Strong earnings, food prospects lift JG Summit

By Marissa Mae M. Ramos
Researcher

JG Summit Holdings, Inc. was among the most actively traded stock last week as investors took note of its robust earnings last year and positive sentiment on its food unit during the enhanced community quarantine (ECQ).

A total of 15.85 million shares worth P866.86 million were traded last week, data from the Philippine Stock Exchange showed.

Shares in the Gokongwei-led company ended at P53.80 apiece on Friday, 1.3% lower than the previous week’s P54.50-per-share finish. Year to date, the stock fell 31%.

Mandarin Securities Corp. Research Analyst Zoren Philip A. Musngi said the stock was active last week due to its “better-than-consensus” full-year earnings last year.

The stock ended at P57 apiece last Wednesday after the earnings report was released, up by 3.6% from previous day’s close.

“Aside from that, trading of JG Summit stock was also boosted by the favorable earnings result and positive investor sentiment on subsidiary URC (Universal Robina Corp.), which saw strong demand on its products in FY 2019 and many investors expect it to improve more in Q1 2020, given the COVID-19 (coronavirus disease 2019) outbreak and the related consumer purchases/hoarding,” Mr. Musngi said in a mobile message.

JG Summit’s consolidated revenues climbed 3.4% to P301.82 billion last year, buoyed by the growth of its airline and banking units as well as gains from its stake in Singapore-based firm United Industrial Corp. Its attributable net income rose 63.1% to P31.29 billion.

For Regina Capital Development Corp. Equity Analyst Anna Corenne M. Agravio, JG Summit’s business segments are in a relatively healthy position in the long term but are still vulnerable to short-term shocks during the pandemic.

“Right now, its banking and snack food units are the most obvious beneficiaries of the ECQ,” she said in an e-mail.

“While those two segments combined are already the majority of the business, [Cebu Air] represents roughly a third of the group’s revenues and with the travel restrictions, [Cebu Air]’s only source of revenue right now is its cargo operations which is only around seven percent of its top line [in the nine months to September 2019],” Ms. Agravio added, noting that “earnings for the full year will likely still be put under a lot of downward pressure.”

Mandarin Securities’ Mr. Musngi said that in a best-case scenario, URC’s net income this year might grow around 25% while Cebu Air would decline more than 50%, which could offset the improvement posted by JG Summit’s food segment.

Net income of URC increased by six percent to P9.8 billion last year, while that of Cebu Air surged 133% to P9.1 billion.

“Rationale is that even though the lockdown is lifted, it is unlikely that people would start traveling to the same levels as before. Cautious sentiment will follow for months regarding consumer habits/spending,” Mr. Musngi said.

Luzon, the largest island in the country, has been on lockdown since March 17 to contain the COVID-19 pandemic. Originally scheduled to end on April 12, the ECQ was extended for two more weeks until April 30 as the total number of COVID-19 cases continues to rise.

The Philippines logged 6,087 COVID-19 cases as of April 18, according to the Department of Health, with 397 deaths and 516 recoveries.

For this week, Mandarin Securities’ Mr. Musngi placed JG Summit’s “immediate resistance” price at P57 while support levels are at P52 and P50.

Meanwhile, Regina Capital’s Ms. Agravio gave JG Summit primary and secondary support levels at P51 and P46 and resistance prices at P58 and P61.60, respectively.