For the year ended December 31, 2017, GLO had revenues of PHP 135.28 billion, an increase of PHP 7 billion versus the previous year 2016. Net income, however, dropped to PHP 15.08 billion from PHP 15.88 billion in the year 2016, a 5 percent decrease. Net profit margin stood at 11.15 percent.
One of the drivers for GLO’s strong first quarter performance is the favorable performance of its home broadband business. From this segment, revenues increased by 10.70 percent versus last year, at PHP 4.3 billion from only PHP 3.8 billion in the same quarter in 2017.
Based on the market survey, customers like this service since it does not require a long-term commitment, especially on monthly subscriptions.GLO appears to be caught in a price war with TEL as it has launched more aggressive promos to prepaid subscribers such as GoSurf50, which costs PHP 50 and lasts for three days. In this promo, 2 GB of free data can be used for video streaming applications.
Globe Telecom Inc. Income Statement
The decision was made in retaliation with TEL to prevent the latter from gaining new subscribers. The downside, though, is possible lower top-ups for subscribers and a more significant requirement for CAPEX because of the bigger data usage.
Despite this, GLO is not planning to cut its planned CAPEX for the year amounting to USD 850 million. Moreso, the company is expected to remain at 30 percent of revenues.
However, the CAPEX may be lower in the future as with the entry of third-party tower providers. Globe may merely lease towers rather than build them. The budget for this infrastructures may be used in other value-adding services for customers.
PLDT Inc. Income Statement
For the year ended December 31, 2017, TEL had revenues of PHP 159.93 billion, a decrease of PHP 5 billion versus the previous year 2016. Net income drastically dropped to PHP 13.47 billion from PHP 20.00 billion in the year 2016, a 33.21 percent decrease. Net profit margin stood at 8.36 percent.
For the first quarter of 2018, recurring profits of the company is higher by 14 percent to PHP 6.1 billion due to boost from non-operating gains. This is above consensus estimates. The company’s headline profits grew by 41 percent at PHP 6.9 billion.
Demand for data and home broadband has been picking up and has, so far, been contributing to an increase in data revenues, which is up by 12.8 percent at PHP 18.3 billion. This was enough to counteract the weakness in non-data revenues, which dropped by 5.4 percent at PHP 20.30 billion.
Mobile revenues of the company remain sluggish, which saw a drop of 2.2 percent at PHP 20.6 billion. On a year-to-year basis, subscriber count continues to decline. There were 57.7 million subscribers as of March 2018 versus the 57.90 million subscribers at the end of 2017.
It appears that between the two, GLO is still gaining revenues while TEL is losing. GLO was also able to generate a higher net income versus TEL. The net profit margin of GLO is better than TEL as well.
Both GLO and TEL have a beta coefficient of 1.00. This means that they move with the index almost 100 percent of the time.
TEL has a dividend yield of 5.89 percent while GLO has a dividend yield of 5.91 percent. This leads to a rather indifferent variance in terms of dividends yield.
GLO has a P/E ratio of 13.3, while TEL has a more expensive P/E ratio of 18.26. Both of them, however, are trading below industry average suggesting undervaluation. Between the two, GLO is more undervalued.
In terms of Price to Book Value (P/BV), GLO is trading at 3.23x, while TEL is trading at 2.57x suggesting that GLO appears more expensive. Both of the TELCOS are trading below the industry averages as well.
GLO has a higher return on equity on an annual basis amounting to 24.53 percent, compared to TEL with 14.28 percent. This means that equity holders would have benefited more in investing in GLO rather than in TEL.
In the five-year ROE, GLO generated an annual return of 23.90 percent, while TEL had 19.87 percent. This shows that investing in GLO for the past five years would have given better returns.
On a technical basis, GLO has dropped from around 1900 per share in the start of the year to just around 1652 today. This translates to a loss of about 13.05 percent.
From the peak of 2,724, the stock is now down 39.35 percent. Both the short term and long term trends are on a downtrend. The 200 SMA is an expected resistance, while the 15 EMA, 20 SMA, and 50 SMA are support levels.
Volume is still inconclusive of the support for the trend. MACD is poised for a bullish crossover. RSI is currently at neutral levels. Support is at 1486 while resistance is expected in 1693.
TEL, on the other hand, has dropped from 1593 to just around 1250. A loss of 21.53 percent year to date. From the peak of about 3,476, the stock is now down to 63.52 percent.
The 15 EMA and 20 SMA are bearishly aligned and are acting as immediate resistance on the monthly chart. The 50 SMA is also poised for a bearish crossover with the 200 SMA.
Volume still seems to support a bearish outlook. MACD and RSI are bearish as well. Support is estimated at 1156 while resistance is expected in 1593.
This clearly shows that, despite both stocks registering losses for the past few years, it would still have been better to have invested in GLO rather than in TEL.
Now that a third TELCO is to enter the market, we personally believe that TELCOS should be avoided for now to let the dust settle. Clearly, GLO is a better investment than TEL, but both stocks are currently on a downtrend. Investing in them may just result to short to medium-term losses.
Here’s what our proprietary charts say about GLO.
GLO has a MODERATE RISK level due to its risk percentage of 40.36%.
GLO registered a Net Foreign Buying worth P27,919,125.00 as of July 03, 2018. On a 30-day trading period, GLO is on a Net Foreign Selling worth PHP151,311,645.00.
Trading participants of GLO with a 100% Buying and Selling Activity from Jun-01-2018 to Jun-29-2018 at 03:30PM:
- 5 out of 63 participants or 7.94% of all participants registered a 100% BUYING activity
- 8 out of 63 participants or 12.70% of all participants registered a 100% SELLING activity
- Top 10 Players’ Buying Average: 1611.7333
- Top 10 Players’ Selling Average: 1594.0755
The psychological average price of the top 10 players from Jun-01-2018 to Jun-29-2018 is from 1594.0755 to 1594.0755.
Here’s what our proprietary charts say about TEL.
TEL has a MODERATE RISK level due to its risk percentage of 47.47%.
TEL registered a Net Foreign Selling worth P31,397,735.00 as of July 03, 2018. On a 30-day trading period, TEL is on a Net Foreign Selling worth PHP342,333,205.00.
Trading participants of TEL with a 100% Buying and Selling Activity from Jun-01-2018 to Jun-29-2018 at 03:30PM:
- 21 out of 104 participants or 20.19% of all participants registered a 100% BUYING activity
- 2 out of 104 participants or 1.92% of all participants registered a 100% SELLING activity
- Top 10 Players’ Buying Average: 1249.7622
- Top 10 Players’ Selling Average: 1238.9120
The psychological average price of the top 10 players from Jun-01-2018 to Jun-29-2018 is from 1238.9120 to 1238.9120.
One may consider looking at other industries rather than choosing to invest in TELCOS. But if one is just looking to diversify their holdings and would want to have exposure in TELCOS, GLO might be a better option.
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