Market Talk (SMC, AC, AEV, FLI, BLOOM)

Infrastructure: Government plans to rebid Calax in 2015. The special bids and awards committee of the Department of Public Works and Highways said President Aquino has ordered a rebid of the Cavite Laguna Expressway (Calax) project. San Miguel Corp. (SMC-Not Rated) has said that they would participate in a rebid. On the other hand, Team Orion, a joint venture between Ayala Corp. (AC-BUY) and Aboitiz Equity Ventures (AEV-SELL), has said that they will not join a rebid.

Property: FLI secures approval for retail bond offering. Filinvest Land Inc (FLI-BUY) has obtained approval from the Securities and Exchange Commission to offer PHP7b worth of retail bonds with indicative rates of 5.21%-5.56%. The proceeds of the offering will be used to repay debt and partly finance capital expenditure.

Gaming: BLOOM plans to open retail expansion in stages next year. Bloomberry Resorts Inc (BLOOM-BUY) said they plan to unveil the retail expansion of Solaire Resort and Casino in 2015. The retail area will have 100,000sqm and it will be opened in stages. 

- Maybank ATR

Market Talk (CHIB, MBT, UBP, PF, BLOOM, RLC)

Banks: Strong loan expansion drives CHIB’s earnings. Stock dividend-adjusted TP of PHP51 is at 1.5x 2015F P/BV. We trim net earnings estimates to account for lower funding cost and higher effective tax rates. Maintain HOLD with just 6% upside. 

Banks: MBT closes 2nd tranche of LTNCD offering. Metrobank (MBT– HOLD) closed the offering of seven-year long-term negotiable certificates of deposits (LTNCDs) amounting to PHP6.25b, which was reportedly offered at 4.25% p.a. This came after an PHP8b offering last month, for a total of PHP14.25b LTNCD. MBT can issue up to PHP20b in their LTNCD program until 1Q15 as earlier approved by the central bank.

Banks: UBP finalizes Tier 2 notes issuance of PHP7.2b. Union Bank of the Philippines (UBP – HOLD) has raised PHP7.2b worth of Basel IIIcompliant Tier 2 notes, higher than the original plan of PHP5b due to strong demand. The bonds will have a coupon rate of 5.375% p.a. and will mature in 10 years and three months, with redemption option after five years and three months. This aims to increase UBP’s capital base to support its lending and investment businesses. Capital adequacy ratio

is at 13.4% at end-Sep 2014, well above the central bank’s minimum requirement of 10%.

Consumer: PF to acquire La Pacita biscuits. San Miguel Pure Foods Co Inc (PF – BUY) disclosed it has entered into an intellectual property rights transfer agreement with Felicisimo Martinez & Co Inc last 19 Nov to acquire the trademarks, formulations, recipes and other intangible properties relating to the seller’s La Pacita biscuit and flour-based snack business. Completion of the transaction is still subject to the fulfilment of certain terms and conditions. Among the products offered under the La Pacita brand are variations of crackers, toasts and cookies.

Gaming: BLOOM set to open Sky Tower this weekend. Bloomberry Resorts Inc. (BLOOM-HOLD) plans to open its Phase 1A expansion by 22-23 Nov. The expansion called Sky Tower will have 10 gaming salons with 66 VIP gaming tables and 223 slot machines. There will also be an all-suite hotel, an exclusive Chinese restaurant and whisky and cigar bar for VIP gamers, state-of-the-art meeting rooms and a lyrical theater.

Property: RLC set to turnover Tera Tower in 2015. Robinsons Land Corp. (RLC-BUY) is planning to turnover its office development project called Tera Tower by 3Q15. The building will have 34,500sqm of GLA and a rental rate of PHP650/sqm/month. The project has already been completed and is located along Ortigas Avenue at the corner of C-5 intersection in Quezon City.

-Maybank ATR

Martket Talk (GTCAP, DMC, SUN, MPI)

Conglomerate: GTCAP looking into green energy projects. GT Capital Holdings Inc’s (GTCAP – HOLD) power unit Global Business Power Corp (GBP) is looking to diversify into renewable energy to grow its energy portfolio to 1,000MW in the next five years. GBP is interested in undertaking a joint venture either through biomass or potential geothermal projects, and has started some engineering design and preliminary studies. The company has yet to disclosed a specific location for the said projects. Currently, GBP owns nine power generation facilities in the Visayas and Mindoro Island with combined gross dependable capacity of 624MW. This includes a 246-MW clean coal-fired power plant in Toledo and a 164-MW clean coal-fired power plant in Iloilo.

Conglomerate: DMC core net income reaches PHP7.54b in 9M14. DMCI Holdings Inc. (DMC-Not Rated) reported core net income was  PHP7.54b in 9M14, 6% lower YoY. But revenues were 11.4% higher at PHP45.85b,. No other information regarding the operating performance was disclosed. Meanwhile, DMC reported that Isidro Consunji has been appointed as chairman of the board of directors replacing David Consunji who has retired and has been named chairman emeritus.

Property: SUN undertakes stock rights offering. Suntrust Home Developers Inc. (SUN-Not rated) wll have a stock rights offering which aims to raise PHP20b to fund acquisitions and capital expenditures for expansion. SUN is 44% owned by Megaworld Corp (MEG-BUY).

Banks: NPL ratio went up 10bps to 2.21% in August. Universal and commercial banks’ gross non-performing loans (NPL) slightly went up10 bps to 2.21% in August from 2.11% last month. This is still better than the 2.67% level a year ago. NPL increased 6.3% MoM to PHP101.2b while loan portfolio only inched up 1.7% to PHP4.6t. The central bank reported that NPL levels are still low across economic sectors including financial intermediation, real estate, renting and business activities, manufacturing, wholesale and retail trade and utilities. Banks continue to beef up reserves which rose 1.4% MoM to PHP135.6b. NPL coverage ratio, however, went down to 133.95% from 140.49% last July. 

Infrastructure: Price challenge for SCTEX. The Bases Conversion Development Authority received an order from the office of President Aquino to conduct a price challenge for the Subic-Clark-Tarlac Expressway (SCTEX) concession. The original project proponent and other parties will be given an opportunity to contend for the highest upfront cash which will be paid to the government in exchange for the right to takeover the operation and management of SCTEX. The minimum bid for the upfront cash is set at PHP3.5b which was the amount offered by Manila North Tollways Corp (MNTC), a subsidiary of Metro Pacific Investments Corp. (MPI-BUY).

-Maybank ATR

Market Talk (GMA7, EEI, PIP, MARC, FGEN)

Media: GMA7 posts 20% increase in 3Q14 profits. GMA Network Inc (GMA7/ GMAP – HOLD) posted a 4% YoY increase in revenues to PHP3.1b and 20% net income growth to PHP422m in 3Q14. This brought 9M14 revenues to PHP8.9b, still down 9% YoY in the absence of election-related ads of PHP724m from 9M13 but tracking our PHP12b full-year top line forecast at 74%. 9M14 net income of PHP1b is already 94% of our 2014F earnings forecast. The improvement in 3Q14 came as regular airtime revenues went up 4% to PHP2.8b after declining 6% in 1H14. GMA International likewise posted a 4% increase in revenues to PHP264m mainly on higher subscriber count and favorable forex rate. Total operating expenses were 3% higher at PHP2.6b, driven by the 14% increase in general and administrative expenses that were partly offset by the 5% decline in production costs. Higher gaex was a result of the revised collective bargaining agreement signed in June. We will be coming up with a more detailed but for now maintain our forecasts and target price.

Construction: EEI earnings fell 20% in 9M14. EEI Corp (EEI – BUY) posted a weaker-than-expected 9M14 earnings of PHP496m, down 20% and accounts for only half our FY forecast. Gross revenues continued to be strong as construction contracts increased 44% to PHP10.2b. Service revenues also jumped 25% to PHP703m, coming from the sale of electricity by its subsidiary EEI Power Corp. However, this has lower margins as compared to last year’s manpower services contracts. With a record 40 domestic projects, EEI’s expenses also accelerated by 48%, mainly from frontloaded equipment and mobilization expenditures which are normally high at the start of new projects. In 3Q14, net income fell 21% to PHP153m. We shall provide more details later.

Consumer: PIP earnings rebound in 3Q14. Pepsi-Cola Product Philippines Inc (PIP – BUY) posted a much better 3Q14 performance compared with 1H14. 3Q14 net income went up 13% YoY to PHP139m, rebounding after plunging 50% in 1Q14 and 11% in 2Q14. This brought 9M14 net profit to PHP619m, 21% lower from a year ago. It is lagging full-year expectations with 9M14 accounting for 61% of our PHP1.02b full-year net income forecast. Last year, 9M accounted for 86% of 2013 earnings. The better 3Q14 results were driven by 18.9% increase to PHP2.13b in net sales as volume jumped 17%. This is stronger than the 9.4% net sales increase in 1H14. Carbonated soft drink (CSD) sales grew 17% while non-carbonated beverage (NCB) sales were even tronger, up 23% after posting 3% increase in 1H14. 3Q14 GPM of 24.5% is about 50bps lower YoY, but not as bad compared with the GPM drop of 270bps in 1H14. EBITDA margin improved around 10bps YoY to 11.3%. Margin improvement can be attributed to a price hike in 2Q (full impact in 3Q) as well as improvements in product mix and better volume. We will be reviewing our forecasts and target price and come out with a more detailed report in the next few days.

Mining: MARC 9M14 results in line and cash dividend declared. Marcventures Holdings Inc’s (MARC-BUY) 9M14 earnings of PHP677m is 84% of our full-year forecast of PHP810m. The company did not discuss operations. The MGB suspended operations early this year due to siltation concerns and mining without the correct permit. MARC addressed the concerns and was allowed to fully operate 15 Oct. The work stoppage is the reason for our 2014 earnings downgrade in Oct. A cash dividend PHP0.15/sh was declared with record date of 19 Dec and payment date of 6 Jan. 6. Yield is about 3%.

Utilities: FGEN posted better-than-expected 9M14 earnings. First Gen Corp (FGEN-BUY) reported 3Q14 recurring net income before preferred dividends of USD44.6m (+7% YoY). 9M14 recurring net income before preferred dividends was USD134.9m (+0.1%), equivalent to 103% of our full-year forecast of USD131m. 3Q14 revenue grew 13% to USD490.7m, partly on the back of growth from FGEN’s 50%-owned subsidiary, Energy Development Corp. (EDC-BUY)

Congolerates: Positive surprise in FPH 9M14 earnings. First Philippine Holdings (FPH-BUY) posted 3Q14 net income before dividends of PHP2.20b (+40% YoY). 9M14 net income before preferred dividends was PHP4.74b (+36% YoY), equivalent to 104% of our full year forecast. The company did not yet provide a breakdown of net income by operating units.

- Maybank ATR