL’s consent.
Goods Sold)
• Receivable Days (365 X Average
Receivables/Sales)
 Company Analysis:
Financial Ratios
Commonly Used Ratios:

LIQUIDITY & COVERAGE RATIOS

This document is private and confidential,
• Current Ratio (Current Assets/Current Liabilities)
and may not be distributed without COL’s consent.
• Debt to Equity Ratio (Total Debts/Total Equity)
• Times Interest Earned (Operating Income/Interest
Expense)
 Industry Analysis & Financial Ratios:
Cement (CHP) as of IPO
Level of Key Ratios FY14 FY15
Concentrated
Concentration Revenue Growth (%) 16.2% 22.8%
Impact of Operating Profit Growth (%) 12.8% 454.2%
Industry Just Right/Shortage Net Profit Growth (%) 11.7% 494.8%
Capacity
This document
Barriers to Entry High is private and
GPM (%)
OPM (%)
confidential,46.7%
4.6%
48.7%
20.6%
and may increase
Economic not bespending
distributed
Positive – Government to
on
without
NPM (%) COL’s consent.
2.6% 12.6%
Influence
infrastructure
Times Interest Earned (X) 18.5 4.3
Current Ratio (X) 1.3 1.3
Other reasons to be positive: Net D/E Ratio (X) 0.0 0.6
• Lower royalty fee from 12% to
Days Receivable 16.5 13.0
5% Days Inventory 93.6 81.9
• Debt refinancing to reduce cost
from 7.5% dollar denominated
to 4.6% peso denominated
 Industry Analysis & Financial Ratios:
Cement (CHP) as of 2017
Key Ratios FY14 FY15 FY16 FY17E
Revenue Growth (%) 16.2% 22.8% 3.6% -9.0%
Operating Profit
Growth (%) What went wrong?
12.8% 454.2% 0.2% -48.7%
Net Profit Growth (%) 11.7% 494.8% -53.1% -11.2%
• Influx of imported
This document is private and confidential,
GPM (%)
and may not be distributed without
46.7% 48.7% 52.1% 45.6% cement
COL’s consent.
OPM (%) 4.6% 20.6% 19.9% 11.2%
NPM (%) 2.6% 12.6% 5.7% 5.6% • Selling price &
volume of CHP
Times Interest Earned
(X) 18.5 4.3 3.7 3.3
fell
Current Ratio (X) 1.3 1.3 1.2 1.1
Net D/E Ratio (X) 0.0 0.6 0.5 0.4

Days Receivable 16.5 13.0 12.7 14.0

Days Inventory 93.6 81.9 82.6 81.1
 Industry Analysis & Financial Ratios:
Cement (CHP) as of 2017
Level of Where were we wrong?
Concentrated
Concentration
Impact of • High barrier to entry for
Industry Overcapacity – Asia domestic producer, but
Capacity This document is private and confidential,
not for importers
Barriersand
to may not be distributed without COL’s consent.
High domestically, but
Entry
not for imported • Overcapacity in other
cement Asian countries such as
Price High because cement
Competition is a commodity
Vietnam
Economic
Positive – Government • Price competition is high
to increase spending because cement is a
Influence
on infrastructure
commodity
 Share Price (1 Year)
14
CHP
12

10

8
This document is private and confidential,
6 and may not be distributed without COL’s consent.
4

0
 Industry Analysis & Financial Ratios:
Retailing (SSI) 2014
Low - But SSI carries a very 2012 2013 2014
Barriers to
attractive portfolio of brands with a Net Sales
Entry 14.0% 10.1% 19.0%
strong following Growth (%)
Growth – Increasing affluence of Operating Income
Stage in the 94.2% 45.5% 105.2%
population means growing demand Growth (%)
Life Cycle
for higher end products Net Income
74.9% 32.8% 62.7%
Economic Growth (%)
Influence This document is private and confidential,
Positive
Negative – Increasing popularity
and may not be distributed without COL’s consent.
GPM (%) 43.9% 49.2% 56.1%
Social
OPM (%)
of travel could mean less business 5.4% 7.2% 12.4%
Influences
for SSI NPM (%) 4.0% 4.8% 6.6%
Medium – Online shopping a
Technological
threat, but not yet in the Days Receivable 10.2 12.5 13.0
Influences
Philippines Days Inventory 281.6 317.3 379.1

Other reasons to be positive: Current Ratio (X) 1.0 1.0 1.6

D/E Ratio (X) 5.9 3.3 1.0
• Aggressive expansion paying off Times Interest
29.3 9.9 6.7
Earned (X)
• Repayment of debts
 Industry Analysis & Financial Ratios:
Retailing (SSI) 2015-16
2012 2013 2014 2015 2016
Net Sales Growth (%) 14.0% 10.1% 19.0% 14.5% 5.9%
Operating Income
Growth (%)
94.2% 45.5% 105.2% -5.9% What went wrong?
-29.5%
Net Income Growth
(%)
74.9% 32.8% 62.7% -18.8% -71.4%
• More brands
GPM (%)
This43.9%
document is private and confidential,
49.2% 56.1% 53.5% 49.6%
entered the market
OPM (%) and may not be
5.4% 7.2%distributed
12.4% 10.2% without
6.8% COL’s consent.
NPM (%) 4.0% 4.8% 6.6% 4.7% 1.3% • SSI over expanded,
necessitating heavy
Days Receivable 10.2 12.5 13.0 12.4 15.0
Days Inventory 281.6 317.3 379.1 398.1 378.0 discounting
Current Ratio (X) 1.0 1.0 1.6 1.6 1.9
D/E Ratio (X) 5.9 3.3 1.0 1.1 0.9
Times Int Earned (X) 29.3 9.9 6.7 5.6 3.7
 Industry Analysis & Financial Ratios:
Retailing (SSI) 2015-16
Low, some brands did not Where were we wrong?
Barriers to
have as strong a following
Entry
as anticipated • Brand loyalty was not as
Stage in the
Shake out, not growth strong as anticipated
Life Cycle This document is private • and confidential,
phase anymore, meaning
more intense competition No longer in the growth
and may notPositive
Economic be distributed without
phase COL’s consent.
but the shake out
Influence phase as market could
Negative – Increasing
Social
popularity of travel could
not absorb the massive
Influences
mean less business for SSI increase in number of
Medium – Online shopping retailers
Technological
a threat, but not yet in the
Influences
Philippines
 Share Price (3 Years)
12 SSI
10

8
This document is private and confidential,
6 and may not be distributed without COL’s consent.
4

0
11/6/2014 11/6/2015 11/6/2016 11/6/2017
 Industry Analysis & Financial Ratios:
Mobile Gaming (X) 2014
Growth – Increasing penetration 2012 2013 2014
Stage in the
of smart phones means growing Net Sales
Life Cycle
demand for mobile games Growth (%) 42.7% 85.1% 50.2%
High – But X found a way to make Operating Income
Price
games more affordable for pre- Growth (%) 95.0% 157.2% 71.2%
Competition
paid subscribers Net Income
Technological High – Shift in types of smart Growth (%) 63.4% 281.4% 62.6%
Influences This document is private and confidential,
phones, types of popular games
and may not be distributed without COL’s consent.
GPM (%) 53.1% 64.7% 73.4%
OPM (%) 39.9% 55.5% 63.2%
Other reasons to be positive: NPM (%) 21.6% 44.5% 48.1%

• Strong historical growth numbers, Current Ratio (X) 3.0 3.3 12.4
driven by higher revenues and margin D/E Ratio (X) 0.0 0.0 0.0
expansion Times Interest
NA NA NA
Earned (X)
• Debt free, low capital requirement
 Industry Analysis & Financial Ratios:
Mobile Gaming (X) 2016-17
2012 2013 2014 2015 2016
Net Sales Growth (%) 42.7% 85.1% 50.2% 117.8% 130.1%
Operating Income
Growth (%) 95.0% 157.2% 71.2% 42.4% 35.3% What went wrong?
Net Income Growth
(%) 63.4% 281.4% 62.6% 21.4% 15.5% • Bad acquisitions
This document is private and confidential,
• Most of the
GPM (%) 53.1% 64.7% 73.4% 65.1% 43.7%
OPM (%) and may39.9%
not be distributed
55.5% 63.2% 41.3%without
24.3% COL’sacquisition
consent. still in
NPM (%) 21.6% 44.5% 48.1% 26.8% 13.5% the “Embryotic
Stage”
Current Ratio (X) 3.0 3.3 12.4 0.8 1.2
D/E Ratio (X) 0.0 0.0 0.0 0.0 0.0 • X generates first
loss in 3Q17
in PhpMil 3Q16 3Q17 % Change 9M16 9M17 % Change
Revenues 390 467 19.6 1,126 1,681 49.3
Operating income 92 (17) n/a 847 1,509 78.2
Operating margin (%) 23.5 (3.7) - 75.2 89.7 -
Net income 48 (21) n/a 150 87 (41.5)
Net margin (%) 12.2 (4.6) - 13.3 5.2 -
 Share Price (3 Years)
25
X
20

15
This document is private and confidential,
and may not be distributed without COL’s consent.
10

0
11/1/2014 11/1/2015 11/1/2016 11/1/2017
How do certain developments affect the
market?

Will it hurt/benefit the economy?

This document is private and confidential,
and may not be distributed without COL’s consent.
Which industries will be affected?

Which companies are most

sensitive?
How will Duterte’s infra spending
plan affect the stock market?

GDP growth (+)

This document is private and confidential,
and may not be distributed without COL’s consent.
Construction (+), Banks (+),
Properties (+)

MWIDE MBT ALI

 How will plans to impose excise taxes on
sugar/sugary drinks affect the stock market?

GDP growth (+)

This document is private and confidential,
and may not be distributed without COL’s consent.
Consumer Cos (-)

PIP URC
 This document is private and confidential,
and may not be distributed without COL’s consent.
 Valuations

Market price – Current price

Fair Value (FV) estimate – Target price

This document is private and confidential,

and may not be distributed without COL’s consent.
Why is FV estimate
important?

A benchmark based on
earnings and fundamentals
Methods of getting the FV estimate

This document is private and confidential,

and may not be distributed without COL’s consent.
 Absolute Valuation

Discounted Cash Flow Method

This document is private and confidential,

and may not be distributed without COL’s consent.
Most commonly used
01 Advantages Specific assumptions can be made

02 Disadvantages
 Absolute Valuation

Discounted Cash Flow Method

This document is private and confidential,

and may not be distributed without COL’s consent.
01 Advantages
Time consuming
02 Disadvantages Information heavy
 VALUE OF A COMPANY
= How much cash it can make

year
This document is private and confidential,
and may not be distributed01
without
CashCOL’s consent.
earnings
+
02 Cash earnings
+
03 Cash earnings
+
…and so on
Methods of getting the FV estimate

Jan 2016 Jan 2016

This document is private and confidential,
Php100Mil Php100Mil
and may not be distributed without COL’s consent.
1.375% 1.375%
Time deposit rate Time deposit rate

Jan 2017 Jan 2017

Php101.375Mil Php101.375Mil
Php100Mil in 2016 Php100Mil in 2017
Php100Mil in 2016 Php101.375Mil in 2017

This document is private and confidential,

The value of money today
and may not be distributed without COL’s consent.

is not equal to the value

of money in the future
 VALUE OF A COMPANY
= How much cash it can make

year VALUE TODAY

This document is private and confidential,
and may not be distributed01
without
CashCOL’s consent.
earnings
+
02 Cash earnings
+
03 Cash earnings
+
…and so on
 This document is private and confidential,
and may not be distributed without COL’s consent.

FV ESTIMATE
= Value of company per share
 Absolute Valuation
Three main components:

Free cash flow to equity (FCFE)

- Cash flow available for distribution to shareholders
- CashThis
net document is privateinvestments
income – Required and confidential,
+ ▲ Debts
and may not be distributed without COL’s consent.
Required rate of return (rCE)
- Dependent on current bond yields
- Also dependent on a company’s risk profile

Growth (gFCFE)
 Absolute Valuation
If FCFE increasing at a constant growth rate (g), then FV is

FV = FCFE1/(rce – gFCFE)
This document is private and confidential,
andismay
If FCFE not beatdistributed
growing without
a rapid pace, and isCOL’s consent.
expected to
eventually mature, then FV is

FV = FCFE1/(1+rce) + FCFE2/(1+rce)2 +
FCFF3/(1+rce)3 + . . . FCFEn/(1+rce)n +
[FCFEn+1/(rce-gM)]/(1+rce)n
 Absolute Valuation:
Implications
Given these two formulas:

FV = FCFE1/(rce – gFCFE)
FCFEThis document
= Cash is private
net income and confidential,
– Required investments +
▲ Debts
and may not be distributed without COL’s consent.
Share Price Drivers
(+) (-)
Higher net income growth Slower net income growth
Lower interest rates Higher interest rates
Lower risk Higher risk
Lower capex requirement Higher capex requirements
Lower debt level Higher debt level
 Examples of Headlines that
Moved Share Prices
(+) (-)
• Philippines now • Tuna prices increase to
investment grade rating record level
This document is private and confidential,
• PLDT increases earnings • Colliers warns of potential
and may not be distributed without
glut in COL’sproperties
office consent.
growth guidance
• FGEN sells shares in • Excise taxes on
EDC automobiles to increase
• Fed to start tapering its
bond buy back program
 Relative Valuation

P/E and EPS growth

P/BV and ROE

This document is private and confidential,

and may not be distributed without COL’s consent.
LOOP – Law Of One Price
Identical assets should trade at the same price
 Relative Valuation

P/E and EPS growth

P/BV and ROE

This document is private and confidential,

and may not be distributed without COL’s consent.
Easy to apply
01 Advantages

02 Disadvantages
 Relative Valuation

P/E and EPS growth

P/BV and ROE

This document is private and confidential,

and may not be distributed without COL’s consent.
01 Advantages
Comparables and multiples can
02 Disadvantages be very subjective
 Relative Valuation: Steps in
Computing FV
1. Determine the appropriate P/E or P/BV
• Peer average or median
2. Estimate the EPSis or
This document BVPS
private and confidential,
• Annualized
and may not be distributed
profits without profits
or estimated COL’s consent.
3. Compute for the FV

FV = P/E X EPS
FV = P/BV X P/BV
 Relative Valuation Example:
MAC
30
• Annualized 1H17 profits
Php1.3 Bil or EPS of 25
Php1.04
• Median This
17E document is private and confidential,
20
P/E of peers
21Xand may not be distributed15without COL’s consent.
• FV = 21 x Php1.04
10
= Php21.84
5

0
 P/E and EPS growth

STOCK A STOCK B
Current Price: Php10 Current Price: Php100
ThisPhp1
2016 EPS: document is private 2016
and confidential,
EPS: Php50
and may not be distributed without COL’s consent.
10X P/E 2X P/E

Earnings Current price

EPS = Number of share
P/E = Earnings per share

General Rule:
Relatively cheaper if P/E is lower
 P/E and EPS growth

STOCK A STOCK B
10X P/E 2X P/E
This document
2017: 100% is private 2017:
growth EPS and confidential,
0% growth EPS
and may not be distributed without COL’s consent.

Limitation of relative valuation:

Looking at a point in time

Higher EPS growth justifies higher P/E

 P/E and EPS growth

EPS
Company P/E Growth
Which stock looks cheap?
This document is private and confidential,
Which stock looks expensive?
and may not be distributed without
A COL’s 10.0
consent. 10%
B 8.0 20%
Company B looks cheap
C 12.0 15%
Company D looks expensive
D 15.0 8%
 P/E and EPS growth
2017E P/E EPS growth

Consumer 24.7 9%
A 16.5 17%
This
B document is private
18.9and confidential,
13%
and may
C not be distributed26.6
without COL’s consent.
18%
D 15.2 6%
E 36.2 13%
F 19.1 14%
G 10.7 11%
H 12.7 14%
I 28.0 3%
J 24.4 5%
 P/E and EPS growth
2017E P/E EPS growth

Conglomerates 17.9 9%
A 21.0 6%
This
B document is private
19.7and confidential,
16%
and may
C not be distributed12.3
without COL’s consent.
4%
D 11.1 10%
E 9.0 17%
F 6.2 12%
G 16.3 13%
H 16.7 4%
I 18.0 11%
J 22.1 -5%
 P/BV and ROE

Used for banks because assets are already at market value

Most companies’ book value is not equal to market value

This document is private and confidential,

and may not be distributed without COL’s consent.
Liabilities

Assets
Equity or
Net Assets
(Book Value)
 P/BV and ROE
Book value Equity
=Number of shares
per share
Current price
P/BV =
This document is private and confidential,
Book value per share
and may not be distributed without COL’s consent.
Net income
ROE = Equity

General Rule:
Relatively cheaper if P/BV is lower
Higher ROE justifies higher P/BV
 P/BV and ROE

Company P/BV ROE

Which stock looks cheap?
This document is private and confidential,
Which stock looks expensive?
and may not be distributed without
A COL’s consent.
0.9 15%

B 1.4 12%
Company A looks cheap
C 1.9 8%
Company C looks expensive
D 1.7 15%
 P/BV and ROE
2017E P/BV ROE

Banks & Financials 1.7 11.9%

A 1.9 12.7%
This
B document is private
2.4and confidential,
13.6%
and may
C not be distributed1.2
without COL’s consent.
9.2%
D 0.9 8.4%
E 1.3 9.9%
F 0.8 8.2%
G 0.8 8.0%
H 2.0 11.7%
I 1.5 12.9%
J 1.9 12.7%
 Dividend Yield
Salary as an investor
Suited for more conservative investors
Most high dividend yielding stocks are utility companies
with slower
This earnings
documentgrowth
is private and confidential,
and may not be distributed
Ticker Company without COL’s consent.
Dividend Yield
MER Manila Electric Company 6.3%
AP Aboitiz Power 3.4%
DMC DMCI 4.1%
GLO Globe Telecom 4.5%
TEL Philippine Long Distance 4.7%
*As of November 3, 2017
Dividends per share
Dividend yield = Current price per share
 Valuations:
Application of Concepts
1. Knowing what is priced in

This
2. If FV document
≠ Market is private
Price, do Iand confidential,
really know
and may not be
something distributed
that the marketwithout COL’s consent.
doesn’t?

Important for outperformance!

 Knowing What is Priced in: STI
• Share prices fell to as low as
2
Php0.36 on concerns that the
introduction of the K-12 program 1.8
would mean significantly less 1.6
students
This document is
• Surprise: STI offered SHS, drop
private
1.4 and confidential,
and may not
in enrollments did notbe distributed
1.2
without COL’s consent.
1
materialize
• At Php0.36, stock was trading at 0.8
7.0X P/E, well below the 0.6
regional average 18X P/E 0.4
• LT outlook has also improved
0.2
since STI is now tapping a
bigger market 0
10/19/2014 10/19/2015 10/19/2016 10/19/2017
Knowing What is Priced in: New
& Exciting Businesses

This document is private and confidential,

and may not be distributed without COL’s consent.

Source: Phoenix Copper Corp.

Share price of new & exciting businesses

typically follow this pattern
 Knowing What is Priced in:
BLOOM
18

16
Earnings
14
Est 2013 2014 2015 2016

This document is private and confidential,

12 (PhpBil)
Initial 6.0 8.5 6.7 7.3
10
and may not be distributed without
Latest
COL’s
-1.3
consent.
4.4 -2.1 1.7
8
Actual -1.3 4.0 -3.4 2.3
6
Variance 0.0 -0.4 -1.3 0.6
4

0
 Knowing What is Priced In: DD
DD VLL FLI
Market 80
Capitalization 85.4 79.8 45.8
(PhpBil) 70
Net Income
5.5 7.9 5.2 60
(PhpBil)
This document
Debt/Equity (X) 1.2 1.0 is private
0.9
50
and confidential,
• Net and may
income not than
is less be distributed
that of without COL’s consent.
VLL, but stock is more 40
expensive
30
• Net income is more than FLI,
but FLI’s profit was already 20
booked in 2016
10
• More leveraged than the other
property cos. 0
4/6/2014 4/6/2015 4/6/2016 4/6/2017
 Knowing What is Priced In:
Property Sector
Reasons for our bold call:
• Favorable economic
backdrop
• Divergence of share price
This document is private and confidential,
with land values &
and may
company not be distributed without COL’s consent.
profits
• More concentrated and
disciplined industry to
shorten down cycles
• More significant
competitive advantage over
smaller players vs the past
 Sources of Information

This document is private and confidential,

and may not be distributed without COL’s consent.

PSE Website Company Website

Focus on company Learn more about what the
disclosure, especially company does
17A (annual report)
and 17Q (quarterly Sometimes, the company
report) would have press releases,
presentations available
 Sources of Information

This document is private and confidential,

and may not be distributed without COL’s consent.

COL Financial News Report

Get the views from
your COL analysts
 This document is private and confidential,
and may not be distributed without COL’s consent.
 This document is private and confidential,
and may not be distributed without COL’s consent.
 COL Reports

MARKET STRATEGY
 Semi-annual strategy reports
This document
 Focused is private
on longer and confidential,
term relevant issues
and(past
may six
notmonths,
be distributed
next sixwithout COL’s
to twelve consent.
months)

COLING THE SHOTS

 Monthly strategy reports
 Focused on relevant issues for the month
 COL Reports

COMPANY REPORTS
 Company specific
This document
 Earnings reports is private and confidential,
and may notwith
 Meeting be distributed
management without COL’s consent.

DAILY/WEEKLY
 Summary of both recent economic and company
specific news
 Investment Guide

 Contains most important information on COL’s

coverage list

This document
MOST is privateINFORMATION
IMPORTANT and confidential,
and may not be distributed without COL’s consent.
 Current price and buy below price
 Rating and fair value estimate
 P/E and EPS growth
 P/BV and ROE
 Dividend Yield
 C OL’s Investment Guide

This document is private and confidential,

and may not be distributed without COL’s consent.
 How to Maximize the Value of
COL’s Research Recommendations

CREATE A SHORTLIST OF STOCKS TO BUY

01 This
and may
Ex.document is the
List down all private
stocksand
that confidential,
have a BUY rating and
whose prices still provide an attractive capital appreciation
not be distributed without COL’s consent.
potential

02 DIVERSIFY
Choose companies that belong to different sectors
Ex. One property stock, one bank, one power, etc.
 DETERMINE YOUR PREFERENCES
03 Growth, value or income
• Growth: high EPS growth
• Value: high capital appreciation potential, low P/E, low
P/BV
• Income: high dividend yield
This document is private and confidential,
and may not be distributed without COL’s consent.
Liquidity
• Active traders with large portfolio: go for larger market
cap stocks
• Long term investor: can invest in smaller market cap
stocks

Names
• Major shareholders (Ayala, Aboitiz, Sy, Gokongwei,
MVP, etc)
• Brands (Jollibee, SM, Meralco, etc.)
 This document is private and confidential,
and may not be distributed without COL’s consent.
 Invest for the Long Term
Maximum and Minimum Real Holding Period Returns, 1802-1997
80.0 STOCKS
67 BONDS
Compound Annual Returns (%)

60.0 T-BILLS

41
40.0 35
27
20.0
This document is private
24
18 15
”
and
25 22
17 confidential,
12 12 13 9
and may not be distributed without COL’s consent.
8 11 7 8
0.0
1 -3 -3 3 -2 -2
-4 -5 -5
-11 -10 -8
-20.0 -16 -16 -15
-22
-40.0 -32
-39
-60.0

1 2 5 10 20 30
Years of Holding Period

Stocks outperform all asset classes in the long run

COLing the Shots Model Portfolio
Current Buy Below
Ticker Sector FV estimate
Price Price

SCC Power/Mining 37.05 42.10 52.60

MEG Property 5.66 5.50 6.33

This document is private42.90

and confidential,
46.10 53.07
ALI Property
and may not be distributed without COL’s consent.
MBT Banks 94.50 95.70 110.00

DNL Consumer 10.68 11.00 12.70

BLOOM Gaming 10.16 11.40 13.10

AC Conglomerates 1,020.00 1,007.00 1,158.00

 This document is private and confidential,
and may not be distributed without COL’s consent.