PLDT: Contrarian Opportunity in an Oversold Telecom Leader

The Philippine telecom giant PLDT (PHI) has reached a critical inflection point, offering investors a compelling entry as technical indicators signal an oversold valuation, while structural advantages and strategic growth drivers—most notably Maya Bank's turnaround—position it to outperform. Amid near-term volatility, the stock presents a high-conviction contrarian play for those willing to look beyond short-term headwinds.

Technical Indicators: Oversold RSI Signals Buying Opportunity

PLDT's 14-day Relative Strength Index (RSI) has dipped to 35.95, firmly in oversold territory below the 30 threshold. Historically, such readings have marked attractive entry points for contrarian investors. Pairing this with a dividend yield of 5.58%—already above the Philippine telecom sector average of 3.6%—creates a rare alignment of value and income appeal. While the yield is projected to rise further to 8.9% by year-end, the current valuation offers a margin of safety as the stock trades at a 20% discount to its fair value estimate.

Maya Bank's Profitability Turnaround: A Catalyst for Earnings Growth

Maya Bank, PLDT's digital banking arm, has emerged as a game-changer. After its first-ever quarterly profit in Q4 2024, Maya contributed PHP 127 million to PLDT's net income in Q1 2025—versus a PHP 400 million drag in the prior year. This turnaround was driven by robust loan growth: nearly PHP 28 billion disbursed in Q1, pushing total loans to PHP 120 billion year-to-date. With a 51.1% loan-to-deposit ratio and 6.8 million bank customers, Maya is now the Philippines' largest digital bank by deposits.

PLDT's 40% stake in Maya positions it to capitalize on the bank's PHP 1 billion+ profit target for 2025, fueled by new credit card offerings (already 200,000 issued) and strategic partnerships. This synergy is further validated by Maya's valuation doubling to PHP 3–3.5 billion in three years, underscoring its role as a fintech unicorn.

Structural Advantages: Dominance in Fiber Broadband and Capital Efficiency

PLDT's fiber broadband business remains a moat against competitors. With 1.8 million fiber-to-the-home (FTTH) subscribers, it leads the Philippine market, and plans to invest PHP 68–70 billion in 2025 CAPEX—focused on network expansion—will deepen this advantage. While CAPEX remains elevated, it is strategically allocated to high-growth areas like 5G and enterprise services, which command premium pricing.

The telecom giant's cash flow sustainability is also robust. A 15.4% cash flow payout ratio ensures dividends are comfortably covered, while its 47% earnings payout ratio leaves room for reinvestment. Combined with a dividend history of semi-annual increases, this builds confidence in income stability even as the stock price fluctuates.

Risks and Mitigants

• Near-term earnings pressure: PLDT's Q1 2025 net income dipped 8% due to a “softer market,” but this was offset by Maya's gains.
• Dividend volatility: While payout ratios are sustainable, yield fluctuations (e.g., 5.58% vs. a 2024 peak of 12%) reflect stock price sensitivity.
• Regulatory risks: Philippine telecom policies could impact pricing, though PLDT's scale mitigates this.

Investment Thesis: Buy on Oversold, Hold for Dividend and Growth

PLDT's 5.58% dividend yield and undervalued stock price make it a buy at current levels. The RSI oversold signal aligns with its fair value multiple of 12x forward P/E versus its current 8.8x. Investors should also monitor the Q2 2025 earnings release (July 30) for further Maya updates and capital allocation clarity.

For income-focused investors, the 8.9% yield projection and Maya's earnings catalysts justify a multi-year horizon. Meanwhile, the fiber broadband and digital finance plays position PLDT to dominate the Philippines' digital transformation.

Final Call: PLDT is a rare blend of value, income, and growth in Asia's telecom sector. With Maya's momentum and a robust balance sheet, it offers a compelling contrarian opportunity to buy the dip and hold for the rebound.