Undervalued’ Globe stocks on investors’ radar – analysts

MANILA, Philippines — Investors looking for value stocks should consider buying into telco-to-tech provider Globe Telecom Inc., as the company’s shares are believed to be undervalued despite market advantages.

B.A. Securities Inc. vice president for sales Jofer Gaite yesterday issued a market call of “strong buy” on Globe, encouraging investors to capitalize on the telco’s apparent pricing mismatch.

He said the consensus among market analysts places Globe’s value at P3,620.8 per share, but it is currently trading at just P1,748 a piece, a twofold difference in pricing.

Further, Gaite said Globe is sitting on a number of upside risks that could bolster its valuation in the future. Primarily, it is waiting for the P92.3-billion initial public offering (IPO) of its e-wallet unit GCash, a development that could unlock new value for the telco.

GCash is treading a positive path in the face of a challenging economy, with Globe receiving an equity share of P3.7 billion from the e-wallet in the first half. To date, Globe sources 28 percent of pre-tax profit from GCash.

Moreover, Gaite said the telco is dominating the mobile landscape, as shown in its revenues that have gone up by six percent to P60.4 billion as of June.

Further, H.E. Bennett Securities Inc. market strategist and chief trader Joel de la Peña said Globe may have been posting a profit decline, but this was because of a non-cash accounting element.

Globe booked an 11-percent drop in profit to P11.04 billion in the six months to June, partly due to its reduced stake in GCash to accommodate Mitsubishi Corp.’s investment.

The telco also spent P26.3 billion for capital expenditures, which hiked its debt-to-equity ratio to 2.25 times. De la Peña said the higher capex forced Globe to deal with costlier loans and larger refinancing, dragging the price-to-earnings ratio down to 12.7 times.

Still, Gaite said Globe is one of the most consistent blue chip companies in the Philippine Stock Exchange. It rewards investors with a quarterly dividend of P25 per share, which bears an annual yield of six percent.

For Gaite, Globe represents a classic corporate dichotomy wherein it faces macroeconomic risks from a higher spending bill and maintains some of the best upsides in the industry it belongs to.

Both Gaite and De la Peña believe the market is punishing Globe too much for its loan book, and investors can exploit this by buying into the telco at its undervalued state.