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Daily Edge Summary - 26 February 2014

Core Content

The document provides an overview of the Philippine Stock Exchange Index (PSEi) performance and insights from Maybank ATR Kim Eng analysts regarding the market and specific sectors. It highlights the impact of domestic liquidity and economic fundamentals on the equity market, despite ongoing foreign outflows. Additionally, it includes updates on several companies, their financial results, and strategic moves.

Main Market Overview

• PSEi: The index closed at 6,295.55, up 7.1% year-to-date (YTD), despite a net foreign selling of PHP2.5 billion.
• Domestic Liquidity: The PSEi's rise is attributed to abundant domestic liquidity from SDA funds unwinding, which is flowing into the equity market.
• Economic Fundamentals: The domestic economy remains robust with a current account surplus that has widened, even with strong domestic demand.
• GDP Forecast: A 6.8% GDP growth is forecasted for the year, which supports earnings and the market's performance.
• Central Bank Policy: The central bank has not raised its policy rate due to the country's sizeable international reserves, which help smooth out currency market volatility.

Key Sectors and Companies

Banks

• MBT: Reported a 46% YoY increase in net income to PHP22.5 billion, with pre-provision operating profit of PHP41.6 billion. Net interest income increased by 24%, and non-interest income surged by 55%.
• SECB: Plans to enter a joint venture to offer insurance products, aiming to boost retail banking to 30% of net income and 40% of loan portfolio within two years. The bank plans to add 24 new branches.
• PSB: Net income increased by 29% YoY to PHP2.9 billion, though 4Q13 showed a net loss of PHP240 million. MBT holds a 76% share in PSB's earnings.
• BDO, BPI, CHIB, EW, MBT, PNB, RCB, UBP, RRHI, CIC, PGOLD: These banks are listed with their respective financial metrics, including share prices, target prices, upside potential, and earnings growth.

Consumer

• DELM SP/DMPL PM: Results were in line with expectations, with recurring profit at USD33.9 million and sales growth in S&W segment. The acquisition of Del Monte Foods is expected to drive future growth.
• JFC: Formed a joint venture with Golden Crown Foods LLC to operate Jollibee stores in UAE, with Golden Plate owning 49% and Golden Crown Foods 51%.
• URC: Net income increased by 21% YoY to PHP2.83 billion, with strong performance in its core business.
• DMPL: Del Monte Pacific Ltd reported results in line with expectations, with management optimistic about the acquisition of Del Monte Foods.

Property

• RLC: Set to open two new shopping malls in September 2014, bringing the total to 37 shopping centers. The company is expanding its mall portfolio significantly, with seven malls scheduled for opening in FY9/14.

Strategy Highlights

• The PSEi's rise is supported by domestic investors and the economic fundamentals.
• Despite foreign portfolio outflows, the domestic market remains resilient due to strong economic performance and liquidity.
• Analysts suggest that the current account surplus and international reserves are key factors in the country's ability to withstand capital outflows.
• Positive corporate earnings, particularly from major players like URC and ALI, are also contributing to the index's performance.

Key Events

• 25 Feb: Del Monte Pacific Limited analysts' briefing.
• 26 Feb: Roxas and Company, Inc. Annual Stockholders' Meeting.
• 30 Feb: Third-round auction for the Naga power plant complex.
• 3 Mar: Expected auction date for the Naga power plant complex.

Summary Table

Conclusion

The PSEi has shown resilience despite foreign outflows, driven by domestic liquidity, robust economic fundamentals, and strong corporate earnings. Analysts remain optimistic about the market's prospects, highlighting the importance of current account surplus and prudent monetary policy in supporting the index. Several companies are performing well, with strategic expansions and acquisitions expected to drive future growth.