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Daily Edge Summary - July 1, 2015

Core Content

This document provides a financial update for various sectors in the Philippines, including property, banks, utilities, and consumer, as of July 1, 2015. It includes market data, analyst insights, and upcoming events.

Main Points

Property Sector

• Iloilo's Growth Potential: Iloilo province is emerging as a key area for property development due to its status as a regional commercial, business, and educational hub. It is now a highly urbanized province, attracting major developers.
• Key Developers: Megaworld Corp (MEG), Ayala Land Inc (ALI), and SM Prime Holdings (SMPH) are heavily involved in Iloilo, with MEG having the largest presence.
• Projects in Iloilo:
  • MEG's Iloilo Business Park is a 73-hectare project expected to cost PHP35 billion over 10 years.
  • ALI is involved in Atria Business District and Avida Iloilo, with a total investment potential of PHP15-20 billion.
  • SMPH is expanding SM City Iloilo and is likely to add residential and hotel projects.
  • Double Dragon is building three Citymalls, the Happy Homes residential project, and the Parola Ferry Terminal.
• Analyst View: The property sector is showing increasing geographical diversification, with Iloilo as a prime example. This trend is expected to continue, supporting long-term growth.

Banks

• UCPB Sale on Hold: The Supreme Court issued a temporary restraining order (TRO) on the sale of the government's 73.9% stake in UCPB, which was targeted for sale on September 18. The Privatization and Management Office is still verifying if the TRO affects the privatization process.
• Loan Growth: Loan growth slowed to 14.5% in May compared to 15.4% in April. However, real estate and business services saw a slight increase to 12.9% YoY.
• PBB Acquires ISB: Philippine Business Bank (PBB) acquired 100% of Insular Savers Bank (ISB) for PHP518 million. ISB has eight branches and focuses on consumer and commercial loans. PBB plans to expand its branch network to 152 by the end of the year.

Utilities

• FGEN's Projects: First Gen Corp (FGEN) is in talks with potential partners for three gas-fired power plants and a liquefied gas terminal, totaling USD2.7 billion. The first plant is expected to be operational by next year.
• Power Demand: Energy Secretary Carlos Petilla indicated that power demand will decrease by August due to maintenance shutdowns and lower consumption, with an estimated demand of 8,000-8,200MW.
• Meralco's San Buenaventura Project: Meralco awarded the EPC contract for the 460MW San Buenaventura coal-fired power facility to a consortium of Mitsubishi Heavy Industries and Daelim Industrial Co Ltd. The project is expected to go on stream by 2018.
• PEMC Penalties: PEMC is urged to stand by its decision to impose penalties on power firms that violated the must-offer rule. Penalties were already imposed on several firms, including Therna Mobile Inc (TMO) and Power Sector Assets and Liabilities Management Corp (PSALM).

Consumer Sector

• PGOLD's Acquisition Plans: Puregold Price Club Inc (PGOLD) is finalizing another supermarket chain acquisition worth PHP800 million to PHP1.4 billion, which could boost annual revenues by 4%.
• CNPF's Dividend: Century Pacific Food Inc (CNPF) declared a PHP0.20/sh cash dividend, yielding 1.1% and with a payout ratio of 26% based on last year's earnings.

Key Information

Market Data

• PSEi: 7,564.50, down by 0.04%.
• Turnover (PHPm): 10,682.46, up by 80.95%.
• PLDT ADR (USD): 62.30, up by 1.15%.
• PLDT ADR (PHP): 2,812.04, up by 1.03%.
• Ave interbank rate: 2.56, up by 3.12 bps.
• PHP/USD rate: 45.14, up by 0.14%.

Analysts

• Head of Research / Economist: Luz Lorenzo
• Analysts: Ramon Adviento, Michael Bengson, Rommel Rodrigo, Lovell Sarreal, Katherine Tan

Top Idea

• Property Sector: Iloilo means business! The sector is seen as a key growth area due to its urbanization and development potential. Favorites include ALI, MEG, and SMPH.

The Week Ahead

• July 1: People, Inc.
• July 3: EEI Corporation
• July 9: Top Frontier Investment Holdings, Inc. and Abacore Capital Holdings, Inc.
• Events: Annual Stockholders' Meetings for several companies.

Earnings and Valuations Table (Selected Highlights)

Conclusion

The property sector is gaining traction in Iloilo, with major developers investing heavily. Banks are experiencing a slowdown in loan growth, but some, like PBB, are expanding through acquisitions. Utilities are focusing on long-term projects, including gas plants and terminals, while the consumer sector sees continued growth through acquisitions and dividends. Overall, the report highlights the diversification and growth opportunities across various sectors.