Market Talk (RLC, MWC, ABS/ABSP)

Property: RLC’s shows strong results in1QFY9/15. Maintain BUY, raise TP to PHP30.00 and NAV to PHP37/sh. 1QFY9/15 results were strong driven by malls, offices and hotels. Higher NAV was due to recent acquisition of landbank in East Metro Manila. 

Utilities: MWC’s FY14 results broadly in line; Stay HOLD. FY14 results in line with expectations. Maintain HOLD. Decision by arbitration panel on 2013-17 rate rebasing possible by end-1Q15. Growth opportunity in Bulacan bulk water supply project, bid documents may be released within the quarter. 

Media: ABS-CBN Mobile targets 3m subscribers in 2015. The Philippine Star reports ABS-CBN Corp’s (ABS/ABSP – BUY) ABS-CBN Mobile is looking to double its subscriber base to 3m this year, according to a top official of the company. The company has raised its break even subscriber count target to 3m from 2m previously as it has imputed a lower monthly average revenue per unit (ARPU) of PHP65 from the initial target of PHP120. ABS-CBN Mobile ended Jan with about 1.6m-1.7m subscribers. For now, we maintain our forecasts as we believe our PHP1.4b operating loss assumption for ABS-CBN Mobile to be conservative even with the higher break even subscriber count target. 

Power: Other power plants face penalties for violation of “must offer rule”. Apart from Therma Mobile, Panasia Energy, Inc. and the Power Sector Assets and Liaiblities Corp (PSALM) may also face penalties for withholding generation capacity in violation of the “must offer rule” of the Wholesale Electricity Spot Market (WESM) from November-December 2013. The power facilities involved are PSALM’s Casecnan (140 MW) and Malaya (650 MW) plants and Panasia’s Limay (540 MW). 

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Market Talk (MWC, PF)

Utilities: MWC 2014 full year results broadly in line. Manila Water Company (MWC – HOLD) released 2014 full year results. This was broadly in line with expectation. The company posted 2014 full year net income of P5.81bn (+1% YoY) and EBITDA of P11.56bn (+1%). Total revenue grew by 3% YoY to P16.36bn and billed volume in the East Zone concession increased 4% to 449 mcm. Total bill billed volume, which includes operations outside the East Zone grew 12% to 671.2 mcm. With regard to the arbitration proceedings on the 2013-17 rate rebasing determination, we understand there will be a last meeting by the Arbitrational Panel in the last week of the month. The company guided that a decision by the Panel could be forthcoming at the end of the 1Q15.

Consumer: PF sets preferred share dividend rate at 5.66% pa. San Miguel Pure Foods Co Inc (PF – BUY) disclosed yesterday its Series 2 preferred share offering will have an initial dividend rate of 5.6569% pa, lower than the 8% dividend rate of its existing preferred shares. Unless the preferred shares have been redeemed by PF by the end of the fifth year, the initial dividend rate shall be adjusted to the step up rate of 3.75% pa plus the simple average of the closing rate of the seven-year PDST-R2 for three consecutive days ending on the fifth anniversary from the preferred shares’ listing date.

Banks: PDIC to bid out PHP253.9m worth of assets of closed banks. The Philippine Deposit Insurance Corp (PDIC), the country’s deposit insurer, will bid out PHP253.9m worth of assets of banks that have been closed by the central bank and put under receivership. PDIC will sell 115 properties which includes condominium units, parking slots, and other properties. These are located in Davao, Compostela Valley, General Santos City, and Camiguin. 

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Market Talk (GTCAP, ABSP, AP)

Consumer durables: Vehicle sales jumps 19% in January. The auto industry is off to a strong start as the Chamber of Automotive Manufacturers of the Philippines Inc (CAMPI) reported motor vehicle sales jumped 19% YoY to 18,662 units in January. CAMPI sees this as an early indication that industry sales will rise further, as January has traditionally been a slow month. Toyota Motor Philippines Inc, the auto subsidiary of GT Capital Holdings Inc (GTCAP – BUY) once again leads all brands with market share of 46.67%, or 8,709 vehicle sales. For 2015 CAMPI is projecting sales of 272,000 units, to be driven by new product launches and promotion packages. Combined with sales from the Association of Vehicle Importers and Distributors, total industry projection for 2015 is 310,000 units.

Media: ABS-CBN officially launches digital TV service. Top officials of ABS-CBN Corp (ABSP – Buy) yesterday held a ceremonial switch-on event for ABS-CBN TVplus, the company’s free-to-air digital terrestrial TV (DTT) service. This is another pioneering event as the company is the first to offer DTT service in the Philippines. The areas to be covered include Metro Manila, Rizal, Cavite, Laguna, Bulacan, Pampanga, Nueva Ecija, Tarlac, Pangasinan, Benguet, and Metro Cebu. ABS-CBN will also sell digital boxes (to be made available in major retailers) that support DTT at PHP2,500 each. ABS-CBN is targeting for 1m households to avail of the service this year. We believe this to be a positive development. Through DTT, ABS-CBN hopes to address it poor signal quality in certain areas in Metro Manila.

Power: PEMC imposes penalty on Aboitiz Power’s Therma Mobile. In connection to the investigation conducted by the Philippine Eletricity Market Corp (PEMC) with regard to the spike in prices at the Wholesale Electricity Spot Market (WESM) in Nov.-Dec. 2013, PEMC alleges that Therma Mobile (owned by Aboitiz Power Corp., AP-BUY) withheld capacity during this period and violated the “Must Offer” rule and imposed financial penalties amounting to P234.9m on Therma Mobile. However, Therma Mobile is contesting this allegation imposition of the penalty, which is equal to 1% of our 2015 net income forecast for Aboitiz Power.


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Market Talk (SECB, MPI, RWM, BLOOM, MCP)

Banks: No surprise in SECB’s 4Q14 results. Security Bank Corp (SECB) reported FY14 earnings of PHP7.2b, in line with our estimate, and translating to 16.3% ROE, the highest in our coverage. Loans expanded 17% with 3.4% NIM, which boosted net interest income. Upside to FY15 earnings may come from trading gains. Maintain BUY and TP of PHP175 based on 2.0x 2015F P/BV. 

Consumer durables: Philippine vehicle sales outpace ASEAN average. Data from the ASEAN Automotive Federation show that total motor vehicle sales in the Philippines jumped 29% YoY to 234,747 units in FY14, compared with total ASEAN sales which fell 10% to 3,190,208 units. Philippine car sales growth outpaced most of the other ASEAN countries. Sales in Thailand plunged 34% to 881,832, Brunei declined 3% to 18,114, Indonesia dropped 2% to 1,208,019, while Malaysia increased 2% to 666,465. In contrast, vehicle sales in Singapore surged 39% to 47,443 while that of Vietnam’s expanded 35% to 133,588. In terms of production, the Philippines is still the smallest at 88,845 units, a 12% YoY increase, while Thailand remains the top producer at 1,880,007 units, but this is 23% lower. In Indonesia, production climbed 7% to 1,298,523 units while Malaysia produced 596,418 vehicles, 1% lower. Vietnam is the fastest growing producer at 29% expansion to 121,084 units. 

Conglomerates: MPI raises USD200m from top up placement. Metro Pacific Investments Corp. (MPI-BUY) has raised USD200m after a top-up placement of 1.8b shares yesterday. The offering was priced at PHP4.90 per share, a 6.5% discount from last week’s closing price. We think this will be used to pay the remaining balance of the acquisition of a direct stake in Manila Electric Co (MER-HOLD) last June 2014 which amounts to PHP10b.

Gaming: China crackdown on foreign casino marketing. There are reports that China’s government is cracking down on foreign casinos that try to set up marketing operations in mainland China. This is not new as the policy as has been in existence since 2011. Nevertheless, stricter implementation has affected local casino operators such as Travellers International Hotel Group (RWM-BUY), Blommberry Resorts Crop (BLOOM-BUY) and Melco Crown Philippines (MCP-Not rated) in anticipation their marketing operations in mainland China will suffer. However, we gather local casino operators don’t have marketing presence in mainland China. Thus we feel this can be an opportunity to accumulate gaming stocks.

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