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Daily Edge Summary - August 18, 2015

Core Content

This document provides an analysis of key financial and market developments for various Philippine companies as of August 17, 2015. It includes market performance data, analyst ratings, and outlooks for selected stocks, focusing on earnings, growth, and valuation metrics.

Key Market Data

Analysts

• Luz Lorenzo – Head of Research / Economist
  Contact: (632) 849 8836 | luz_lorenzo@maybank-atrke.com

• Ramon Adviento
  Contact: (63) 28498845 | ramon_adviento@maybank-atrke.com

• Michael Bengson
  Contact: (63) 2849 8840 | michael_bengson@maybank-atrke.com

• Rommel Rodrigo
  Contact: (632) 849 8839 | rommel_rodrigo@maybank-atrke.com

• Lovell Sarreal
  Contact: (632) 849 8841 | lovell_sarreal@maybank-atrke.com

• Katherine Tan
  Contact: (632) 849 8843 | kat_tan@maybank-atrke.com

Top Idea

Consumer: PGOLD (PHP35.50) – No surprises in 1H15, BUY (Unchanged)

• 1H15 normalized profit increased by 14%, in line with estimates.
• 1H15 revenue rose 12% YoY to PHP43.1b, with 2Q15 revenue growing 11% to PHP22.5b.
• Puregold sales increased by 12% to PHP35.7b, with SSSG at 3.6%.
• 10 new Puregold stores were opened in 1H15, while 4 underperforming stores were closed.
• S&R sales grew 12% YoY to PHP7.5b, with SSSG flattish at 2.7%.
• GPM for Puregold remained steady at 15%, while S&R GPM dropped to 22.8% due to margin compression.
• 1H15 net income grew 21% YoY to PHP2.0b, with normalized net income at 14% growth.
• Full-year earnings are expected to grow 11% / 17% in 2015F/16F.
• Target price (TP) remains PHP47.50, with BUY rating unchanged.

Market Talk

Gaming: RWM (PHP5.15) – The only profitable IR in 1H15, BUY (Unchanged)

• 1H15 net profit fell 18% YoY to PHP2.4b due to VIP and mass market turnover decline.
• Blended win rate improved to 5.18% from 3.88% in 1H14, offsetting some of the revenue decline.
• 2Q15 VIP volume increased 16.8% QoQ, outperforming regional peers.
• Construction work at RWM's integrated resort is expected to improve 2H15 earnings.
• TP is maintained at PHP8.40 based on EV/EBITDA using an 11x multiple.

Transport: CEB (PHP88.00) – Bracing for tougher 2H, BUY (Unchanged)

• 2Q15 net profit rose 9.5% YoY to PHP159m, in line with estimates.
• 1H15 net income increased 16% to PHP300m, translating to 7.2% ROE.
• Loan growth was 10%, slower than the 34% average in the past six quarters.
• Funding costs increased by 15bps to 1.5% due to higher-cost deposits.
• TP is raised to PHP19 from PHP18, based on 1.0x P/BV.
• 2H15 earnings may improve due to construction progress and sustained win rates.

Conglomerates: DNL (PHP8.40) – TP adjusted after 100% stock dividend

• DNL's share price adjusted to reflect a 100% stock dividend.
• Total outstanding shares doubled to 7.14b.
• TP is adjusted from PHP16.80 to PHP8.40.

Conglomerates: FPH (PHP2.6b) – 1H15 net income increased by 5% YoY

• FPH's 1H15 net income reached PHP2.6b.
• Electricity sales increased to PHP42.9b, contributing 89% of total revenue.
• Real estate sales declined due to Rockwell Land and First Philippine Industrial Park.
• Contracts and services revenue dropped to PHP2b, while merchandise sales rose to PHP950m.

Telcos: Minimum broadband speed set

• The NTC issued a circular setting minimum broadband speed at 256 kbps for 80% of the time.
• ISPs must disclose average data rates per location.
• Administrative sanctions will be imposed if the rules are not followed.

Utilities: Manila Water unit obtains approval for rate cut

• BIWC will implement an 8.15% tariff reduction.
• FCDA reduction is 14.34%, while CPI adjustment is 7.22%.

Utilities: AP's Davao unit seeks ERC approval of PHP1b capex

• DLPC plans to spend PHP979.73m on 12 projects.
• DLPC serves Davao, Panabo, and surrounding municipalities.

Conglomerates: MPI (BUY) partners with French firm for five airport bids

• MPI took a 60% interest in a consortium for airport operations.
• Partners include Aéroports de Paris (France) and TAV Havalimanlari Holdings A.S (Turkey).

What's Our View

• PGOLD: No changes to forecasts or TP of PHP47.50; maintain BUY.
• RWM: Maintain BUY and TP of PHP8.40; 2H15 earnings may improve.
• CEB: Maintain BUY and TP of PHP116; no fundamental basis for recent sell-off.
• PBB: Adjusted loan growth assumptions to 15% and 13% for 2016F and 2017F, respectively.
• TP is raised to PHP19 from PHP18 based on 1.0x P/BV.

Market Highlights

• PGOLD is targeting 25 new Puregold stores and 1-2 S&R outlets annually for the next five years.
• PGOLD also plans to open 40-50 Lawson convenience stores in 2015 and expand to 500 stores by 2020.
• PGOLD launched its first Merkado supermarket as a 50-50 JV with Ayala Land Inc.

The Week Ahead

• Aug 18: Wellex Industries, Inc., DMCI Holdings, Inc.
• Aug 22: Far Eastern University
• Aug 26: Double Dragon Properties Corp.
• Aug 28: Vista Land and Lifescapes, Inc., Metro Alliance Holdings & Equities, Ever Gotesco Resources & Holdings, Inc.
• Sept 4: Federal Resources Investment Group, Inc., Acesite (Philippines) Hotel Corporation
• Sept 10: IRC Properties, Inc., Mabuhay Holdings Corporation

Valuation Table (as of 17 August 2015)