As the third quarter earnings season ends, the local stock market is seen to be weighed down by reports of huge damage caused by powerful Typhoon Ulysses as well as concern over other typhoons that may plague the country until the end of the year.
“The unfortunate series of typhoons which hit most parts of Luzon and Visayas will weigh on the market’s fourth quarter story,” said online brokerage firm 2TradeAsia.com.
It noted that, “While the risk tied to these have historically been priced-in given the presence of cyclones during this period of the year, the relative frequency (5 typhoons in two weeks) and intensity (typhoons Rolly and Ulysses being the most powerful storms in the world this year) fans further caution moving forward.”
More damage by typhoons will translate to higher inflation for November and December, especially for food staples and transport.
Power, water, telephone and internet damages will take up extra capital for firms and this can spill over to the first quarter of 2021 depending on when the estimated four to five more typhoons will hit.
Commercial real estate establishments will also have to shell out for repairs, while infrastructure construction and logistics will miss some operating days.
However, 2TradeAsia.com said that, “From an investment standpoint, we are reminded of plays that usually get the windfall for a time after calamities. These include private construction, materials (cement and steel), and consumer durables (cars, appliances, furniture).”
“Note, however, that the rebound may not be as pronounced as in the past, given pandemic-induced poor consumer confidence,” it added.
As investors also look forward to possible recovery in 2021 and 2022, 2TradeAsia.com recommends they buy on dips in the market.
COL Financial is recommending a BUY for DMCI Holdings even though earnings of some of its core businesses have been hit by the pandemic.
“Despite the very poor earnings outlook of the company, we believe that much of the negative
news is already priced-in,” it said adding that the stock is cheap as it is trading at only six times its estimated 2021 earnings.
COL is also optimistic about Concepcion Industrial Corporation because of its “positive long-term growth prospects given its market leading position in the underpenetrated air-conditioning and refrigerator markets and increasing share in the fast-growing laundry market.”
Meanwhile both COL and Abacus Securities Corporation look favorably at Robinsons Land Corporation despite the impact of the pandemic on both its residential and recurring income portfolio.
“We still believe the recovery is underway and should accelerate once mobility restrictions are eased, which we believe will happen soon given the declining daily new cases of COVID-19,” COL said.
For Abacus, a shot in the arm for RLC is its planned launch of a real estate investment trust (REIT) in the middle of 2021 which it expects to boost the valuation given that RLC has the highest ratio of recurring earnings among leading property developers.