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Daily Edge Summary - July 14, 2015

Core Content

This report provides an overview of the Philippine stock market performance and key insights on specific companies, particularly Semirara Mining and Power Corp (SCC), as well as updates on other sectors such as Mining, Utilities, and Banks. It also includes upcoming events for the week.

Key Market Data

Analysts

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

Top Idea: Mining Sector

SCC (PHP141.60): New capacity on-grid, maintenance moved

• Recommendation: BUY (Unchanged)
• Key Update:
  • The first 150MW unit of Southwest Luzon Power Generation Corp (SLPGC) is now connected to the grid, with 75MW generated as of 12 July.
  • Calaca Unit 2 preventive maintenance schedule was moved forward to July from November.
  • Calaca Unit 1 preventive maintenance was pushed back to 2016 from August.
• Impact:
  • The delay in powering up SLPGC Unit 1 will be offset by the rescheduling of Unit 1's PMS to 2016.
  • No changes to forecasts or target price due to the offsetting effect of the maintenance rescheduling.
• Expectation:
  • Power levels in the testing phase are volatile and expected to last about a month.
  • Commercial operations for SLPGC Unit 1 will be declared after this period.
  • SLPGC Unit 2 likely will also be delayed by a month to September.

Market Talk

Mining

• NIKL:
  • Posted 25% increase in 1H15 shipment volume compared to the previous year.
  • 1Q15 shipment volume of 9.68m WMT, 10% higher than guidance.
  • Implied 2Q production of 6.17m WMT, 15% YoY and 76% QoQ increase.
  • Average price of USD23.10 per WMT, a 29% QoQ and 44% YoY decrease.
  • Volume increase driven by middle-grade saprolite and limonite across three of four mines, with Rio Tuba doubling shipment and Cagdianao tripling production volume.
• NIKL Loan Guarantee:
  • Approved to guarantee up to PHP3b loans for its subsidiary Emerging Power Inc (EPI).
  • EPI owns the Montelago geothermal project in Mindoro Oriental, with up to 30MW over 25 years.
  • The loan will be used for purchasing 99.99% ownership in JSI and 60% in BGI, as well as developing initial generating facilities.

Banks

• East West Banking Corp (EW):
  • Entering non-life insurance brokerage via a wholly-owned subsidiary.
  • This is separate from its existing life insurance unit, EastWest Ageas Life.
  • The new insurance business will add to its financial products and help boost fee income.

Utilities

• Aboitiz Power Corp (AP):
  • Planning to develop four to five hydropower plants with average capacities of 25MW and above to meet 2b kWh annual generation target by 2020.
  • Projects are in the pre-development phase.
  • Currently has 22 hydropower plants in various locations.
  • Ongoing construction of a 68MW project in Bukidnon, consisting of two units (43MW and 25MW).
• Manila Electric Co (MER):
  • Interested in establishing an electric vehicle manufacturing plant.
  • Believes e-vehicles will become an increasing part of the transportation industry, starting with public transport.
  • Not its core business, so it will need a partner.
  • Currently supporting the local e-vehicle industry by setting up charging stations.
• Trans-Asia Oil and Energy Development Corp (TA):
  • Spent PHP2b on its energy portfolio, including:
    • PHP1b for the development of a 54MW wind energy project in San Lorenzo, Guimaras.
    • PHP1.04b for coal power projects.
    • PHP105m for Maibarara Geothermal, Inc.
    • PHP41.6m for the expansion of a 21MW bunker-fired power plant in Calamba.

Earnings and Valuations Table (as of 13 July 2015)

The Week Ahead

• July 14: Coal Asia Holdings, Inc.
• July 15: Easycall Communications Phils., Inc., Concepcion Industrial Corporation
• July 16: Robinsons' Retail Holdings, Inc., RFM Corporation, Petroenergy Resources Corporation, Island Information and Technology, Inc.
• July 17: Iripple, Inc., Macroasia Corporation, Annual Stockholders' Meeting (multiple entries)

Summary

The report highlights recent market performance and updates on key companies and sectors, emphasizing the progress and challenges in the mining and utilities sectors. SCC's new on-grid capacity and maintenance rescheduling are central to the analysis, with no changes to forecasts or target price. NIKL's shipment volume increase and loan guarantee for EPI are also notable. EW is expanding into non-life insurance, while AP and MER are focusing on hydropower and e-vehicle initiatives respectively. TA is investing in renewable energy projects. The earnings and valuations table provides detailed financial metrics for several stocks, including BDO, BPI, MBT, and others. The week ahead includes several company announcements and shareholder meetings.