20140327-Maybank_KERPL-Top_Idea_11页_403kb

Daily Edge Summary - 27 March 2014

Core Content

The Daily Edge report for 27 March 2014 provides an overview of the Philippine financial markets, focusing on the PSEi index, key economic indicators, and detailed analysis of various stocks. It includes insights from analysts at Maybank ATR Kim Eng, discussing monetary policy, inflation trends, GDP growth, and market performance.

Key Economic Indicators

Analysts

The report lists the following analysts and their contact details:

• Luz Lorenzo - Head of Research / Economist

  • Phone: (632) 849 8836
  • Email: luz_lorenzo@maybank-atrke.com

• Laura Dy-Liacco

  • Phone: (632) 849 8840
  • Email: laura_dyliacco@maybank-atrke.com

• Rommel Rodrigo

  • Phone: (632) 849 8839
  • Email: rommel_rodrigo@maybank-atrke.com

• Lovell Sarreal

  • Phone: (632) 849 8841
  • Email: lovell_sarreal@maybank-atrke.com

• Katherine Tan

  • Phone: (632) 849 8843
  • Email: kat_tan@maybank-atrke.com

• Ramon Adviento

  • Phone: (63) 28498845
  • Email: ramon_adviento@maybank-atrke.com

Top Idea

• Monetary Policy Tightening Likely to be Minimal:

  • The BSP is expected to make a small move in monetary policy, likely not the start of sustained tightening.
  • Reasons: consumer inflation is expected to trend down, economic growth may slow due to natural calamities, and liquidity from abroad will be affected by the Fed tapering.

• Consumer Sector Performance:

  • PGOLD reported a 46% earnings growth to PHP3.96b in 2013, slightly ahead of expectations.
  • 2013 net sales increased by 27% to PHP73.2b, with 40 new stores and acquisitions contributing to growth.
  • Gross profit margin improved by 1.3pps to 17.4%, and net margin increased by 0.7pps to 5.4%.
  • PF reported 2013 net income of PHP4.1b, slightly below forecast, and declared a special dividend of PHP48/sh.
  • The company's performance was driven by core brands and better sales volume in various segments.

• Property Sector:

  • ALI announced a PHP7b township project in Bulacan, expected to add PHP0.25 to the NAV.
  • The project is a 98-hectare joint venture with Araza Resources Corp, with 12 hectares allocated for residential use.

• Utilities Sector:

  • MER petitioned for recovery of excess January charges, seeking installments over six months.
  • The revised January rates reflect adjustments in generation charges, which are lower than the original.

Market Talk

Domestic Inflation

• February headline inflation eased slightly to 4.1% YoY from 4.2% in January.
• Inflation in food and non-alcoholic beverages, which accounts for ~40% of the index, has steadied.
• The BSP's 2014 inflation forecast is 4.3%, downgraded from 4.5%, and may trend to the lower end of their 3–5% target.
• 2015 forecast is 3.3%, with the analysts maintaining their 3.7% forecast for 2014.

GDP Growth

• Natural calamities in 2013 affected both inflation and growth, albeit temporarily.
• The economy was not overheating, with higher investment and a low loan-deposit ratio.
• Most forecasts suggest slower 2014 GDP growth compared to 2013, with the government maintaining a 6.5–7.5% target.
• Analysts forecast 6.8% for 2014, which is in line with the government's target.

Money Supply

• Central bank's limit on retail access to SDA has pushed money supply growth over 30% since July.
• Most of the released funds went into bank deposits, contributing to liquidity.
• Loan growth was robust at 16% in 2013, despite higher liquidity.
• The tapering of US monetary policy makes abundant liquidity useful for domestic financial markets.

The Week Ahead

The report highlights the following companies for upcoming events:

• 27 Mar: San Miguel Corporation, San Miguel Pure Foods Company, Inc., Petron Corporation
• 31 Mar: Col Financial Group, Inc.
• 4 Apr: Integrated Micro-Electronics, Inc., Manila Water Corporation, Inc.
• 7 Apr: Ayala Land, Inc.

Earnings and Valuations Table (as of 26 March 2014)

Summary of Key Points

• Monetary Policy: Minimal tightening is expected, with the BSP focusing on gradual adjustments to avoid market disruption.
• Inflation: Likely to trend lower, with the BSP's 2014 forecast at 4.3% and 2015 at 3.3%.
• GDP Growth: Expected to slow in 2014 due to natural disasters and Fed tapering, with analysts forecasting 6.8%.
• Consumer Sector: Strong performance from PGOLD and PF, with PGOLD's earnings growth exceeding expectations.
• Property Sector: ALI's township project in Bulacan is a significant investment, expected to enhance NAV.
• Utilities Sector: MER's petition for rate recovery reflects ongoing challenges in managing costs and rates.
• Market Outlook: The report emphasizes the importance of liquidity and the potential impact of external factors on domestic financial markets.