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Daily Edge Summary - July 6, 2015

Core Content

The document provides a summary of market activities and stock performance for the Philippines, including key financial metrics and analyst insights for specific companies. It highlights the performance of the PSEi index, the turnover, and exchange rates, followed by detailed analysis of telecoms, utilities, and property sectors.

Key Financial Metrics

Analysts

The following analysts are associated with Maybank ATR Kim Eng:

• Luz Lorenzo: (632)849 8836 | luz_lorenzo@maybank-atrke.com
• Ramon Adviento: (63) 28498845 | ramon_adviento@maybank-atrke.com
• Michael Bengson: (63) 28498840 | michael_bengson@maybank-atrke.com
• Rommel Rodrigo: (632) 849 8839 | rommel_rodrigo@maybank-atrke.com
• Lovell Sarreal: (632) 849 8841 | lovell_sarreal@maybank-atrke.com
• Katherine Tan: (632)849 8843 | kat_tan@maybank-atrke.com

Top Idea: Property Sector

Ayala Land Inc. (ALI)

• Share Price: PHP36.80
• Target Price: PHP48.63
• Upside: 32%
• Recommendation: BUY (Unchanged)

Key Points

• The target price and NAV have been raised to PHP48.63 and PHP54.03, respectively, due to the inclusion of five new mixed-use estates.
• These projects are expected to contribute to ALI's 2020 Vision strategy, enabling it to reach PHP40b net income by 2020.
• The analyst conducted site visits and met with industry leaders to validate the potential of the BPO sector in supporting ALI's residential sales.
• Earnings growth is projected to increase, with a CAGR of 22% from 2014 to 2019, surpassing the target.
• Capex assumptions for 2015-2017 are increased by 13-28%.
• ALI is expected to generate PHP17-29b in operating cash over the next three years, which should cover its debt maturities.
• Leverage ratios are projected to increase to 0.90x net D/E in 2016 and 2017, with no debt covenants restricting borrowing.

Market Talk

Telecoms

• GLO takes over 54% of Bayantel: The NTC approved GLO's conversion of its debt holdings into equity, resulting in GLO owning at least 54% of Bayantel.
• GLO holds ~96.5% of Bayantel's financial indebtedness, which is equivalent to USD423.2m.
• After the conversion, Bayantel's debt will be reduced to USD131.1m.
• The acquisition is expected to be marginally EBITDA-accretive.
• GLO will gain more frequencies, particularly in the 1,800 megahertz band.
• Bayantel has an 83% capacity interest in the National Digital Transmission Network, the only major alternative telecom backbone in the country.

Utilities

• MRAIL bags MRT3 power supply: MRAIL Inc, a unit of MER-HOLD, was awarded a PHP43.23m contract to maintain the MRT3 power supply and overhead catenary systems for six months.
• The contract is part of a multi-disciplinary approach to improve efficiency before a long-term provider is selected.
• The DOTC is still seeking approval from the Government Procurement Policy Board to proceed with an alternative procurement method for the three-year maintenance contract, after two failed biddings.

The Week Ahead

The following companies are scheduled to report earnings:

• July 9: Top Frontier Investment Holdings, Inc. | Abacore Capital Holdings, Inc.
• July 10: Steniel Manufacturing Corporation | 2GO Group, Inc.
• July 13: National Reinsurance Corporation of The Philippines
• July 14: Coal Asia Holdings, Inc.
• July 15: Easycall Communications Phils., Inc. | Concepcion Industrial Corporation
• July 16: Robinsons' Retail Holdings, Inc. | RFM Corporation
• July 17: Petroenergy Resources Corporation | Island Information and Technology, Inc.
• July 17: Iripple, Inc. | Macroasia Corporation

Earnings and Valuations Table (Summary)

Banks

Consumer

Property

Utilities

Key Information

• ALI is expected to meet its 2020 Vision goals with new projects contributing significantly to its earnings.
• GLO acquires 54% of Bayantel, which will be marginally EBITDA-accretive and increase its frequency holdings.
• MRAIL wins a contract to maintain MRT3 power supply, with the DOTC seeking approval for an alternative procurement method.
• The PSEi experienced a slight decline in value, and the turnover dropped by 31.88%.
• Debt and Leverage: ALI is expected to fund new projects through debt, increasing leverage ratios.
• Operating Cash Flow: ALI is projected to generate significant operating cash over the next three years, which will be used to cover long-term debt obligations.
• Earnings Growth: Strong CAGR projections for ALI and other companies indicate sustained growth in the medium term.
• Valuation Metrics: Various valuation ratios such as P/E, P/BV, and EV/EBITDA are provided, reflecting the analysts' views on stock valuations.

Conclusion

The report outlines a positive outlook for the property and utilities sectors, with Ayala Land Inc. (ALI) leading the charge. Analysts have raised target prices and maintained BUY recommendations due to expected earnings growth and strategic projects. In the telecom sector, Globe Telecom's acquisition of Bayantel is seen as a significant move that may enhance its market position. The document also highlights the upcoming earnings reports and provides key financial insights for various companies.