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Daily Edge Summary - September 15, 2015

Core Content

This document is a financial report and market analysis dated September 15, 2015, covering various sectors including the Consumer, Market Talk, and Utilities. It provides insights into stock performance, earnings, and key developments in the Philippine market.

Main Points

Market Overview

• PSEi Index: Closed at 7,069.18 with a 2.28% increase.
• Turnover: Increased to PHP5,178.18 million, a 14.71% rise.
• PLDT ADR (USD): Closed at USD50.42, up 1.02%.
• PLDT ADR (PHP): Closed at PHP2,356.38, up 0.69%.
• Ave interbank rate: Remained at 2.53% with no change (0 bps).
• PHP/USD rate: Closed at 46.77, up 0.11%.

Analysts

The report includes contact details for several analysts from Maybank ATR Kim Eng, including:

• Luz Lorenzo (Head of Research / Economist)
• Michael Bengson
• Rommel Rodrigo
• Lovell Sarreal
• Katherine Tan

Top Idea

• Consumer Sector: Emperador Inc (EMP) launched a local whisky product under the Andy Player brand. The company is maintaining a BUY recommendation but has reduced the target price (TP) from PHP13 to PHP10.75, reflecting a 21x PER for 2016F, due to market and execution risks.

Market Talk

Gaming

• BLOOM's casino operations in Jeju Island, South Korea, are set to reopen this month after renovation with state-of-the-art equipment. The second phase of the refurbishment is expected to be completed by December.

Mining

• SCC may resume coal mining in Semirara this year if it complies with the regulations. The company needs to hire more technical staff and submit a work plan to lift the suspension order.

Conglomerates

• SMC Global Power Holdings Corp's subsidiary SPPC secured an extension of the TRO against PSALM Corp. The court extended it for 17 more days until September 28 and scheduled a hearing on September 23. The dispute involves unpaid generation payments of over PHP6 billion.

Telcos

• Smart Communications Inc launched a mobile payment service on Apple devices, allowing postpaid subscribers without credit cards to make purchases through Smart-Pay-With-Mobile. This service is a partnership with BDO Unibank Inc.

Utilities

• MWC (Manila Water Co): Effective October 1, 2015, water rates will include a foreign currency differential adjustment (FCDA) of PHP0.05 per cubic meter. The FCDA will be adjusted to 0.21% of the basic charge for 4Q15. This adjustment is based on the exchange rates of USD1:PHP45.2649 and JPY1:PHP0.3674. The FCDA does not affect the projected net income.

• TSI (Therna South Inc): The first 150MW coal-fired power plant is set to begin commercial operation next week. The second unit is expected to be commissioned in February or March 2016. The full 645MW facility is planned for completion in 2018.

• AP (Aboitiz Power Corp): AP and La Filipina Uy Gongco Corp will bid for the 210MW Mindanao coal-fired power plant in Misamis Oriental. The plant is operated by Steag State Power Inc under a 25-year build-operate-transfer agreement until 2031. Steag State Power is 51% owned by Germany's Steag, with AP owning 34% and La Filipina 15%.

Consumer Sector: Emperador Inc (EMP)

Key Highlights

• New Product Launch: EMP relaunched its Andy Player brand, a local whisky product, which is expected to be widely distributed by October.
• Product Details: The whisky has a 35% alcohol content and is packaged in 500ml bottles. The suggested retail price is around PHP150 per bottle.
• Pricing: Andy Player is priced at a premium compared to Emperador Light brandy (27.5% alcohol content), which sells for PHP90-110 per 750ml bottle in Metro Manila.
• Earnings: 2Q15 earnings rebounded by 39% YoY to PHP1.9 billion. Consolidated 2Q15 sales increased by 72% to PHP9.35 billion, and EBIT rose by 93.4% to PHP3.3 billion. The increase was driven by contributions from Whyte and Mackay (W&M), a rebound in domestic sales, and better margins due to lower costs.
• 1H15 Performance: Net income rose by 6.6% to PHP3.26 billion, representing 47% of the full-year forecast of PHP6.95 billion.
• Sales Growth: Sales excluding W&M grew by 9% YoY in 2Q15 but declined by 10% to PHP11.5 billion in 1H15.
• Target Price Adjustment: The target price for EMP was cut by 17% to PHP10.75, or 21x PER for 2016F, due to greater industry and execution risks.
• Sector Comparison: Despite the cut, the target price remains at a 10% premium to the consumer sector average PER, reflecting EMP's industry dominance and strong financial position.

Key Financial Metrics (FYE 31 Dec)

1H15 and 2Q15 Interim Results Summary

The Week Ahead

• Sept 15: Alliance Global Group, Inc.
• Sept 17: Filsyn Corporation
• Sept 24: Manila Broadcasting Company
• Sept 25: STI Education Systems Holdings, Inc.
• Sept 30: PAL Holdings, Inc.

Earnings and Valuations Table

Conclusion

The report highlights the performance of the Philippine stock market, with a focus on the Consumer and Utilities sectors. It provides detailed financial data and market insights for various companies, including the launch of a new whisky product by EMP, the reopening of a casino by BLOOM, and the progress on coal mining by SCC. Analysts have maintained BUY recommendations for several stocks while adjusting target prices based on market conditions and execution risks.