RP economic cycle good for real estate and banking

Online financial services provider, CitisecOnline (Research) is upbeat on the Philippines' property, construction and banking sectors.

These sectors, according to the company are the best sectors to play the pick up of the economic cycle in the country.

CitisecOnline executive vice president Juan G. Barredo was recently here in Cebu to introduce the company's services to the Cebu business community through the Cebu Chamber of Commerce and Industry (CCCI).

Based on the company's Philippine Equity Research-Strategy Report, the prevailing low interest rate environment and the continuous growth in OFW (Overseas Foreign Workers) remittances are expected to spur demand for development properties.

Office values and rents are also on the rise given the growing demand from business process outsourcing (BPO) units and shortage of supply.

"Our top pick is ALI [Ayala Land Inc.] as it has the necessary land bank and financial muscle to capitalize on the strong demand for properties," the report said.

The company strongly believes that the government's plan to aggressively increase infrastructure spending following the improvement in its fiscal position and the strong demand for housing should benefit the construction sector.

The company also revealed its top pick in the banking sector, as it remains positive on the banking sector.

"Banks will continue to aggressively sell bad assets following the extension of the SPV law and given the prevailing high level of loan loss reserves," it said.

Although demand for loans has been weak, "we think that the risk is on the upside, especially for consumer loans, given the prevailing low interest rate environment."

"Our first pick is BDO [Banco de Oro]. It is a re-rating candidate. Aside from being well positioned to capitalize on the favorable operating environment of Philippine banks given its strong balance sheet, it also has the best earnings surprise potential given its rapid growth during the past few years, its outstanding performance during the first nine months of 2005 and its potential merger with EPCI [Equitable-PCI]," the report said.

The company also favored the performance of Ayala-led Bank of the Philippine Islands (BPI), especially in its goal to give out 80 percent of its earnings as cash dividends to stockholders.

Furthermore, the report stated that BPI also has a strong consumer franchise given its huge exposure to consumer lending and extensive branch network. Coupled with its highly capitalized balance sheet, this should improve its ability to grow its consumer lending portfolio.

Likewise, MetroBank in 2005, finally took concrete steps to improve its asset quality. Its recently concluded capital raising exercise is a share price catalyst as it would facilitate faster disposal of non-performing assets and improve the bank's ability to grow its loan portfolio.

CitisecOnline is one of the leading innovators in online stock trading in the country.