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Daily Edge Summary - June 24, 2015

Core Content

The Daily Edge report from June 24, 2015, provides an overview of the Philippine stock market, highlighting key indices and financial metrics for various companies and sectors. It also discusses the CARS program (Comprehensive Automotive Resurgence Strategy Program), a government initiative aimed at revitalizing the automotive industry through incentives and fiscal support. Additionally, it covers market insights, particularly in the telecoms and energy sectors, as well as upcoming events for listed companies.

Main Points

1. Market Overview

• PSEi Index: Closed at 7,551.56, with a -0.76% change.
• Turnover: Reached PHP6,064.15 million, showing a 11.40% increase.
• PLDT ADR (USD): Closed at 62.70, with a 0.85% increase.
• PLDT ADR (PHP): Closed at 2,827.77, with a 0.96% increase.
• Ave interbank rate: Remained at 2.50%.
• PHP/USD rate: Closed at 45.13, with a -0.23% change.

2. Analysts

• The report features several analysts from Maybank ATR Kim Eng, including:
  • Luz Lorenzo
  • Ramon Adviento
  • Michael Bengson
  • Rommel Rodrigo
  • Lovell Sarreal
  • Katherine Tan

3. Top Idea: Conglomerates

• GTCAP (PHP1,384.00) is highlighted as a top idea with a BUY recommendation.
• The CARS program is expected to benefit GTCAP's Toyota Motor Philippines (TMP) and its Vios model.
• GTCAP owns 51% of unlisted TMP, which commands 39.2% market share and contributed PHP1.2 billion to GTCAP's 1Q15 gross income.
• The CARS program is expected to improve production margins and sales volume by increasing local production and reducing costs.

4. CARS Program Details

• The program is expected to be effective in 2016 and will provide fiscal support of up to PHP27 billion.
• Participants can receive two types of support:
  • Fixed Investment Support (FIS): PHP3.6 billion (USD80 million), covering localized parts and model introduction.
  • Production Volume Incentive (PVI): PHP5.4 billion (USD120 million), based on production volume and localization of parts.
• The total fiscal support is PHP9 billion (USD200 million), with 100% allocated to eligible participants.

5. Market Talk

• Telecoms: PLDT is interested in acquiring GMA Network Inc. to support its content and telecom integration strategy.
• Energy: Petron Corp. (PCOR) was approved as a supplier of fuel to three state-owned power plants, with a total contract value of PHP5 billion.
• Car Sales: Strong growth is expected in 2015, with a 20.7% increase in sales to 84,141 units in April 2015.
• Financing Plans: Banks offer effective yields of 9-12% and loan terms of 4-5 years, supporting motor vehicle sales.

6. Earnings and Valuations

• The report includes an earnings and valuations table with target prices, upside potential, and recommendations for various stocks.
• BDO, BPI, CHIB, EW, MBT, PBB, EMP, ALI, FLI, MEG, RLC, VLL, SMPH, AP, EDC, FGEN, MER are analyzed with their financial metrics and projections for 2014, 2015, and 2016.
• Many companies show positive EPS growth and increased net profit in 2016, with BUY recommendations.

Key Information

CARS Program

• Objective: Revitalize the automotive industry and make it a regional manufacturing hub.
• Implementation: Expected to start in 2016, with fiscal support of PHP27 billion.
• Eligibility: Limited to three models of four-wheeled vehicles, with one model per manufacturer.
• Impact: Likely to boost local production and reduce costs, making the Philippines more competitive with ASEAN peers.

Market Trends

• Car Sales: Showed 20.7% YoY growth in April 2015, with 26% monthly growth since 2014.
• Fuel Prices: Expected to sustain sales due to their low levels.
• Financing: Banks offer attractive terms, including low yields and long-term loans, which support vehicle purchases.

Financial Highlights

• EPS Growth: Companies like EW, RLC, and EMP are expected to show significant EPS growth.
• P/E Ratio: Decreased from 27.92 in 2013 to 14.25 in 2017, indicating improved valuations.
• ROE and ROA: Improved over the years, showing stronger profitability and operational efficiency.

The Week Ahead

• June 23: LT Group, Inc., Philex Mining Corporation, Primex Corporation, Pryce Corporation, Jolliville Holdings Corporation, Cebu Air, Inc., Global Ferronickel Holdings, Inc.
• June 24: Annual Stockholders' Meetings and Investor Briefings.
• June 25: Solid Group, Inc., Discovery World Corporation, Concrete Aggregates Corporation, Global-EstateResorts, Inc., Lorenzo Shipping Corporation, Anchor Land Holdings, Inc.

Conclusion

The Daily Edge report outlines the positive outlook for the Philippine stock market, emphasizing the potential of the CARS program to revitalize the automotive sector. It highlights the importance of local production and fiscal incentives in enhancing market competitiveness and profitability. Additionally, it presents financial data and market trends for various sectors and companies, suggesting a bullish outlook for many stocks, especially those in the consumer and banking sectors. The upcoming events also highlight the importance of shareholder meetings and investor briefings for market participants.