I believe that the economy is consumption driven and companies that are connected to consumption will do very well! Sharing a Bloomberg Philippines interview where I shared my thoughts on the PSEi, the consumption industry and also why CHP had a bounce from 4 Pesos to where it is now.
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Investor Insights 2018 — January 20, 2018
Stock Smarts London — January 26 – 28, 2018
Stock Smarts Dubai, UAE — February 9 – 12, 2018
Stock Smarts Manila — March 3,4,17,18 & 24, 2018
Stock Smarts Davao — April 28 – 29, 2018
Stock Smarts Singapore — May 5 – 6, 2018
Stock Smarts Iloilo — May 12 – 13, 2018
ICON 2018 — May 26, 2018
Where will the PSEi go?
On a valuation level, if the PSEi grows by 10% and the P/E remains at the higher end say 23x I think the PSEi could hit 9,360.
On a sentiment level, news that are factored in and news that people are expecting wont really drag the PSEi further.
Example, the widening trade gap, the USD going above 50, US FED increasing rates, BSP increasing interest rates, inflation increasing but within the BSP range won’t really affect the market negatively. At this point also I think all the effects of martial law, the war on drugs and all the Duterte rhetoric have some how been accepted by investors are in generally part of the game and will be there for the next 4 more years.
On a technical level, this is what I believe.
After the breakout of the PSEi from the 200 day moving average last April 2017, we have never looked back. The breakout from the 200 day moving average dictates how strong of a bullish market we currently have. To people who want to follow the trend they should just watch out for that. As long as we stay above that level for 2018, it will denote has strong and how long the bullish market is. Following that, it tells us that the strongest support level can now be found at 8,100 and as long as we stay above that, even if corrections may happen in the year, which I think will happen, the market will still remain on an upward swing.
Now on a shorter level, I think the shorter support level is now at 8,550, as long as we stay above that the play upward would be still intact and we would see a swing from 8,550 – 8900++ over the midterm. However should we go back and stay above 8,900, the technicals will also confirm that for the short to mid term we have a target of 9,300 for the PSEi and a possible move to go to 10k. This is all under the condition that the support at 8,100, 8,550 and 8900 will all hold.
Possible catalysts to watch out for in 2018:
1. Continued increase of FDI’s as we have seen go growth in 2017.
2. Package 2 of TRAIN
3. Surprise earnings of 15% or more for the general market
4. Full Swing of Build. Build. Build.
5. Tourism boom.
Fundamentally, I think nothing much has changed with the company. Earnings for the first 3 quarters of 2017 still remain to be weak. ROE is just at 2 and even at 5 Pesos, the P/E places it expensive at 38x.
I really think that the current price movement is really based on investors banking on that the stock has dropped so low already and that the optimism that projects get fully implemented for 2018.
On a technical level, it formed support at 4 which when it hit it, it became oversold already. After that the market started to bouce and progress higher. With that I would like to note a resistance at 5. This resistance at 5, is also close to where the 50 day moving average is, sometime December 2017, the stock broke out from that level but with that, it allowed the stock to breakout from the 5 resistance and in doing so also caused the stock to breakout from the more than 13 month downtrend that was plaguing the stock. If CHP stays above 5, on a tech standpoint this places the resistance as our next target price as 6.20.
Failure to hold 5, may cause the stock to retrace down back to 4.
Should the produce positive and shocking earnings per quarter in 2018, I think that would be a catalyst to make it move higher.
On a macroeconomic perspective, I really believe Shakeys will take advantage of the increased disposable income that Filipinos will have this 2018. This is a household name which, is priced higher than JFC. MCDO, etc. As people have more money, spending here will just increase and their expansion is tapping into that income. We have to remember that our Remittances and BPO sector still is at a highbase and this will maintain spending or even help bring it higher.
Annual income has increased each year and that’s something I look at on how sustainable and how much the company is growing. Earnings dipped though for the 3rd quarter of 2017 but we have to see the full years earnings to see if 2017 beat their earnings for 2016.
On a trend perspective, the stock has been sideways since March 2017 and it has been moving from a 12.8 to 14.4 range. For people who are doing quick trades, a buying opportunity at 12.8 would be good and sell at 14.4 this represents a 13% tradable range for the short term. If the stock breaks out of 14.4, I think the stock could go up further to 16.
For people following the trend, just broke out from the 200 day moving average 3 days ago, as long as you buy close to that and the stock holds that level position traders may come in and buy.