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Daily Edge Summary - August 6, 2015

Core Content Overview

This report provides a summary of financial performance and market insights for various companies and sectors in the Philippines. It includes stock data, analyst views, and key market developments. The report is divided into several sections covering the mining sector, banking, consumer goods, conglomerates, and telecoms, along with economic indicators and upcoming events.

Main Points

Market Overview

• PSEi Index: Closed at 7,662.55, up 0.85%.
• Turnover: PHP9,045.78 million, up 10.33%.
• Inflation: Further eased to 0.8% YoY in July, within the BSP's forecast range of 0.5-1.3%.
• Core Inflation: Decelerated to 1.9% from 2.0% in July, indicating a slowdown in non-food and non-energy price increases.

Mining Sector

• NIKL (Nickel Asia Corp):
  • 1H15 Ore Revenue: PHP7.66 billion, slightly below forecasted PHP7.43 billion but aligned with expectations.
  • Export Price: Lower than expected, at USD19.70/WMT, due to a shift in product mix to high-iron limonite.
  • Net Income: PHP1.49 billion, down 45% YoY.
  • Analyst View: Downgraded price and pay factor assumptions due to weak demand from China. New target price is PHP11.85, with an upside of more than 10%, and the recommendation remains BUY.

Banks

• CHIB (China Banking Corp):

  • 1H15 Net Earnings: Increased by 14% YoY to PHP2.5 billion.
  • Loan Growth: Lower than expected at 10% YoY, but consumer loans rose 26%.
  • Net Interest Income: Up 9% YoY.
  • Provisioning: Increased 37% to PHP256 million due to consumer loan expansion.
  • ROAE: 14.1% in FY15E and 20.7% in FY16E.
  • Recommendation: HOLD.

• BDO:

  • Recommendation: BUY.
  • Target Price: PHP123.00.
  • Upside: 18%.

• BPI:

  • Recommendation: HOLD.
  • Target Price: PHP101.00.
  • Upside: 5%.

• PNB:

  • Recommendation: HOLD.
  • Target Price: PHP77.00.
  • Upside: 18%.

• RCB:

  • Recommendation: BUY.
  • Target Price: PHP62.00.
  • Upside: 56%.

• UBP:

  • Recommendation: HOLD.
  • Target Price: PHP66.00.
  • Upside: 10%.

• SECB:

  • Recommendation: BUY.
  • Target Price: PHP200.00.
  • Upside: 35%.

Consumer Sector

• CNPF (Century Pacific Food Inc):

  • 1H15 Earnings: Increased by 30% YoY to PHP935 million.
  • Revenue: PHP11.3 billion, up 17% YoY.
  • Gross Profit Margin: Narrowed to 26.4% from 27.3% due to lower fresh fish availability and higher meat prices.
  • Operating Income: Increased 26% YoY to PHP1.3 billion.
  • Operating Margin: Improved by 73 bps to 11.1%.
  • 2Q15 Earnings: Increased by 25% YoY to PHP497 million.
  • Recommendation: Not rated.

• JFC (Jollibee Foods Corp):

  • Recommendation: HOLD.
  • Target Price: PHP216.00.
  • Upside: 13%.

• PIP (Philippine International Paper):

  • Recommendation: BUY.
  • Target Price: PHP5.10.
  • Upside: 9%.

• RFM (Ramon Magsaysay Foundation):

  • Recommendation: BUY.
  • Target Price: PHP5.60.
  • Upside: 26%.

• URC (United Retail Corporation):

  • Recommendation: BUY.
  • Target Price: PHP250.00.
  • Upside: 25%.

• PF (Philippine Foods Inc):

  • Recommendation: BUY.
  • Target Price: PHP285.00.
  • Upside: 74%.

• RRHI (Rizal Commercial Banking Corp):

  • Recommendation: BUY.
  • Target Price: PHP85.00.
  • Upside: 8%.

• CIC (Cebu Insurance Corporation):

  • Recommendation: BUY.
  • Target Price: PHP72.00.
  • Upside: 30%.

• PGOLD (Philippine Gold and Silver Corp):

  • Recommendation: BUY.
  • Target Price: PHP47.50.
  • Upside: 25%.

• EMP (Emerging Power):

  • Recommendation: BUY.
  • Target Price: PHP13.00.
  • Upside: 39%.

Conglomerates

• AC Energy: Considering entering the LNG segment. Feasibility studies are ongoing.

Telecoms

• Globe Telecom: Launched KonsultaMD, a 24/7 health hotline service with:
  • Subscription Fee: PHP150/month for Globe Postpaid customers (includes four household members).
  • Free Subscription: For two months upon enrolment.
  • Prepaid & TM Customers: PHP15/week.
  • Platinum Elite Members: Free.

Key Insights

• Market Talk: NIKL completed the acquisition of a 66% stake in Emerging Power, increasing its ownership from 55% through additional investment. This is expected to boost production in the Montelago geothermal field.
• Analysts: The team includes Luz Lorenzo, Ramon Adviento, Michael Bengson, Rommel Rodrigo, Lovell Sarreal, and Katherine Tan.
• Upcoming Events:
  • Aug 6: GMA Network, Inc. Analysts' / Investors' Briefing
  • Aug 7: Ayala Land, Inc. Analysts' / Investors' Briefing
  • Aug 11: Petron Corporation Analysts' / Investors' Briefing
  • Aug 12: ABS-CBN Corporation Analysts' / Investors' Briefing
  • Aug 13: GMA Network, Inc. Annual Stockholders' Meeting
  • Aug 14: Ayala Corporation Analysts' / Investors' Briefing

Valuation and Forecast Table (as of 5 August 2015)

Summary of Key Changes and Assumptions

• NIKL: Revised assumptions for nickel prices and pay factors due to weak demand from China.
• 1H15 Actual vs Forecast: Revenue was in line with forecast, but export prices were lower than expected.
• Downgrades: The report includes downgrades for various financial metrics, including net income and EBITDA, reflecting the impact of lower prices and higher costs.
• Target Price: Adjusted for 2015 and 2016 based on revised assumptions and updated financial forecasts.

Conclusion

The report highlights the mixed performance of the Philippine stock market, with some sectors showing resilience while others face challenges due to weak demand and economic conditions. The mining sector, particularly NIKL, is under pressure due to declining nickel prices, but the company's performance in the first half of 2015 is in line with expectations. The banking sector showed improvement in net income and cost management, while the consumer sector reported strong earnings growth. The report also outlines upcoming events and analyst recommendations, providing a comprehensive view of market dynamics and future outlook.