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Daily Edge Summary - 11 March 2014

Core Content Overview

This document provides a market update and analysis for key stocks in the Philippines, focusing on financial performance, analyst views, and future outlooks for the banking, utilities, and property sectors. It includes updates on stock prices, target prices, and performance metrics for various companies, along with insights from analysts at Maybank ATR Kim Eng.

Key Market Indicators

• PSEi: 6,487.23, up 0.08%
• Turnover (PHPm): 6,193.02, down 24.30%
• PLDT ADR (USD): 62.76, down 0.70%
• PLDT ADR (PHP): 2,795.96, down 0.32%
• Ave interbank rate: 2.03%, no change
• PHP/USD rate: 44.51, down 0.17%

Top Idea: Utilities Sector - FGEN (PHP18.16)

Key Points

• Analyst: Laura Dy-Liacco
• Rating: BUY (unchanged)
• Target Price (TP): PHP20.35 (up 20% from previous estimate)
• Reason: EDC (Energy Development Corp) upgrade leads to higher TP for FGEN. The pace of restoration of EDC's power plants has exceeded expectations, prompting a 70% increase in 2014 profit forecast for EDC and a 20% increase in TP.
• Earnings Estimate for FGEN: 2014 adjusted earnings to common (USD84m), up 77% from previous estimate.
• NAV/sh Estimate: PHP20.35 (up from PHP17)
• Performance: FGEN's share price has risen 38.9% YTD, outperforming the PSEi (10.1% rise). However, it still hasn't fully recovered from its 41.4% drop in 2013.

Market Talk

BDO (PHP84.25)

• Analyst: Luz Lorenzo
• Rating: BUY (unchanged)
• Target Price (TP): PHP88.00
• Key Points:
  • BDO held an analysts' briefing to discuss FY13 results.
  • Loan growth is expected to be low to mid-teens (15% assumed for FY14), slower than peer targets.
  • Deposit growth is projected to normalize at low double-digits.
  • Trading and FX gains are expected to revert to a mean of PHP4b.
  • The bank's Common Equity Tier 1 ratio is adequate for Basel III compliance.
  • BDO plans for organic growth with 51 new branches in 2014.
  • M&A opportunities may be considered to strengthen market position.
  • Current shareholders are prepared to fund potential developments.

MBT (PHP81.65)

• Analyst: Luz Lorenzo
• Rating: HOLD
• Target Price (TP): PHP88.00
• Key Points:
  • MBT will issue 10-year Tier 2 notes in PHP, with an early redemption option after 5 years.
  • Notes are Basel III-compliant and will replace older debt.
  • Proceeds will be used to manage capital in anticipation of growth.

Property Sector: Vista Land (VLL)

• Net Profit (2013): PHP5.1b, up 15% YoY and in line with forecasts.
• Real Estate Sales Revenue: PHP20.0b, up 23% YoY, driven by Communities Philippines and Camella Homes.
• Real Estate Inventories: Increased by 5% to PHP15.5b.
• Key Financial Highlights (2013):
  • Real estate revenue: PHP20.0b
  • Interest income: PHP263m
  • Miscellaneous net: PHP224m
  • Total revenue: PHP5.438b
  • Total expenses: PHP4.141b
  • Net income: PHP1.277b, up 22.1% YoY.

Valuation Table (As of 10 March 2014)

The Week Ahead

• 11 Mar: Ayala Corporation Analysts' and Investors' Briefing
• 12 Mar: Aboitiz Equity Ventures Analysts' and Investors' Briefing
• 12 Mar: Aboitiz Power Corporation Analysts' and Investors' Briefing

Key Analysts

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

Summary of Key Insights

• FGEN's TP and earnings estimates have been upgraded due to improved performance of EDC.
• BDO's FY14 loan growth is expected to be lower than peer targets, but deposit growth and organic expansion are emphasized.
• Vista Land reported strong net profits and real estate sales, with a focus on low-cost housing segments.
• MBT is issuing new Tier 2 notes to strengthen its capital base.
• Analysts suggest that market sentiment is positive for several sectors, with BUY ratings and rising target prices.