Daily Edge Summary - 20 May 2014
Core Content Overview
This report provides a summary of financial performance and analyst views for several key companies in the Philippines, focusing on the banking and consumer sectors. It includes financial highlights, earnings forecasts, and market outlooks.
Main Points
PGOLD (PHP42.25) - Consumer Sector
- 1Q14 Performance: Net income declined by 1.9% YoY to PHP943m due to lower interest income. Net sales increased by 14% to PHP18.4b, driven by new store openings. Same-store sales growth (SSSG) remained flat.
- Gross Profit: Increased by 13% to PHP3.2b, but gross margins slightly declined by 18bps to 17.4% due to increased promotional discounts.
- New Stores: 10 new stores (5 hypermarkets, 5 supermarkets) were opened by end-March 2014, out of the 25 planned for 2014.
- Analyst View: Recovery is likely to start in 2Q14. Maintain BUY rating with a target price of PHP50.
CHIB (PHP55.55) - Banking Sector
- 1Q14 Earnings: PHP1.2b, down 35% YoY but in line with expectations. PDB earnings contribution not yet included, expected in 2Q14.
- Lending Growth: Loans increased by 32% in 1Q14, contributing to a 42% rise in net interest income to PHP3b.
- PDB Acquisition: Acquired in February at 2.0x adjusted equity value (PHP919m), adding 78 branches and making CHIB the fifth largest private bank with PHP455b in assets.
- Market Expansion: Launched a money transfer service and plans to introduce a credit card business in 2H14. Maintains a strong traditional Chinese-Filipino market.
- Capital and Ratios: PHP8b fresh capital from a rights offer. Common equity Tier 1 ratio increased to 14.4%, above the minimum requirement. Maintain HOLD rating with an 8% upside to target price of PHP60.
Key Financial Highlights
PGOLD
| Metric |
1Q13 (PHPm) |
1Q14 (PHPm) |
Change (% YoY) |
| Net Sales |
16,093 |
18,385 |
14.2 |
| Gross Profit |
2,834 |
3,204 |
13.0 |
| Net Income |
962 |
943 |
-1.9 |
| Gross Margin (%) |
17.6 |
17.4 |
-0.2 |
| Net Margin (%) |
6.0 |
5.1 |
-0.9 |
CHIB
| Metric |
1Q13 (PHPm) |
1Q14 (PHPm) |
Change (% YoY) |
| Net Interest Income |
2,115 |
3,013 |
42.5 |
| Non-Interest Income |
2,331 |
1,005 |
-56.9 |
| Net Income |
1,797 |
1,163 |
-35.3 |
| Net Interest Margin (%) |
3.13 |
3.13 |
- |
| Cost-to-Income Ratio (%) |
54.4 |
62.7 |
+8.3 |
Key Forecast Changes
PGOLD (2014F and 2015F)
| Metric |
Old 2014F (PHPm) |
Revised 2014F (PHPm) |
Change (%) |
Old 2015F (PHPm) |
Revised 2015F (PHPm) |
Change (%) |
| Net Sales |
87,140 |
87,271 |
0.2 |
98,979 |
98,720 |
-0.3 |
| Gross Profit |
15,471 |
15,261 |
-1.4 |
17,723 |
17,411 |
-1.8 |
| Net Income |
4,563 |
4,580 |
0.4 |
5,429 |
5,391 |
-0.7 |
CHIB (2014F and 2015F)
| Metric |
2013F (PHPm) |
2014F (PHPm) |
Change (%) |
| Net Profit to Common |
5,103 |
5,479 |
+7.4 |
| EPS |
3.57 |
3.45 |
-3.6 |
| Net DPS |
1.20 |
1.00 |
-16.7 |
| PER |
29.5 |
25.5 |
-4.0 |
| P/BV |
1.8 |
1.6 |
-11.1 |
| ROE (%) |
13.6 |
14.1 |
+1.2 |
Market Talk Highlights
- PGOLD: Expected recovery in 2Q14. New store openings boosted net sales, and SSSG is anticipated to improve.
- CHIB: Healthy lending is expected to drive growth. PDB's contribution is expected to be included in 2Q14. CHIB is expanding into the consumer segment with new services.
Analysts
- Head of Research / Economist: Luz Lorenzo
- Analysts: Laura Dy-Liacco, Rommel Rodrigo, Lovell Sarreal, Katherine Tan, Ramon Adviento
The Week Ahead
- Filipino Fund, Inc.
- Petron Corporation
- Anglo Philippine Holdings Corporation
- Filinvest Land Inc.
- Annual Stockholder's Meeting
- Analysts and Investors' Briefing
Earnings and Valuations Summary
| Stock |
Share Price (PHP) |
Target Price (PHP) |
Upside (%) |
Recommendation |
Year |
Net Profit (PHPm) |
EPS (PHP) |
EPS Growth (%) |
PE (x) |
DPS (PHP) |
Yield (%) |
BVPS (PHP) |
P/BV (x) |
Net Gearing (%) |
ROA (%) |
ROE (%) |
| PGOLD |
42.25 |
50.00 |
18 |
BUY |
2014F |
4,580 |
1.66 |
15.7 |
25.5 |
0.30 |
0.7 |
35.03 |
3.4 |
- |
14.1 |
14.1 |
| CHIB |
55.55 |
60.00 |
8 |
HOLD |
2014F |
5,479 |
3.45 |
-3.6 |
16.1 |
1.20 |
1.8 |
35.03 |
1.6 |
- |
14.1 |
14.1 |
| BDO |
88.65 |
93.50 |
5 |
HOLD |
2014F |
22,319 |
6.23 |
0.2 |
14.9 |
1.00 |
2.6 |
140.43 |
1.8 |
- |
1.3 |
13.2 |
| BPI |
88.95 |
93.50 |
5 |
HOLD |
2014F |
20,765 |
5.28 |
-0.1 |
13.8 |
1.00 |
2.0 |
152.17 |
2.0 |
- |
1.6 |
13.2 |
| PNB |
92.95 |
111.00 |
19 |
BUY |
2014F |
5,432 |
0.45 |
-13.7 |
36.7 |
0.45 |
2.0 |
7.14 |
3.1 |
- |
8.2 |
8.6 |
| EW |
31.20 |
31.80 |
2 |
HOLD |
2014F |
2,661 |
2.36 |
-9.6 |
25.9 |
1.00 |
2.0 |
119.85 |
2.0 |
- |
4.5 |
14.2 |
Key Takeaways
- PGOLD's performance in 1Q14 showed a slight decline in net income but strong growth in net sales, with expectations of recovery in 2Q14.
- CHIB's earnings were in line with expectations, with the PDB acquisition expected to boost growth in the second quarter.
- Analysts are optimistic about the consumer and banking sectors, with several stocks showing potential for upside.
- The report also highlights upcoming events such as the Annual Stockholder's Meeting and Investors' Briefing for the week ahead.
