In this briefing:
- Puregold Price Club: Steady Grower with Provincial Expansion Story
- Chunghwa Telecom’s 2019 Guidance Looks Optimistic After Missing 2018 Guidance.
1. Puregold Price Club: Steady Grower with Provincial Expansion Story
- Conference call with the IR of Puregold Price Club (PGOLD PM) reveals that SSSG grew healthily at 6.5% YoY in 9M18, thanks to personal income tax cut.
- The bigger growth driver is provincial expansion (outside Metro Manila), which would allow PGOLD to achieve mid-teen sales growth.
- There has been little to no sales impact from e-commerce as e-commerce penetration in Philippines is lagging even in the ASEAN context.
- PGOLD trades at 18.3x 2019E PE, a 15% discount to peers average of 21.6x
2. Chunghwa Telecom’s 2019 Guidance Looks Optimistic After Missing 2018 Guidance.
Chunghwa Telecom (2412 TT) recently announced very ambitious FY19 guidance targets. While the market may view management’s optimism poistively, we expect this to be very short-lived for two reasons (i) Chunghwa’s 2018 guidance proved to be hopelessly optimistic, eventually missing revenue and EBITDA by a wide margin, and (ii) Chunghwa starts 2019 with a -6% revenue growth. It will be tough to get to the guided 2.4-3.5% growth in 2019. Management seem to be assuming the competitive environment will ease, but the comparables will be very tough in 1H19, and we will not see a repeat of the one-off cancellation fees received in May 2018. The dividend looks to be at risk, and if that is a key concern, we would prefer to own Far Eastone (4904 TT) or Taiwan Mobile (3045 TT) which should keep dividends stable. We to reiterate our Reduce recommendation and slightly lower the target price to NT$86.
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