As OFW Remittances Boost Consumer Spending: Foreign broker bets on food, beverage companies

Companies selling food and beverage are likely to post higher earnings this year on strong consumer spending, aided by robust remittances from the nation’s more than eight million overseas workers, according to a foreign brokerage firm.

Macquarie Securities said consumer stocks offer a good investment alternative due to rising private consumption on the back of robust OFW remittances.

The foreign broker firm’s top three picks among consumer stocks include the Gokongwei-owned Universal Robina Corp., food and beverage conglomerate San Miguel Corp., and fastfood giant Jollibee Foods Corp.

"We are positive on the Philippines given the healthy growth of OFW remittances and the expectation of government pump-priming in the second half, indicating the Philippines is well placed for a domestic demand-led upswing in GDP (gross domestic product) growth in the latter half of 2006," Macquarie said.

"The benefit of OFW remittances is spread across property, banks, as well as consumer plays. At this stage, we fail to see a situation that would materially impact OFW remittances over the coming years," Macquarie Securities added.

Among its top three picks, Macquarie said URC has the biggest potential, citing the snacks and drink company’s estimated EPS CAGR (earnings per share compounded annual growth rate) of 22 percent from 2005 to 2008.

Macquarie has an "outperform" rating and a target price of P24 for URC, the food unit of conglomerate JG Summit Holdings Inc.

URC has been aggressively expanding in Asia in line with its goal to become a major player in global markets.

URC manufactures branded consumer foods like Jack & Jill snacks, Great Taste coffee mixes, Cloud 9 and Nips chocolates, Magic Flakes biscuits, XO and Maxx candies, Payless and Nissin noodles, and Hunts canned products and sauces, among others.

It has production facilities in Thailand, Malaysia, China, Indonesia, and Vietnam and sales/marketing offices in Hong Kong and Singapore.

URC is currently the market leader in biscuits in Thailand. In Malaysia, it continued its aggressive growth anchored on its leading positions in coated nuts, potato chips and chocolates.

San Miguel and Jollibee, on the other hand, were given a "neutral" recommendation by the foreign brokerage house.

Data from the Bangko Sentral ng Pilipinas show that remittances from OFWs for the first semester of the year rose 15.4 percent to $6.0 billion.

Overseas workers are a major source of dollars for the country, contributing $10.7 billion last year. The high volume of remittances provides ample supply of dollars, which help prop the peso.

There are more than eight million Filipinos who live and work outside the country due to the lack of high-paying jobs at home.