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报告摘要

Daily Edge Summary - September 9, 2014

Core Content

This report provides an analysis of the Philippine stock market, focusing on key financial indicators and analyst recommendations for selected companies. It includes updates on banking and consumer sectors, along with market highlights and upcoming events.

Key Financial Indicators

Indicator	9/8 Value	% Change
PSEi	7,314.94	0.71
Turnover (PHPm)	10,129.48	-11.15
PLDT ADR (USD)	78.08	-0.76
PLDT ADR (PHP)	3,399.60	-1.04
Ave interbank rate	2.25	-3.13 bps
PHP/USD rate	43.56	0.26

Analysts

Luz Lorenzo - Head of Research / Economist
Lovell Sarreal
Rommel Rodrigo
Katherine Tan
Ramon Adviento

Top Idea: Banks

UBP (PHP121.50)

TP (Target Price): PHP127, 1.7x PBV and 10.2x PER
Recommendation: HOLD
Earnings Update: FY14 and FY15 earnings downgraded by 16% and 14%, respectively, due to weak trading income and lower treasury gains
CAR (Capital Adequacy Ratio): Expected to increase by almost 450ps to 17.8% via Tier 2 notes
Core Lending: Boosted through thrift unit City Savings Bank (CSB), which contributed PHP800m in 1H14 and is expected to bring in PHP1.6b for the full year

Market Talk

Banks

EW (PHP29.40): Credit cards drive provisions, with FY14F provisions raised by 26% to PHP2.8b and FY15F by 31% to PHP2.8b
TP: PHP31.80, 1.5x 2015F PBV and 13.6x PER
Recommendation: HOLD
NIM (Net Interest Margin): Remains strong at 8.1%, tracking the forecast
Capital: CET1 at 10.9%, above minimum requirement, but may need further capital
Potential Dilution: May raise common equity Tier 1 capital next year

Mining

Bill on unprocessed mineral exports: Approved at the committee level, to be sent to general assembly
Senate version: Needs to be passed and unified with House version
Implementation: If signed into law, implementing rules will be needed, possibly taking time
Precedent: Indonesian ore ban signed in 2009 and implemented in 2014
Philippine Nickel Miners: Likely to invest in processing plants or form joint ventures with Chinese partners, with M&A activity expected

What's Our View

UBP

Despite strong treasury performance, UBP is focusing on core lending through CSB
CSB is expected to contribute significantly to growth, but is still relatively small
Maintain HOLD with unchanged target price of PHP127, equivalent to 1.7x 2015F PBV and 10.2x PER
Adjusted target price to PHP77 after the 65% stock dividend

EW

Maintains strong NIM of 8.1%, tracking forecast
Aggressive branch expansion has not led to economies of scale, cost-income ratio remains high
Potential dilution from raising capital next year
Maintain HOLD with target price of PHP31.80, equivalent to 1.5x 2015F PBV and 13.6x PER
8% upside from current price

The Week Ahead

Sept 9: Wellex Industries, Inc.
Sept 13: Waterfront Philippines, Inc.
Sept 16: Alliance Global Group, Inc.
Sept 18: MRC Allied Industries, Inc.
Sept 22: APC Group, Inc.
Sept 24: Liberty Flour Mills, Inc.
Annual Stockholders' Meeting: Multiple companies scheduled

Earnings and Valuations Table (as of 8 September 2014)

Stock	Share Price (PHP)	Target Price (PHP)	Upside (%)	Recommendation	Year	Net Profit (PHPm)	EPS (PHP)	EPS Growth (%)	PE (x)	DPS (PHP)	Yield (%)	BV/share (PHP)	P/BV (x)	Net Gearing (%)	ROA (%)	ROE (%)
BDO	95.00	96.00	1	HOLD	2013	22,268	6.22	37.5	15.3	2.10	2.2	152.17	1.5	11.9	13.5
BPI	96.45	93.50	-3	HOLD	2013	18,811	5.29	15.0	18.2	1.80	1.9	29.39	3.3	22.2	28.5
CHIB	54.85	55.00	0	HOLD	2013	5,103	1.91	27.0	21.2	0.45	7.0	6.73	6.0	44.1	4.9	28.5
UBP	121.50	127.00	5	HOLD	2013	9,033	14.08	19.1	8.6	2.40	0.1	52.57	2.3	22.2	24.7
EW	29.40	31.80	8	HOLD	2013	2,056	1.82	17.5	44.0	-	-	17.18	1.7	22.2	11.2
PNB	87.80	109.00	24	BUY	2013	5,124	4.72	45.6	24.0	-	-	11.06	3.1	4.9	13.6
RC	69.00	91.00	32	BUY	2013	2,745	2.01	69.1	34.3	0.05	0.1	26.72	2.6	78.9	7.2	12.6

Main Points

UBP is focusing on boosting CAR and core lending, with a recommendation of HOLD due to the impact of lower treasury gains and provisions
EW continues to lead in NIM and is less vulnerable to interest rate uncertainty, but has higher provisions due to credit card growth
Mining sector is likely to see M&A activity if the proposed bill becomes law, similar to the Indonesian ore ban
Market Talk highlights the importance of core lending and capital management for banks
Earnings and valuations show mixed performance across sectors, with some companies showing growth and others facing challenges
Upcoming events include several company earnings reports and annual stockholders' meetings

Key Information

UBP is expected to increase CAR by 450ps through Tier 2 notes
EW has raised its FY14F provisions to PHP2.8b and FY15F to PHP2.8b
Mining bill is a significant factor for the sector, with potential changes in export regulations
Consumer sector shows mixed performance with some companies recommended as BUY and others as HOLD
Capital management is a key concern for several banks, with potential dilution and capital raising expected

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