Market Talk (MER, SECB, UBP, SCC, AT)

Utilities: Soft demand results to flat 1Q14 for MER. Manila Electric Co’s (MER) 1Q14 core net income was up 1.6% YoY to PHP4.09b. Top line results were flattish with distribution revenues and energy sales only increasing by 1.3% and 1.7%, respectively. Maintain HOLD with TP of PHP280 for now. (Refer to page 3 for details.)

Banks: SECB 1Q14 earnings up 17%: Security Bank Corp (SECB – BUY) reported net income increased 17% YoY to PHP1.43b in 1Q14, representing 27% of our full-year estimate of PHP5.23b and 25% of consensus forecast of PHP5.75b. This translates to an ROE of 13.8%. Net interest income surged 42% to PHP2.78b on the back of a 39% expansion in loans. This is faster than our FY14 loan growth assumption of 22%. Deposits improved 49% to PHP211b, bringing loan-to-deposit ratio to 79% in 1Q14 from 84% in 1Q13. No other details were provided. Given better-than-expected core income, we estimate NIMs expanded YoY. We believe the bank is on track in building its core lending business to compensate for the anticipated weakness in treasury income. Pending detailed results, we are keeping our forecast and BUY rating on SECB shares.

Banks: UBP declares stock dividend. Union Bank of the Philippines (UBP–HOLD) has declared a 65% stock dividend, equivalent to 416.9m shares or PHP4.17b. Fractional shares will be paid in cash for PHP120/sh on record date to be set upon approval of regulators. The bank increased its authorized capital stock by PHP16.4b with PHP6.4b of common shares and PHP10b of non-voting preferred shares.

Mining/Utilities: SCC declares PHP12/sh cash dividends. In a disclosure, Semirara Mining Corp (SCC – HOLD) declared yesterday regular cash dividends of PHP12/sh, maintaining last year’s dividend payment. All common stockholders as of record date 15 May will be entitled to the dividend payment on 28 May. Based on yesterday’s

closing price, this translates to a dividend yield of 3.0%. The cash dividends are on top of a 2:1 stock dividends amounting to PHP712.5m declared last 6 March.

Mining: AT declares PHP0.15/sh special cash dividend. Atlas Consolidated Mining and Development Corp’s (AT – BUY) Board of Directors approved yesterday special cash dividend of PHP0.15/sh, translating to a 1% dividend yield based on yesterday’s closing price. Record date is set on 14 May with payment date on 9 June.

-ATR