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