From previous projections of an interest rate cut of 0.5 to 0.75 percentage points, it now expects the BSP to lower rates by 0.25 to 0.5 percentage points.
Unicapital’s research team- led by Gavin Lee, Gabriel Aguila, and Wendy B. Estacio-Cruz - said Philippine stocks remain undervalued, especially when compared to markets like the US, where the Dow Jones is at 20 times and the S&P 500 at 22.5 times earnings.
It expects stock prices to rise in 2024, driven by a projected 11 percent growth in corporate earnings.
Main stock picks
Unicapital’s top picks are SM Prime Holdings (target price: P43 per share), AREIT Inc. (P43.20 per share), and Metropolitan Bank & Trust Co. (P81 per share).
SM Prime is trading at a 45-percent discount to its 1-year forward net asset value despite having the highest return on equity.
AREIT offers a 1-year forward yield of 6.2 percent with a total return potential of 18 percent, including an 11.6-percent share price upside and a 6.2 percent 2024 estimated yield.
Metrobank, with its high dividend yield and fastest earnings growth among covered banks, is also poised for further re-rating.
Bullish on property
Unicapital noted that real estate stands to benefit from the anticipated reductions in interest rates, which are likely to lower mortgage rates.
Apart from SM Prime, it has a buy recommendation on Ayala Land with a target price of P40 per share.
Economic outlook
Unicapital sees a 50-basis point rate cut in the second half of 2024, driven by cooling inflation due to the rice tariff reduction.
Additionally, the US Federal Reserve is likely to lower interest rates in September, boosting consumer spending and supporting its gross domestic product forecast of 5.8-6 percent for the year.
What could go wrong?
Unicapital said assumptions can change if interest rates stay higher for longer, and the escalation of geopolitical tensions that would disrupt trade.
