Market Talk (MPI, NIKL, MARC, AP, LRI)

Conglomerate, MPI: Vote of confidence in MER, Part 2. Maintain BUY, raise our NAV estimate to PHP8.80/sh and target price to PHP7.00, increasing both by 4%. 2015F profit improves 5% and growth goes to 6% from flat. Higher stake in MER increases earnings visibility and cash flows to parent.

 Mining: NIKL’s 1Q15 ore sales up 95% YoY. 1Q15 shipment higher by 95% in value. Current weak ore prices factored in 2Q15 estimates but we believe supply tightness will become evident in 2H15. Share price has declined 32% the past two weeks which we believe is unjustified given NIKL’s strong position.

Mining: MARC 2014 results 3.8% higher than forecast. Marcventures Holdings Inc (MARC–BUY) released 2014 results with gross revenues ofPHP2.527b, up 2.8% from forecast, coming from sales volume of 2.1m WMT of nickel ore, in line with our expectation, and bottom line at PHP841m, 3.8% better than our estimate. For 2015, MARC expects to ship out 3.0m WMT of nickel ore as there are no more legal impediments to operation. Guidance is for 50:50 split between high-iron limonite and saprolite.

Power: Commissioning of AP’s Davao coal Unit 2 delayed. Aboitiz Power Corp (AP–HOLD) said the Mindanao-wide blackout on 5 Apr caused damage to auxiliary components of the boiler of Unit 2 of the Davao coal power plant owned by subsidiary Therma South Inc. The affected components include the air-preheater and electrostatic precipitator. The damage will delay commercial operations of Unit 2 by approximately 10 months or until 2016. The commissioning schedule of Unit 1 is not affected. AP expects commercial operation of Unit 1 by end-Jun 2015.

Cement: LRI’s 1.7m MT capacity expansion to be completed this year. Business World reports Lafarge Republic Inc (LRI–HOLD) is set to complete expansion of the Teresa and Norzagaray plants within the year, boosting total cement capacity to over 7m MT. Each grinding mill will contribute an additional 850k MT cement capacity or a total of 1.7m MT. Yesterday, LRI inaugurated the PHP892m new grinding mill in Teresa, Rizal while the new mill in Norzagaray, Bulacan is expected to operate in Dec. The two plants, together with the LRI’s Batangas and Cebu facilities, will be sold to Ireland-based CRH Plc upon completion of the global merger between Lafarge SA and Holcim Ltd. Meanwhile Holcim Philippines Inc (HLCM – BUY) is set to acquire LRI’s Iligan plant with 800k cement capacity and the aggregates business and terminal in Harbour Centre in Manila.

Banks: PBB FY14 net income down 47% YoY. Philippine Business Bank’s (PBB – HOLD) FY14 net earnings plunged 47% YoY to PHP536m. This is 18% lower than our estimate and 7% behind consensus, likely due to higher provisioning and tax expenses. Net interest income went up 29% to PHP2.2b, in line with our forecasts, as PBB’s loans and receivables expanded 29% to PHP41b. Deposits grew 23% to PHP47b, helped by the opening of 16 new branches to bring total network to 116 at end-2014. Pre-provision operating profit fell 26% to PHP969m, as expected, likely due to lower trading income. PBB reported its NPL ratio improved to 1.5% from 2.4% in FY13 as nonperforming loans declined 17% to PH601m. Implied 4Q14 net income is PHP55m, substantially better than the PHP1m profit posted in 4Q13. Meanwhile, PBB declared a 25% stock dividend, subject to stockholder and central bank approval.

- Maybank ATR