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Daily Edge Summary - 13 February 2014

Core Content

This document provides a financial overview of key companies and market insights for the Philippines on 13 February 2014. It includes barometer data, analyst notes, and market highlights, with a focus on the performance of Universal Robina Corp (URC) and Robinsons Land Corp (RLC), as well as other sectors such as banks, property, and consumer goods.

Main Points

Barometer Data

• PSEi: 6,112.31 (+0.10%)
• Turnover (PHPm): 7,865.91 (+15.15%)
• PLDT ADR (USD): 59.60 (-0.03%)
• PLDT ADR (PHP): 2,671.87 (-0.55%)
• Ave interbank rate: 2.00 (0 bps change)
• PHP/USD rate: 44.96 (+0.11%)

Analysts

• Head of Research / Economist: Luz Lorenzo
• Analysts: Laura Dy-Liacco, Rommel Rodrigo, Lovell Sarreal, Katherine Tan, Ramon Adviento

Top Idea: Consumer Sector - URC (PHP122.80)

• Rating: BUY (unchanged)
• Target Price: Raised to PHP160 from previous estimates
• Performance:
  • 1QFY9/14 operating income surged by 42% YoY to PHP3.3b
  • Revenues increased by 13% YoY to PHP22.7b
  • Net earnings (excluding mark-to-market and forex gains/losses) rose by 21% YoY to PHP2.83b
• Key Drivers:
  • Strong performance in domestic branded consumer foods group (BCFG)
  • Margin improvement to 15.5% (366bps increase)
  • Management guidance for mid-teen full-year growth
• Dividend: Likely another dividend after PHP3/sh this quarter due to healthy net cash balance

Market Talk

Property Sector - RLC

• 1QFY9/14 Net Income: PHP1.03b (-13% YoY), lower than estimates due to one-time write-offs (PHP319m) from typhoon Haiyan and fire incident
• Without Write-Off: Net income would have been 13% higher YoY and 5.6% higher than estimates
• Rating: BUY (unchanged)
• Target Price: PHP25.66
• Key Highlights:
  • Commercial centers revenue grew 10% YoY due to new provincial malls
  • Office revenue only rose 1% YoY as no contract escalation
  • Opening of Cyberscape Alpha and Beta buildings expected to increase net leasable space by 41%
  • Residential division contributed 38% to consolidated revenue with 39% YoY increase
  • Hotel revenue increased 1% YoY, with average occupancy rates under 70%

Consumer Sector - EMP

• Investment: EMP invests PHP3.7b for a 50% stake in Bodega Las Copas SL in Spain
• Company: Fully-integrated brandy production company with vineyards, distillery, and production premises

Conglomerates - AEV

• Divestment: Completed the sale of shipping-related businesses to multiple entities
• Transaction Value: USD8.3m
• Strategy: Focus on core businesses (power, financial services, food, real estate, infrastructure)

Utilities - Malaya Plant

• Designation: Designated as a must-run unit (MRU) in WESM
• Purpose: To reduce capacity gap and stabilize power prices
• Criticism: Previously criticized for not operating during a shortage in November

The Week Ahead

• 18 Feb: Manila Water Company
• 19 Feb: Roxas Holdings, Inc.

Earnings and Valuations Table (as of 12 February 2014)

Key Insights

• URC showed strong performance in 1QFY9/14, with significant increases in operating income, revenue, and net income, outperforming expectations.
• RLC faced a one-time write-off that impacted its net income, but the company is expected to improve in the remaining quarters with new mall openings and the launch of Cyberscape Alpha and Beta.
• AEV has focused on divesting non-core businesses to concentrate on power, financial services, food, and real estate.
• Malaya Thermal Power Plant was designated as a must-run unit to address power supply issues and stabilize prices.
• Market Outlook: The document highlights potential earnings and valuation changes across various sectors, emphasizing growth, margin improvements, and dividend expectations.

Summary

The report presents a comprehensive analysis of financial performance and market expectations for key Philippine companies, with a focus on URC and RLC. URC delivered strong results, with a 42% YoY increase in operating income and margin improvements. RLC faced a one-time write-off, which reduced its net income, but the company remains a BUY with positive outlook due to future mall openings. The document also covers other sectors, including banks, property, and consumer goods, providing insights into earnings, valuations, and strategic moves.