SM Prime Falls as Duterte Nixes Manila Bay Reclamation Projects
SM Prime Holdings, Inc. (SMPH) fell as 5.65% to a low of Php39.65 from Php42.00 in the morning session of January 14, 2020 on news that President Duterte nixed the proposed reclamation projects in Manila Bay. Recall that SM Prime has proposed to reclaim a total of 660 hectares of land in Pasay and Paranaque. In December 2019, the company already received an official notice to proceed from the Pasay City government for the 360-hectare project in the city’s municipal waters. With the current price of land in the Bay City reaching as much as Php300,000 per square meter, the said projects would give SMPH a significant upside.
Just two weeks ago, the stock reached a new all time high of Php43.35. Note that at that price, SMPH’s upside appears to be very limited vis-a-vis its 12-month consensus fundamental target of Php42.63. With its upside from its proposed reclamation projects back in the drawing board at least until 2022, profit taking activities may, therefore, likely occur.
From a technical standpoint, SMPH may continue to pull back following its inability to sustain a recent upside break. Its “failed breakout” may therefore create an “upthrust” that may then send the stock towards its key support at its 200-day moving average. Note that it is crucial for SMPH to keep its head above the 200-day MA as a slip below that may then send it to its next support at the Php34.00 to Php35.00 area. A correction, of course, in SMPH would also take its parent, SM Investment Corporation down to a certain degree with it. Additionally, SMPH and SM are two of the only 6 stocks that are still on an uptrend. With SMPH and SM having a combined weight of 26.23% in the Philippine Stock Exchange Index (PSEi), a correction in the two companies would likewise have the capacity bring down the index with them. SM Investments, by the way, is also trading right at its 12-month consensus fundamental of Php1,063.36, offering it zero upside from a fundamental point of view around its current score.
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*Consensus target price or average target price given by the major foreign and local brokers of various stocks on top of index names are available in our Equity Advisor!
