Fundamental and Stock Analysis of Selected Agro-based Companies Listed in the Philippine Stock Exchange during the Pandemic (2020-2021)

Date

2022

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Abstract

The pandemic made drastic changes in the economy that also affected the Philippine stock market. There were company performances that declined while others were able to move forward with the trend with strong fundamentals and resilient stocks. With this study, the agro-based industry of food, beverage, and tobacco were analyzed according to their company and stock performance using the complementary advantage of fundamental and technical analysis as a guide for stock trading. Through Fundamental analysis, the economic environment of the country and company performances were examined. The former consisted of scanning the macroeconomic indicators involved such as GDP, inflation rate, exchange rate, an government policies. This would help look at the bigger picture and assess the situation that the country is in since the market is connected to the performance of the economy. Meanwhile, the second part of the fundamental analysis was narrowed down to individual companies in the industry. The companies were selected and outperformers were profiled and assessed based on the risks they were subjected into in the industry. In financial ratio analysis, the factors considered were productivity and liquidity of the business. The relative valuation methods such as Price Earnings ratio and Price to book ratio were performed in order to know the intrinsic value of the stock. Through stock analysis using the risk-assessment method, Sharpe Index bases its calculation on the concept of the Capital Market line as a benchmark, namely by dividing the portfolio risk premium by its standard deviation or total risk involved. In this way, the performance of the stock can be evaluated by comparing stock trades to other risk- free investments such as Treasury bonds in order to account whether the stock is outperforming or underperforming during the pandemic in the year 2020-2021. Through Technical analysis, the performance of the stocks were analyzed through th emerging trend, volatility, and oscillation. It involves evaluating the stocks’ moving averages such as Simple, Exponential, and Convergence Divergence, Bollinger bands and Relative Strength Index. This will help investors identify entry and exit point and forecast stock price movements. The combination of the fundamental and technical analysis were used in order to asses performances and help investors navigate the food, beverage, and tobacco industry in the Philippine stock market amidst the pandemic. It served to evince how useful the indicators were in assessing risks associated to the market and making informed decisions for better investments. Eight out of Twenty-eight stocks were chosen assessed among companies in the food, beverage and tobacco industry using the set criteria. It was found that two of the stocks were overvalued and six were undervalued using the Relative Valuation Method. Jollibee Foods Corporation and Emperador’s valuation were above industry standard which made them more expensive than what its originally worth. On the other hand, Century Pacific, Del Monte, D&L, San Miguel Food and Beverage, Ginebra, and Universal Robina Corporation were undervalued and investors can make the most of them. However, undervalued conditions do not necessarily reflect the performance of the company just as how San Miguel Food and Beverage was undervalued but have decreasing margins. Therefore, after conducting Fundamental analysis, in terms of financial performance, 3 companies showed good investment opportunities. Through Stock Analysis using Sharpe Ratio or index, four stocks underperformed namely San Miguel Food and Beverage, Jollibee Foods Corporation, D&L Industries and Universal Robina Corporation. Those that did fairly well were Emperador an Century Pacific, while Ginebra did better, and Del Monte outperformed. Their stock performances were directly related to their financial performance as returns were measured in the course of the 2-year pandemic periods relative to risk-free investment such as Treasury bonds. Through Historical Price Trends Analysis, the selected stocks were compared based on their patterns in order to assess their performances by putting into consideration the reason for their growth and decline and what factors made discrepancies in the general trend. One of the reasons for similarity in historical prices patterns was because they belong to the same industry such as Ginebra and Emperador with 2021 growth attributable to their business models and compliance with government announcements. Second factor was from operations that involve buyer-customer relationships like D&L and Jollibee. Century Pacific and Del Monte generated similar movements as their relatively low prices grew due to good company disclosures, as opposed to stock prices that were already higher than the others like Universal Robina Corporation, San Miguel Food and Beverage, and Jollibee that experienced a decline in prices due to the failure of maintaining profit margins and inefficient strategies. The stock performance results were found to be consistent with the companies’ financial performances and Sharpe values. Through the comparison in the ASEAN stock market scenario, it was found that the Philippine market’s response was directly attributed to the movement of other indices in South East Asia which ultimately affects the agro-based stocks in the industrial sector. Philippines was the recipient of the return spillover from Singapore and it followed the decline after the announcements of COVID-19 in January, forming a dip in February. The trend followed when March started going upwards as a reaction to the production of the vaccines. The Philippine market mirrored movements up to the month of May as a process of market stabilization. This further emphasizes the relationship of the markets and its connectedness could extend for long periods of time with the Philippines being the last to react among the ASEAN markets. This reinforces the idea that financial markets respond to global economic events. By following trends from the ASEAN markets who are sensitive to the shocks can give an idea how the Philippines may fare in the financial market as it mirrors other indices. This is relevant to investors who are looking into diversifying their portfolios for investment opportunities, as well as to policy-makers in order to make planned decisions based on reactions from indices where the PSE is connected to. However, it is also important to know the actual performance of each stock and solidify buying conviction. Using Technical Analysis as supplementary information, the stocks were put into assessment based on the indicators for stock oscillation, trend, and volatility in order to know buying timing and account for its future performance. It was found that five of the stocks gave out buying signals. They were Century Pacific, D&L, Emperador, Universal Robina Corporation, and Jollibee Foods Corporation. Considering the results of Fundamental Analysis, JFC and EMP were overvalued and is not recommended to buy at this point in time. From there, the complementary advantage of Fundamental and Technical Analyses were made in order to come up with good investment decisions in the Philippines Stock market.

Language

English

Location

UPLB College of Economics and Management (CEM)

Notes

Award: Best Special Problem (Agribusiness Management)

Document Type

Thesis

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