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.