Possible reversal for BKD tomorrow

It is possible for BKD to reverse tomorrow and go up. Based on the daily chart below, it closed with a doji candlestick after a downtrend. If you also observe on the chart below, the RSI is pretty much oversold. Also notice that there's a gap above.

Caveat!

Market Talk (BDO, UBP, HLCM, EMP, TA, MARC)

Banks: Strong core operations in 1Q14 for BDO. BDO Unibank Inc’s (BDO – HOLD) 1Q14 net income of PHP5.5b was down 46% YoY, but generally in line with our expectations. We anticipated easing in treasury gains, and these indeed fell 76% to PHP2.2b in 1Q14 from an exceptional 1Q13 trading income of PHP9.2b. Nevertheless, strong performance from the bank’s core businesses supported the bottom line. BDO also declared a special cash dividend of PHP0.90/sh, bringing annual cash dividend to PHP2.10/sh. This is higher than expected and translates to a dividend yield of 2.4%. Management has also set an earnings target of PHP22.8b in FY14, only 0.8% higher YoY and close to our forecast of PHP22.7b. (Details on page 4).

Banks: UBP 1Q14 earnings down on lower trading gains. Union Bank of the Philippines (UBP – HOLD) posted lower-than-expected 1Q14 net income of PHP1.5b, down 61.5% YoY. This accounts for 18% of our FY forecast and 20% of market consensus estimate. Treasury income fell 87.5% to PHP422m from PHP3.4b in 1Q13. However, loans expanded 45% YoY to PHP142.5b, boosting net interest income by 25%. Fee-based earnings also gained traction as it surged 73% to PHP882m. Thrift bank unit City Savings Bank reportedly contributed PHP400m in net profit. For now, we keep our HOLD rating on the bank based on our TP of PHP127/sh.

Cement: HLCM posts 17% profit growth in 1Q14. Holcim Philippines Inc (HLCM – BUY) disclosed its 1Q14 net income grew 17% YoY to PHP1.67b or 33% of our 2014 profit forecast of PHP5.1b. Excluding one-off gains of PHP99m relating mainly to the gain on sale of investment in 1Q13, recurring revenues increased 25%. Total revenues went up 12.4% to PHP8b as overall industry volume grew 8.6% on sustained growth in public and private construction activities nationwide. Operating income grew faster at 25% to PHP2.4b, resulting in a 3pptoperating margin improvement due to production and distribution efficiency enhancements undertaken by the company. We will be coming up with a more detailed report but for now maintain our BUY rating.

Consumer: EMP 1Q14 earnings up 19% YoY. Emperador Inc (EMP – Not rated) disclosed 1Q14 net income of PHP1.7b, up 19% YoY and 25% of Bloomberg consensus profit estimate of PHP6.9b for 2014. Total revenues went up 17% to PHP7.7b from 1Q13’s PHP6.6b on higher volumes. No other details were provided by the company.

Utilities: TA signs PHP500m 10-year note. Trans-Asia Oil and Energy Development Corp (TA – BUY) disclosed it executed last 25 April a PHP500m 10-year fixed rate corporate notes facility. The note was signed with China Bank Corp (CHIB – HOLD) and Banco De Oro Unibank Inc (BDO – HOLD). Proceeds will be used to fund projects and working capital. However, terms of the loan were not disclosed.

Mining: MARC responds to MGB’s mine operations suspension order. In response to the Mines and Geosciences Bureau’s (MGB) suspension of its Carrascal, Surigao del Sur operations, Marcventures Mining and Development Corp (MARC – Not rated) disclosed that contrary to MGB’s claim, the company has validly obtained all the necessary permits from the bureau and its current mine operations in Carrascal are within the approved mining area. MGB argues the 300-ha portion of the contract area approved under the Partial Declaration of Mining Project Feasibility (DMPF) should be situated only in the Cantilan area. However, according to MARC, the said DMPF was issued in connection with Mineral Production Sharing Agreement (MPSA) No. 016-93-XI which covers a total mining area of 4,799 ha and that the DMPF did not state that the 300-ha portion is limited only to the Cantilan area. Likewise, Environmental Compliance Certificates were issued in 2008 and 2013 which represents the entire 4,799-ha area under the MPSA. MARC reiterates it has consistently acted in good faith and has been in constant coordination and compliance with the MGB and the company is set to pursue all remedies available to protect its stakeholders’ interests.

- ATR

Market Talk (SM)

Conglomerates: SEC approves SM’s PHP15b retail bond sale. A BusinessWorld Online article reports the Securities and Exchange Commission has approved SM Investments Corp’s (SM – Not rated) issuance of PHP10b worth of retail bonds with an oversubscription of as much as PHP5b. The retail bonds will have a term of seven and 10 years with indicative yields of 4.7405%-5.8405% pa for the former and 

5.4114%-6.4114% for the latter. Offer period will begin on 30 April and will end on 12 May while the bonds are expected to be issued on 19 May. Proceeds will be used to refinance debt and bankroll expansion projects. 

Market Talk (SECB)

Banks: SECB declares PHP1 cash dividend. Security Bank Corp (SECB – BUY) declared a regular semestral cash dividend of  PHP0.50/sh and a special cash dividend of PHP0.50/sh for a total PHP1/sh cash dividend. Record date is on 7 May, while payment date is on 2 June. We estimate SECB will declare another PHP1/sh cash dividend in 2H14, bringing total dividends for the year to PHP2/sh. Based on yesterday’s closing price, this translates to a 1.8% dividend yield.

Market Talk (PNB, ABC, PBB, ERC)

Banks: PNB earnings down 22% in FY13. Philippine National Bank (PNB – BUY) posted net income of PHP5.1b in FY13, down 22% YoY from PHP6.6b proforma earnings of PNB and Allied Banking Corp (ABC) in FY12. This is lower than our estimate of PHP7.2b and consensus forecast of PHP7b. The decline was mainly due to lower non-interest income (-33.8%) as trading gains fell 42.2% to PHP4.6b while fees and commissions dropped 7.7% to PHP2.4b. Net interest income was flat at PHP13.7b on a 12% increase in loans. In 4Q13, PNB posted net losses of PHP804m due to trading losses of PHP1.6b. We shall provide more details in a later report.

Banks: PBB FY13 net profits rise 53% to PHP1b. Philippine Business Bank (PBB – BUY) turned in net earnings of PHP1b in FY13, up 53% YoY. This is 9% lower than our estimate and consensus forecast of
PHP1.1b. Topline revenues came within expectations as net interest income surged 62% to PHP1.7b. Loan portfolio expanded 51% to PHP31.6b with NIM improvement to 4.52% from 3.84%. Deposits went
up 43% to PHP37.9b and led to loan-to-deposit ratio of 84% from 79% last year. Non-interest income rose 5% to PHP929m as fee income jumped 9% to PHP74m while trading gains climbed 15% to PHP817m. Operating expenses rose 16% to PHP1.4b, led by expansion-related costs such as manpower (+22%), taxes and licenses (+19%) and management fees (+39%). Provisions for credit losses more than doubled to PHP178m. However, provision for income tax came in higher than expected at PHP124m, more than 2x bigger than last year. In 4Q13, net profit only reached PHP1m as bulk (80%) of income tax provision was booked. We shall issue a more detailed report in the coming days.

Utilities: ERC adopts secondary price cap of WESM prices. In a resolution, the Energy Regulatory Commission (ERC) adopted a secondary price cap in the amount of PHP6.245/kWh in the Wholesale Electricity Spot Market (WESM) once the average price threshold of PHP7.808/kWh over a 72-hour rolling period is reached. The cap will be lifted every 12 hours provided that the rolling average is less than the threshold. However, this is still subject to any changes upon the approval of the final WESM offer cap by a tripartite panel composed of representatives from the ERC, WESM operator Philippine Electricity Market Corp and the Department of Energy. The ERC reasoned that the secondary mitigation measure should cater to unreasonably sustained high prices which may be associated with delayed inflow of generation investments for various reasons and even out the interests of suppliers and the consuming public. The proposal is still subject to public consultation. All interested parties have until 22 April to submit comments to the ERC.

-ATR

Market Talk (GMA7, PIP)

Media: No surprises in 2013 GMA7 results. 2013 earnings up 3% to PHP1.67b, in line with estimate. 1Q14 recurring revenues likely to remain flattish. 2014F profit growth maintained at 5%. SELL given 12% implied downside to our PHP7 TP. (Refer to page 3 for more details.)

Consumer: PIP posts 6% increase in net income to PHP903.5m. Pepsi-Cola Products Philippines Inc (PIP – BUY) reported 2013 net income of PHP903.5m, up 6% YoY and tracking our PHP928m estimate. This implies a 21% drop in 4Q13 earnings to PHP123m. Fullyear gross sales grew 16% to PHP26.4b, also in line with our PHP27b forecast and implying 4Q13 growth of 13% to PHP7b. 2013 sales volume rose 20% while cost of sales increased 16% to PHP19.5b, resulting in a 13% growth in gross profit to PHP6b. We will be releasing a more detailed report pending the release of the audited financial statements but for now maintain our BUY rating.

-ATR Kim Eng

PSEI currently moving the upward slope

Last week PSEi closed at 6671 (0.75%) breaking from its previous resistance at 6648. Last few days, we saw a strong bullish signal via Kijun-sen/Price cross followed by Tenkan/Kijun cross which was confirmed on the following days based on the daily chart below. Currently, our index is moving at the center of the upward slope (white lines) and is heading to our next Fibonacci (127.2%) resistance at 6903. But before that, our index needs to break it's previous resistance 6829 last July 25, 2013. RSI is near overbought now and may retrace anytime. We hope that this newly found support at 6648 will hold.

In short,

1st resistance: 6829
2nd resistance: 6903

Newly found support: 6648
Next support: 6491-6447

Caveat.

Market Talk (EW, CHIB, ANS, GMA7)

Banks: EW to issue up to PHP5b preferred shares, plans new ventures. East West Banking Corp (EW – BUY) disclosed yesterday it will issue up to PHP5b worth of preferred shares which will qualify as additional Tier 1 capital under Basel III rules. We estimate this to boost Tier 1 capital by 3pps to 15.7%. Other details have yet to be disclosed. The bank also plans to engage in bancassurance and non-life insurance as well as establish a wholly-owned finance and leasing company.

Banks: CHIB PHP8b rights offering priced at PHP49.50. China Banking Corp’s (CHIB – HOLD) PHP8b worth of rights offering was priced at PHP49.50/sh. Eligible shareholders will get one rights share for every existing 8.83 common shares. This means around 162m new common shares could be offered, increasing total shares by 11% to 1,589m. Proceeds will be used to support CHIB’s expansion plans and hike its capital base in accordance with Basel III regulations. Ex-rights date is on 21 April, record date is on 14 April. Offer period is from 30 April to 7 May.

Conglomerates: ANS profit down 7.5% YoY to PHP1.34b. A. Soriano Corp’s (ANS – BUY) reported net income went down 7.5% YoY to PHP1.34b in 2013, lower than our forecast of PHP1.75b. The company registered a net loss of PHP54m in 4Q13. The decline was primarily driven by lower service revenues and investment gains in 4Q13 which
both went down 41% and 95%, respectively. We will look at the full financials and issue a more detailed report shortly. For now, we have a BUY rating on ANS based on a TP of PHP7.64.

Media: GMA7 posts 3% earnings growth in 2013. GMA Network Inc (GMA7/ GMAP – SELL) disclosed its 2013 net income grew 3.1% to PHP1.67b, in line with our expectation. Total revenues went up 7.2% to PHP13b, 3% higher than our PHP12.6b estimate and implying 4Q13 top line increased 16% to PHP3.2b. Full-year airtime revenues, which accounted for more than 90% of total top line, grew 8.1% to PHP11.7b boosted by PHP724m in election-related ads. Excluding this, regular airtime revenues grew only 1.4% to PHP11b. Subscription and other revenues dropped 1% to PHP1.2b on flattish international revenues and lower theatrical receipts. Total operating expenses went up 7.8% to PHP10.6b driven mainly by higher production costs while general and admin expenses increased by only 2%. We will be issuing a more detailed report but for now maintain our SELL rating on the stock with implied downside of 12% to our PHP7/sh target price.

-ATR Kim Eng

Buy sign for LRW?

LRW was up today with 2.65%. Last candlestick on daily chart below showed a bullish sign. It was able to bounce near support which is 1.13 down to 1.11. RSI also shows a buy sign based on the trend line drawn. Is it really a buy? We'll need a confirmation on the next trading day to be sure. Immediate resistance is at 1.40.

Caveat.

GERI to retest it's support again?

GERI showed some bullishness early morning of Tuesday but later on, the bears were so strong and it closed with a -3.43% at 1.97. Based on the daily chart below, you will see that GERI wasn't able to pass it's resistance at 2.12. This means that it may have to retest its last support at 1.91.  RSI is not yet overbought and all ichimoku indicators are still in green sign. Any pullback may be an opportunity to buy.

Caveat

Market Talk (ABS, CIC, TA, SECB, CHIB)

Media: ABS healthy core business highlighted. Reiterate BUY on biggest Philippine media company. 2013 earnings up 25% in line with expectations. Attractive long-term potential growth from new
businesses. (Refer to page 3 for more details) Conglomerates: AC to issue USD300m exchangeable bonds into ALI common common shares. Ayala Corp (AC – BUY) disclosed last 10 April the pricing of the USD300m 0.50% exchangeable bonds due 2019 offered by its wholly-owned subsidiary AYC Finance Limited. The bonds are exchangeable into ALI common shares. It will bear an annual interest rate of 0.50% payable annually and will mature on 2 May 2019 unless earlier exchanged, redeemed or repurchased. (Refer to page 5 for more details)

Consumer: CIC posts 20% earnings growth to PHP511m. Concepcion Industrial Corp (CIC – BUY) disclosed 2013 net income grew 20% to PHP511m, slightly higher than our PHP492m estimate. This implies 4Q13 earnings growth of 68% to PHP148m. Full-year net sales went up 9% to PHP7.6b, 5% lower than our PHP8b forecast but more than made up by the 2.6-ppt improvement in operating margins to 15.7%. Higher net sales were mainly driven by growth in the residential segment, particularly among first-time buyers and in the replacement market. We will be releasing a more detailed report in the coming days but for now maintain our BUY rating.

Utilities: TA signs PHP2.5b loan facilities. Trans-Asia Oil and Energy Development Corp (TA – BUY) disclosed it signed two loan facilities worth PHP2.5b. It executed a PHP1b five-year term loan agreement with Security Bank Corp (SECB – BUY) and PHP1.5b and a 10-year corporate note facility with China Banking Corp (CHIB – HOLD). Proceeds of the loans will be used for TA’s projects and working capital.

-ATR Kim Eng

Strong bullish sign for TEL?

TEL got a strong bullish sign via kijun-sen cross from Tuesday and was confirmed today. Based on the daily chart below, the immediate resistance is at 2773 and support is at 2741-2740. RSI is 56.8 which is still far from overbought. 

If you notice, there is a gap on the chart (yellow rectangle) that needs to close. The question is.., when? 

Market Talk (FLI, MER, GLO, PX)

Property: FLI FY2014 profit increases 14%; sets 2014 strategy. Filinvest Land Inc (FLI - BUY) announced FY2013 net profit grew 14% YoY to PHP4.0b, in line with our PHP3.98b forecast. Earnings growth was driven mainly by residential and leasing with 66% and 29% contributions in earnings respectively. Of the total revenue 69% came from the core residential affordable and middle-income segments with its 11%YoY increase in sales take-up. 2013 capex of PHP10.6b was mostly spent in real estate development (40%) and land acquisition (41%). Of the latter, PHP3.5b or 33% of capex was for land banking for recurring income. This is in line with the strategy to have strong visibility in office space in areas strategically located throughout Metro Manila and close to transport hubs, apart from growing its core residential businesses. Management highlighted 2014 capex will almost double to PHP20b mostly for recurring business while project launches will be PHP17.5b in 2014 with 22 projects. Maintain BUY and TP of PHP2.20.

Utilities: MER signs another interim power supply agreement. Manila Electric Co (MER – HOLD) disclosed it signed last 8 April an interim power supply agreement (IPSA) with PanAsia Energy, operator of the 620-MW Limay diesel-fired power plant, for the purchase of up to 270 MW. The IPSA is on a non-firm basis and covers the period April to June 2014. Effectivity of the agreement is subject to the final approval by the Energy Regulatory Commission. Recall that last 2 April, MER also announced it signed three IPSAs for a total capacity of up to 204 MW.

Telecom: GLO to issue up to PHP10b preferred shares. Globe Telecom Inc (GLO – HOLD) disclosed its board of directors approved the issuance, offer and listing of up to 20m non-voting preferred shares, worth up to PHP10b. Earlier, GLO had reclassified its unissued common and voting preferred shares into non-voting preferred shares. Terms of the preferred shares issuance were not yet provided.

Mining: PX, Benguet towns reach agreement on PHP200m fine settlement. In a disclosure to the Philippine Stock Exchange, Philex Mining Corp (PX – BUY) confirmed a Philippine Daily Inquirer article
stating the company has already reached some agreements in principle with two towns of Benguet province regarding the settlement of a PHP200m in tax debts dating back to 2002. This relates to the PHP1.3b accumulated business obligation of PX to Itogon town and neighboring Tuba town. Nonetheless according to the company, the parties are still in the midst of finalizing and refining the details of the agreement to facilitate earliest resolution of the matter. We estimate this would potentially cut by 6% our 2014F earnings of PHP3.2b.


-ATR Kim Eng

Will TA pass 2.40?

Yesterday TA went up by 7.84% and got a strong bullish sign via Kijun-sen cross based on the daily chart below. It closed above the 78.6% fibonacci line (2.18) which now acts as its support. Can TA pass its previous high last Oct 31, 2013 which is at 2.40? Look at the RSI (69.58), its now close to overbought. Will it pull back the price? Let's see.

Congrats to those who accumulated TA below 2 pesos on the previous days. :)

Market Talk (LRI, FGEN, AP, GTCAP, JFC, ALI)

Cement: Up on Holcim-Lafarge merger plans.
Lafarge Republic Inc’s (LRI) share price up 10% on Holcim-Lafarge merger announcement. Maintain BUY on under-researched stock. Even if merger does not push through, fundamentals remain solid. (Refer to page 3 for more details)

Utilities: Update on FGEN’s Sta. Rita natgas plant.
First Gen Corp (FGEN – BUY) confirmed that unit 40 (which has a nominal capacity of 250 MW) of First Gas Power Corp’s (First Gas) Sta. Rita combined cycle power plant incurred damages to the internal components of its transformer. Recall that on 28 Feb, FGEN disclosed that unit 40’s main generator transformer protection activated during the start-up process of  the unit upon the completion of its scheduled maintenance outage. FGEN is currently evaluating repair or replacement options for the transformer either of which can be completed by 4Q14. The company also said that First Gas has a spare transformer already in production which can be installed and commissioned by November should it be required for unit 40. In total, First Gas has a nominal capacity of 1,000 MW. In 2013, First Gas posted net profits of USD75m. This is the second transformer-related incident for FGEN in less than a year. Recall that unit 60 (nominal capacity of 250 MW) of FGP Corp’s San Lorenzo combined cycle power plant was offline from May to December 2013 due to a fire on the main transformer. Actual repairs, however, were completed ahead of schedule in Dec 2013 from the original 1Q14 target.

Utilities: AP to more than double capacity of Davao coal plant.
As reported by Business Mirror, Aboitiz Power Corp’s (AP – HOLD) whollyowned subsidiary Therma South Inc (TSI) will increase the capacity ofits Davao coal plant to 645 MW from 300 MW, according to TSI president and CEO Mr. Benjamin Cariaso Jr. Construction fo the first 300 MW is ongoing and is scheduled to be completed in 2015. The first 172.5 MW of the expansion project is scheduled to be completed in 2017, while the second 172.5 MW is targeted in 2018. The expansion of the Davao coal plant was approved by the Davao City council last March.

Auto: Toyota sales up 34% in 1Q14.
GT Capital Holdings (GTCAP – HOLD) subsidiary Toyota Motor Philippines Corp (TMP) reported vehicle unit sales jumped 34% YoY to 22,828 units in 1Q14. Passenger car sales reached 8,340 units while commercial vehicle segment totaled 14,383 units. The robust sales were driven by best-selling Toyota vehicle Vios and were further reinforced by newly introduced models such as all-New Corolla Altis, the new Innova and the new Wigo in 1Q14. Toyota also launched new Yaris subcompact hatchback last 31 Mar. TMP’s 1Q14 unit sales accounts for 26% of our FY estimate of 88,147 vehicles this year.

Consumer: JFC declares PHP0.75/sh cash dividend.
Jollibee Foods Corp (JFC – BUY) disclosed its board of directors approved yesterday the declaration of PHP0.75/sh regular cash dividend to stockholders of record as of 8 May payable on 30 May. Ex-dividend date is set on 5 May. This amount is 15% higher than last year’s regular cash dividend of PHP0.65/sh. We expect total dividends to be declared this year to amount to PHP1.81/sh translating to a 1% yield based on yesterday’s closing price.

Property: ALI appoints new president. The turnover of Ayala Land Inc’s (ALI–BUY) presidency to Bernard Vincent “Bobby” Dy from Antonino “Tony” Aquino was announced in yesterday’s annual stockholders’meeting. The appointment of Bobby Dy as new ALI president assures continuity of the strategy (5-10-15) laid out by Tony Aquino, which aims to sustain growth over the medium-term, that s, in 2009-15. The new strategy continuing from 2015 will be announced in 2H14. In the meantime, the company discussed the (2-3-4) goals which stand for doubling the gross leasable area in commercial space, tripling the office space and quadrupling the hotel rooms based on the 2009 numbers by 2015. Additionally, ALI obtained approval for issuance of 1b common shares to be used mainly for assets or property acquisitions. This approval for 1b shares is only intended to provide enough flexibility to tap the equity market in an efficient manner should there be unplanned large investment opportunities, and at the same time allow ALI to stay within prescribed debt ratios.

Market Talk 4-7-2014

Conglomerates: FPH posts reported net income of PHP2.4b.
First Philippine Holdings Corp (FPH – BUY) announced its full-year 2013 reported net income amounted to PHP2.4b, significantly lower than 2012’s PHP9.55b due to the exclusion of some PHP8.2b one-off gains in 2012 related to the sale of FPH’s share in Manila Electric Co (MER – HOLD) and Rockwell Land Corp (ROCK – Not rated). On a quarterly basis, we estimate FPH booked a reported loss of around PHP1b in 4Q13. To compare, Energy Development Corp (EDC – BUY), a 49%-owned subsidiary of First Gen Corp (FGEN – BUY) which in turn is 66.2% owned by FPH, similarly booked a reported loss in 4Q13 of around PHP610m. Excluding one-offs (consisiting mainly of forex losses and typhoon-related damages), EDC posted a recurring net income of PHP740m. Note that FPH only released a one-paragraph statement so we are still unable to estimate the company’s 4Q13 recurring profit.

Conglomerates: LPZ reported net income reaches PHP1.95b.
Lopez Holdings Corp (LPZ – BUY) disclosed in a one-paragraph statement that its reported net income amounted to PHP1.95b in 2013, down 54% from PHP4.29b in 2012. Implied 4Q13 reported loss reached PHP284m. LPZ’s subsidiary First Philippine Holdings Corp (FPH – BUY) also booked a loss of PHP1b in 4Q13 while its unit ABS-CBN Corp (ABSP - BUY) posted lower reported profits of PHP109m, down 29%. We will issue a more detailed report pending the release of its financials.

Conglomeratates/Utilities: AC to start construction of Mindanao plant in 2H14.
As reported by Business World, Ayala Corp’s (AC – BUY) wholly-owned subsidiary AC Energy Holdings Inc (AC Energy) is targeting the start of construction of a 405 MW coal-fired plant in Northern Mindanao by 2H14. The project is in partnership with Power Partners Ltd Co and consists of 3x135 MW units in Lanao del Norte. However, details such as the construction period and final cost of
investment are still being finalized.

Property: MEG allocates PHP5B to build 10 office towers in Iloilo. 
Megaworld, (MEG -HOLD) the country’s top office developer and landlord, will build 10 office towers in the 72-hectare Iloilo Business Park by 2021. The office towers will provide a total of about 100,000sqm of office space inventory for the biggest cyberpark in Western Visayas, generating approximately 30,000 jobs in the information technology-business process outsourcing (ITBPO) sector. MEG is allocating PHP5b for the office towers in Iloilo Business Park. As part of the first phase of the IT-BPO cluster of the township, three office towers are set to be operational within this year – One Global Center, Two Global Center, and Richmonde Tower. These three towers are already included in our forecast this year and estimated to contribute 1% from start-up in August. Our total rental income forecast for MEG this year is PHP5.4b.

Economy: Airport PPP awarded to GMR-Megawide consortium. 
The Mactan Cebu International airport public-private partnership (PPP) project worth PHP17.52b was awarded last Friday to the consortium of Bangalore-based GMR Infrastructure Inc (GMR) and
construction company Megawide Construction (MWIDE – Not rated). GMR-Megawide offered the highest premium of PHP14.4b among seven bidders in the auction last November. The project involves rehabilitation of the existing passenger terminal and theconstruction of a new one to increase the capacity to 25m passengers. The existing terminal was designed for 4.5m passengers but now serves around 7m a year. GMR expects to take over management of the Cebu airport terminal six months after the 25-year concession agreement is signed.

Economy: March headline inflation confirms downtrend. 
Consumer inflation slowed to 3.9% YoY in Mar, lower than Feb’s 4.1% in Jan as the high-base effect from increased sin taxes on alcohol and tobacco last year wore off and housing and utilities inflation slowed. However, there was still pressure on food and non-alcoholic beverages as prices climbed 5.8%, faster than Feb’s 5.5%. 1Q14 headline inflation averaged 4.1%, higher than 4Q13 of
3.5%. We expect the downtrend to continue, barring extraordinary events, and maintain our 3.7% forecast for the year. The central bank expects 4.2% but we believe they may downgrade their forecast as they have done already twice this year


- ATR Kim Eng

Market Talk (April 4, 2014)

Consumer: URC to invest USD30m in Myanmar. 
In a disclosure to the Philippine Stock Exchange, Universal Robina Corp (URC – BUY) confirmed a Philippine Daily Inquirer article stating the company is investing a total of USD30m in Myanmar to construct a manufacturing facility and build its brands. Earlier in 2013, the company was given the go-signal to operate in Myanmar with estimated population of around 50m after complying with the government requirements. URC also confirmed it is aiming to double last year’s total net sales to USD3b in five years.

Telecom: TEL clarifies acquisition of Philippine Star. 
In a disclosure, Philippine Long Distance Telephone Co (TEL – BUY) clarified that Mediaquest’s wholly-owned subsidiary Hastings Holdings Inc (Hastings) has signed an agreement to acquire additional equity interests in The Philippine Star. After the transaction, Hastings will own 51% interest in The Philippine Star. Mediaquest is a wholly-owned entity of PLDT Beneficial Trust Fund.

-ATR Kim Eng

Market Talk (April 3, 2014)

Media: GMA declares PHP0.27/sh regular cash dividend. 
GMA Network Inc (GMA7/ GMAP – SELL) disclosed its board of directors approved yesterday the declaration of regular cash dividends of PHP0.27/sh to stockholders of record as of 24 April payable on 19 May for common and preferred shares and on 20 May for PDR holders. This implies a dividend payout ratio of around 78% based on our 2013 EPS stimate of PHP0.34/sh. The PHP0.27/sh regular cash dividend is slightly higher than our PHP0.26/sh estimate and translates to a dividend yield of 3.5% based on yesterday’s closing price.

Utilities: MER signs interim power supply agreements for summer. 
Manila Electric Co (MER – HOLD) disclosed that it signed interim power supply agreements (IPSA) with three power companies for a total capacity of up to 204 MW. The IPSAs were intended to address the increase in demand and mitigate exposure to the Wholesale Electricity Spot Market (WESM) during the summer months. In particular, it signed IPSAs with Toledo Power Co (TPC) for up to 28 MW and an option of nine (9) MW. With Panay Power Corp (PPC) the option is up to 27 MW, with both contracts covering 1 April to 30 June period. MER also signed an IPSA with 1590 Energy Corp for up to 140 MW from the Bauang power plant which will become effective upon the final approval from regulators. This will expire on 30 June 2014 but subject to earlier termination or extension.

-ATR Kim Eng

GERI closed above support at 1.90

GERI holds it's support at 1.90 or 23.6% of fibonacci line. Is this support strong enough? If this support will be broken then our next support is at 1.77 to 1.72 to 1.67. Immediate resistance are 2.05 and 2.12.

See daily chart below.

Market Talk (April 2, 2014)

Conglomerates: GTCAP net earnings up 31% to PHP8.6b in FY13. 

GT Capital Holdings Inc (GTCAP – HOLD) posted FY13 consolidated net earnings of PHP8.6b, up 31% YoY. This compares with our PHP8.2b estimate and PHP8.9b consensus forecast. Consolidated revenues leaped 4.6x to PHP105.5b which the company attributed to the consolidation of Toyota Motor Philippines (TMP), Charter Ping An Insurance Corp (CPAIC), and Global Business Power Corp (GBP). Metrobank (MBT – HOLD) posted net income of PHP22.5b, 46% higher YoY. TMP’s net earnings expanded 50% to PHP4.2b, in line with our estimates, while Toyota Manila Bay Corp’s net income jumped 9% to PHP110m. Federal Land’s core net income surged 58% YoY to PHP1b as total revenues soared 85% to PHP7.9b. AXA Philippines grew net earnings 30% to PHP1.2b as premium revenues climbed 49% to PHP18.3b. CPAIC registered net earnings of PHP190m, a 12% decline due to the natural calamities claims late last year. As expected, GBP’s earnings fell 14% to PHP1.9b on continued soft WESM spot prices due to lower peak power consumption as well as damage from calamities last year. We shall review our estimates and issue a detailed report. 

Banks: RCB declares PHP1/sh cash dividend, plans to issue Tier 2 notes.

Rizal Commercial Banking Corp (RCB – BUY) declared PHP1.3b in cash dividends, or PHP1/sh for common and preferred shareholders. This is equivalent to 20.5% payout ratio and translates to 2.1% yield at current price. Other details are waiting for approval of the central bank. RCB also disclosed it plans to issue Basel III compliant Tier 2 notes with a minimum tenor of ten years with a call option on the fifth year. The issuance will be used to strengthen RCB’s capital and to support its expansion plans. Meanwhile, RCB also plans to infuse additional PHP3.5m in Luisita Industrial Park Corp to maintain its 35% stake. 

Telecom: TEL to take majority interest in Philippine Star. 

As reported by BusinessWorld, Philippine Long Distance Telephone Co (TEL – BUY) Chairman Manual V. Pangilinan said that TEL bought an additional 40% stake in the publisher, The Philippine STAR, bringing TEL’s total stake to nearly 60%. PhilSTAR Daily Inc President and Chief Executive Officer Miguel G. Belmonte clarified that the deal is still being finalized as of yesterday but the shareholder agreement was signed last Friday, 28 March. The Belmonte family will retain 20% interest while the balance will still be owned by various minority shareholders. He also said that the purchase price is “just below” PHP5b and includes the group of publications – The Philippine STAR; Pilipino STAR Ngayon, Cebu-based Freeman, Cebuano tabloid Banat, and People Asia magazine.

-ATR Kim Eng

Market Talk (April 01, 2014)

Banks: Strong lending growth sustained at 19.4% in February. 
Lending activities of universal and commercial banks expanded 19.4% YoY to PHP3.8t in February, faster than 17.1% growth in January. In absolute amounts, loans grew by PHP618b YoY. Borrowings from the production sector rose 17.8% with robust growth evident in most sectors. Real estate and business services accounted for 18.5% of lending and went up 20.2%, quicker than 17.3% a month ago.
Electricity, gas and water also grew faster at 34.8% from 29.6% last month, while manufacturing slowed down to 11.3% from 12.7%. Other major sectors also exhibited double-digit growths: Construction (41.6%), trade (18.9%), and financial intermediation (14.5%). Lending to transport, storage and communications which makes up 6.3% of loans cut its five-month losing streak and grew 2.4%. On the consumer front, loans jumped 9.2% from 8.9% rise a month ago. Credit card receivables slowed down to 5.3% from 5.9%, while auto loans inched up by 12.1% from 11.6% last month. Others which include personal and salary loans, expanded 21.1%, faster than from 16.4% a month ago. The central bank expects that with the 1 ppt increase in reserve requirement, bank lending growth should move toward its long-run trend.

Utilities: AP submits highest bid for Naga power plant.
Aboitiz Power Corp (AP – HOLD) disclosed its wholly-owned subsidiary Therma Power Visayas Inc (TPVI) submitted the highest bid for the privatization of the 153.1-MW Naga power plant complex in Naga City, Cebu. Further, Business World reported that there were only two companies who submitted their bids, with TPVI’s PHP1.09b besting SPC Power Corp’s (SPC – Not rated) PHP859m bid. Ayala Corp’s (AC – BUY) AC Energy and Trans-Asia Oil and Energy Development Corp (TA – BUY) who previously hinted interests by attending last month’s pre-bid conference and completing the initial documentary requirements did not sumbit their bids. Official declaration of the winning bidder is still subject to confirmation and verification process. However, SPC has the right to match the bid of TPVI pursuant to its agreement with the National Power Corp and Power Sector Assets and Liabilities Management Corp.

Consumer: Additional details on the URC-Calbee JV.
Universal Robina Corp (URC – BUY) disclosed yesterday the formation of a 50-50 joint venture with Calbee Inc for the manufacture of Calbee snack products in the Philippines with expected start of business in 2015. Initial paid-in capital of the JV company would be approximately PHP654m while target annual net sales is at PHP2b by 2020. The agreement is still subject to the board
approvals of both companies and approval of the terms of related-party agreements.

Cement: LRI posts 30% earnings growth in 2013. 
Lafarge Republic Inc (LRI – BUY) disclosed 2013 net income of PHP3.7b, up 30% YoY but slightly lower than our PHP3.9b estimate. Implied 4Q13 profits declined 18% to PHP695m. 2013 net sales grew 16% to PHP23b, slightly below our PHP24.5b forecast and implying 4Q13 revenues were flattish at PHP5.3b. Topline growth was driven by increased demand from both private and public sectors. The company also indicated higher cost of sales due to increased power costs, raw materials and logistics expenses but these were partially offset by the utilization of local coal and other alternative fuel and continuing operational efficiencies. We will be issuing a more detailed report on LRI pending the release of the 2013 financial statements.

Mining: AT looking at 42% growth in 2014 copper production. 
In a disclosure to the Philippine Stock Exchange, Atlas Consolidated Mining and Development Corp (AT – BUY) confirmed a Philippine Daily Inquirer article stating that the company expects to grow its copper concentrate production this year by up to 42% to 130m lbs, in line with our 131.8m lbs forecast. This will be supported by the expansion of the average daily milling capacity of
AT’s flagship project Carmen Copper Corp to 60,000 tonnes per day which was achieved in late March and is expected to stabilize this month.

-Maybank ATR