Philippine Markets Newsletter

This UITF from SEA’s first bank has caught up to the PSEi’s performance thanks to a rebound from the 2020 market selloff…also, DMC tearsheet

August 13, 2021

It took the market selloff in March 2020 for this unit investment trust fund (UITF) to be able to close the gap with the Philippine Stock Exchange Index (PSEi). Moreover, the average Uniform ROA for this UITF’s holdings is 7%, higher than global corporate average returns and its as-reported average of 5%.

Although as-reported metrics would leave investors confused with the fund’s stock picks, Uniform Accounting helps make sense of the fund’s investments.

In addition to examining the fund’s portfolio, we are including the fundamental analysis of one of the fund’s largest holdings, providing you with the current Uniform Accounting Performance and Valuation Tearsheet for that company.

Philippine Markets Daily:
Friday Uniform Portfolio Analytics
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Bank of the Philippine Islands (BPI), founded in 1851, was the first bank in Southeast Asia and is currently the 4th largest bank in the Philippines.

BPI is a universal bank that offers a wide range of financial products and solutions that serve both retail and corporate clients. The bank has over 800 branches in the country. Notably, its subsidiary, BPI Asset Management and Trust Corporation (BPI AMTC), is the largest standalone trust corporation in the country.

BPI offers both commercial and investment banking products and services. Its investment products and services include money market funds, bond funds, balanced funds, and equity funds to cater to the varying risk profiles of their clients.

We’ve analyzed some of BPI’s UITFs before:

This week, we’ll be revisiting the BPI Invest Philippine Infrastructure Equity Index Fund.

The BPI Invest Philippine Infrastructure Equity Index Fund was first established on January 16, 2017. The strategy of this fund is to track the performance of the BPI Philippine Infrastructure Equity Index by investing in a diverse portfolio of stocks in the same weight as the index. The fund invests in companies that derive significant portions of their revenue from business activities related to infrastructure.

Only BPI clients with high or aggressive risk profiles are permitted to invest in the BPI Invest Philippine Infrastructure Equity Index Fund, since this fund is exposed to additional sources of risk which are inherent to equity funds. It is currently invested in up to 99% of selected equities, while the remaining is in cash, time deposits, and money market.

We’ll be taking a look at how this UITF has performed against the PSEi since the fund’s inception until August 9, 2021.


At its inception in January 2017, BPI Invest Philippine Infrastructure Equity Index Fund’s net asset value per unit (NAVPU) was at PHP 100.00. The fund’s NAVPU rose to a peak of PHP 112.29 by September 2017, recording a gain of 12% and slightly underperforming the PSEi’s 13% gain over the same period.

Following this high, the fund’s NAVPU shrank to PHP 84.48 in June 2018 due to international concerns such as Brexit and the US-China trade war. The fund underperformed the PSEi during this period, reporting a 25% loss against the PSEi’s 14% loss.

By June 2019, the fund had rebounded by 19% to a NAVPU of PHP 100.88, before falling once again to PHP 59.27 in March 2020, due to the coronavirus-induced market selloff. The fund incurred a loss of 41%, slightly outperforming the PSEi’s 43% loss.

As of August 9, 2021, the fund’s NAVPU is at PHP 90.77, a 53% gain from the 2020 low, outperforming the PSEi’s gain of 40%.

Since its inception, the BPI Invest Philippine Infrastructure Equity Index Fund has had a cumulative 9% loss, versus the PSEi’s cumulative 8% loss.

As-reported metrics would have investors believe that the fund’s portfolio consists of companies that do not generate economic profit. However, Uniform Accounting reveals the truth behind the companies this fund invests in.

The table below shows the top nine core non-financial company holdings that are part of the BPI Invest Philippine Infrastructure Equity Index Fund. Furthermore, the table presents the fund’s Uniform return on assets (ROA), as reported ROA, and ROA distortion—the difference between Uniform and as-reported ROA.


Most of the companies in the BPI Invest Philippine Infrastructure Equity Index Fund show as-reported ROAs below cost-of-capital levels, suggesting that they are not generating economic profit. Moreover, the fund is generating an average as-reported ROA of 5%, slightly lower than the global corporate average returns of 6%.

However, on a Uniform Accounting basis, this UITF’s holdings have actually delivered stronger returns with an average Uniform ROA of 7%, nearly 1.5x the average as-reported ROA. These companies have strong returns, with most of the companies having Uniform ROAs above global average returns.

The Uniform Accounting framework addresses financial statement inconsistencies attributable to the flaws present in the Philippine Financial Reporting Standards (PFRS). This enables investors to determine the true underlying performance of companies and avoid distorted financial analysis and valuation.

As such, it should not be surprising that when analyzing the non-financial holdings of the BPI Invest Philippine Infrastructure Equity Index Fund, the figures that easily stand out are the large discrepancies between Uniform ROA and as-reported ROA for these companies.

While at a glance, the difference between as-reported ROA and Uniform ROA may not seem that great, the distortion in percentage ranges from -36% to 149%, with Aboitiz Equity Ventures, Inc. (AEV:PHL), Aboitiz Power Corporation (AP:PHL), and Manila Water Company, Inc. (MWC:PHL) having positive distortions of at least 100%.

As-reported metrics understate the profitability of Aboitiz Equity Ventures, suggesting a below-average firm with an as-reported ROA of 3%. In reality, it is an above-average company with an 8% Uniform ROA, more than double its as-reported returns. Prior to the pandemic, it consistently generated returns of at least 10% over the last decade.

Similarly, as-reported metrics understate the profitability of Aboitiz Power Corporation, suggesting a below-average firm with an as-reported ROA of 4% when in fact, it is a high quality firm with a 10% Uniform ROA. It has consistently generated returns of at least 11% since 2010.

Likewise, as-reported metrics understate the profitability of Manila Water Company, Inc, suggesting a below-average firm with an as-reported ROA of 4%. In reality, it is an above-average firm with an 8% Uniform ROA, double its as-reported ROA. It has consistently generated returns of at least 8% over the last decade.

By focusing on as-reported metrics alone, these companies look like anything but profitable businesses.

That said, looking at profitability alone is insufficient to deliver superior investment returns. Investors should also identify if the market is significantly undervaluing a company’s earnings growth potential.


This table shows the earnings growth expectations for the major non-financial holdings of the fund. It features three key data points:

  1. The two-year Uniform earnings per share (EPS) growth represents the Uniform earnings growth the company is likely to have for the next two years. The earnings number used is the value of when we convert consensus sell-side analyst estimates according to the Uniform Accounting framework.
  2. The market expected Uniform EPS growth represents what the market thinks Uniform earnings growth is going to be for the next two years. Here, we show by how much the company needs to grow Uniform earnings in the next two years to justify the current stock price of the company. This is the market’s embedded expectations for Uniform earnings growth.
  3. The Uniform EPS growth spread is the difference between the 2-year Uniform EPS growth and market expected Uniform EPS growth.

On average, Philippine companies are expected to have 5%-6% annual Uniform earnings growth over the next two years. Meanwhile, the BPI Invest Philippine Infrastructure Equity Index Fund’s major holdings are forecasted to significantly outperform that with a 72% projected Uniform earnings growth in the next two years, while the market is forecasting an underperformance with a 3% projected Uniform earnings shrinkage.

All the companies in the BPI Invest Philippine Infrastructure Equity Index Fund have a positive Uniform earnings growth spread except for Globe Telecom (GLO:PHL) and PLDT, Inc. (TEL:PHL). Among these companies, DMCI Holdings, Inc. (DMC:PHL), Aboitiz Equity Ventures, Inc., and Aboitiz Power Corporation have the highest positive Uniform earnings growth spread.

The market is pricing DMC’s Uniform earnings to grow by 15% in the next two years, while sell-side analysts are projecting the company’s earnings to grow by 378%.

On the other hand, the market is pricing AEV’s Uniform earnings to shrink by 2% in the next two years, while sell-side analysts are projecting AEV’s earnings to grow by 160%.

Similarly, the market is pricing AP’s Uniform earnings to shrink by 6% in the next two years, while sell-side analysts are projecting the company’s Uniform earnings to grow by 83%.

Overall, as-reported numbers significantly understate the expected earnings of these companies as shown by the Uniform-adjusted sell-side estimates.

While these firms suffer from the adverse effects of the coronavirus pandemic, dragging down their short-term earnings growth expectations, Uniform Accounting metrics show that these companies have intact business models that should drive economic profitability moving forward.

SUMMARY and DMCI Holdings, Inc. Tearsheet

Today, we are highlighting one of the individual stock holdings in the BPI Invest Philippine Infrastructure Equity Index Fund, DMCI Holdings, Inc. (DMC:PHL).

As our Uniform Accounting tearsheet for DMCI Holdings highlights, the company trades at a Uniform P/E of 11.8x, below both the corporate global average P/E of 23.7x and its historical P/E of 21.5x.

Low P/Es require low, and even negative, EPS growth to sustain them. In the case of DMCI Holdings, the company has shown a 94% Uniform EPS shrinkage in 2020.

Sell-side analysts provide stock and valuation recommendations that poorly track reality. However, sell-side analysts have a strong grasp on near-term financial forecasts like revenue and earnings.

We take sell-side forecasts for Philippine Financial Reporting Standards (PFRS) earnings as a starting point for our Uniform earnings forecasts. When we do this, DMCI Holdings’ sell-side analyst-driven forecast shows that Uniform earnings are expected to grow by 1,970% and 10% in 2021 and 2022, respectively.

Based on the current stock market valuations, we can back into the required earnings growth rate that would justify DMCI Holdings’ PHP 5.73 stock price. These are often referred to as market embedded expectations.

DMCI Holdings is currently being valued as if Uniform earnings were to grow by 15% per year over the next three years. What sell-side analysts expect for DMCI Holdings’ earnings growth is above what the current stock market valuation requires in 2021 but below that requirement in 2022.

The company has an earning power below long-run corporate averages, but its cash flows and cash on hand consistently exceed obligations within five years. Moreover, the company has an intrinsic credit risk of 280bps. Together, these indicate that DMCI Holdings has a moderate credit risk but low dividend risk.

To conclude, DMCI Holdings’ Uniform earnings growth is well above peer averages but it is trading below peer average valuations.

About the Philippine Markets Daily
“Friday Uniform Portfolio Analytics”

Investors who don’t engage in the buying or selling of securities for a living often rely on professionals to manage their own investments within the scope of their investment policies.

With so many funds and managers out there, it can get confusing and difficult to decide which one best suits your needs as an investor.

Every Friday, we focus on one fund in the Philippines and take a deeper look into their current holdings. Using Uniform Accounting, we identify the high-quality stocks in their portfolio which may not be obvious using the as-reported numbers.

We also identify which holdings may be problematic for the fund’s returns that they would need to reconsider from a UAFRS perspective.

To wrap up the fund analysis, we highlight one of their largest holdings and focus on key metrics to watch out for, accessible in our tearsheets.

Hope you’ve found this week’s focus on the BPI Invest Philippine Infrastructure Equity Index Fund interesting and insightful.

Stay tuned for next week’s Friday Uniform Portfolio Analytics!


Angelica Lim
Research Director
Philippine Markets Daily
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