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Daily Edge Summary - 12 February 2014

Core Content Overview

The Daily Edge report for 12 February 2014 provides an analysis of key financial and market developments across various sectors in the Philippines, including Telecom, Oil and Gas, Mining, Banks, and Consumer. It includes insights from analysts at Maybank ATR Kim Eng, forecasts, and ratings for selected stocks.

Key Sectors and Companies

Telecom Sector

• Globe Telecom Inc (GLO):
  • Core net income for 2013 reached PHP11.62b, 13% YoY growth, slightly exceeding the target.
  • Service revenues hit PHP90.50b, up 9%, with 4Q13 revenues at PHP23.24b, a 9% YoY and 2% QoQ increase.
  • Data remains the key growth driver, with mobile browsing, broadband, and fixed line data all showing double-digit growth.
  • Subscriber growth was robust: mobile subscribers increased by 16% to 38.5m, postpaid by 17% to 2.02m, and prepaid by 16% to 36.45m.
  • ARPU decline slowed to 4% in 2013, compared to 5% in 2012 and 11% in 2011.
  • Capex budget for 2014 is USD600-650m, with 20% allocated to data network expansion.
  • Core NIAT is estimated at PHP11.62b, and the target price (TP) remains PHP1,582, with a HOLD rating.

Oil and Gas

• Phoenix Petroleum Philippines (PNX):
  • 2013 revenues grew by 26% to PHP43.5b, driven by 28% volume sales increase.
  • Retail stations now number 368, with 500 stations as a 2015 target.
  • Buy rating remains unchanged, with TP of PHP7.44.
  • 2014 forecast: 22% volume growth to 1,391m L, and 72% net income growth to PHP1.1b.

Mining

• Nickel Asia Corp (NIKL):
  • Share price exceeded the target, leading to a downgrade to HOLD from BUY.
  • Net profit for 2013 was PHP3,536m, with EPS growth at 128.6%.
  • China, the main customer, is expected to slow down its growth, which raises concerns for future demand.
  • Pilot plant results for byproducts (scandium and chromite) are being closely watched for future growth potential.

Banks

• Metropolitan Bank and Trust Co (MBT):
  • Approved to issue peso Tier 2 debts, providing flexibility in funding.
  • 2013 core net income is PHP11.62b, with a BUY rating.
• RCB (Metrobank):
  • FY13 net income dropped by 14.6% YoY due to lower trading gains.
  • Loans grew by 25%, with higher-yielding segments boosting NIM to 4.25%.
  • Fee-based and miscellaneous income increased by 50% to PHP6.6b.
  • Operating costs rose by 5.4%, but cost management was effective.
  • Core NIAT is PHP11.62b, with BUY rating unchanged.

Key Financial Metrics (Summary)

Key Highlights

• GLO's strong performance in 2013 was driven by data services, with core income growth of 13%.
• PNX is on track to meet its 2015 goals, with 22% volume growth expected in 2014.
• NIKL's BUY rating was downgraded to HOLD due to uncertainty in nickel demand and supply.
• RCB managed to improve NIM and fee-based income despite lower net income.
• MBT received approval to issue Tier 2 debts, enhancing its capital structure flexibility.

Market Talk Summary

• Oil and Gas: PNX is expected to continue its growth trajectory, with strong momentum in both retail and commercial segments.
• Mining: NIKL's future depends on the resolution of pay factor negotiations and the success of its pilot plants.
• Banks: RCB and MBT are showing resilience with strong loan growth and improved NIM, despite challenges in net income.
• Consumer: RFM Corp's 2013 profits rose 17% YoY, with 2014 revenue and net income growth targets at 20% and 18%, respectively.

Additional Notes

• Dividend yield for GLO remains 4.3%, among the highest in the sector.
• Market dynamics are expected to influence future performance, especially in the nickel and oil sectors.
• The PSEi increased by 1.06% on 2/11, while the PHP/USD rate was 45.01, with the stock underperforming the index by 36.55ppts last year.