20131206-Maybank_KERPL-Daily_Edge_13页_436kb

Daily Edge Summary - 6 December 2013

Core Content

The document provides an overview of financial and market trends in the Philippines as of 6 December 2013, including stock performance, analyst insights, and forecasts for various sectors such as consumer, banks, and utilities. It also highlights upcoming events like stockholder meetings and includes detailed financial data and valuation metrics.

Main Points

Barometers

• PSEi: 6,030.95, down 1.22%
• Turnover (PHPm): 6,339.46, up 16.95%
• PLDT ADR (USD): 60.47, down 2.48%
• PLDT ADR (PHP): 2,651.31, down 2.54%
• Ave interbank rate: 2.00, no change
• PHP/USD rate: 43.85, down 0.15%

Analysts

• Head of Research / Economist: Luz Lorenzo
• Analysts: Laura Dy-Liacco, Rommel Rodrigo, Lovell Sarreal, Katherine Tan, Ramon Adviento

Top Idea: Consumer Sector - RFM Corp

• RFM (PHP5.17): Expected rebound in 2014F after a stall in 2013
• Net Income Forecast: Reduced by 5.1% to PHP804m for 2013, and 13% to PHP949m for 2014F
• EPS Reduction: 14.3% to PHP0.23 in 2013F and 21.7% to PHP0.27 in 2014F due to increased common shares
• Reason for Stalling: Weak YTD operating results, mainly due to a slowdown in the ice cream business
• Optimism for 2014: Product innovation, marketing campaigns, and retail penetration are expected to drive growth
• Target Price: PHP6.05, implying a PER of 22x for 2014F, in line with the consumer sector average
• Acquisition Potential: RFM raised PHP1.6b and may sell properties to fund potential acquisitions, though this is not factored into current forecasts
• Market Share: RFM dominates the ice cream market with 76% share and is the leader in pasta noodles with 35% market share

Market Talk: Banks

• SDA to Bank Deposits: BSP's mandate to limit SDA access led to a surge in bank deposits by over PHP1t from last year
• Deposit Costs: Savings deposits at 0.41%, time deposits at 1.07%, down significantly YoY
• Impact on Earnings: Neutral in the short term due to lower deposit costs, but banks may need to boost lending or seek higher-yielding investments if SDA rates fall further
• LDR: 66% as of 9M13, down from 73.4% in 9M12
• BSP's Intent: To redirect displaced SDA funds to investment projects
• Recommendation: Maintain BUY on BDO, MBT, EW, PNB, RCB, and SECB; HOLD for BPI, CHIB, and UBP

Market Talk: Economy

• November Inflation: Increased to 3.3% YoY, up from 2.9% in October
• Main Contributors: Food and non-alcoholic beverages (up to 3.9%), housing and utilities (up to 1.9%)
• Typhoon Impact: Likely affected food inflation, with data from Leyte not yet included
• Inflation Outlook: Likely to remain below the central bank's target of 3–5% for 2013, with 2014 inflation expected to be influenced by the typhoon's impact
• Monetary Policy: Less likely to tighten next year due to supply shocks and economic growth dampening from natural disasters

Market Talk: Utilities

• Maibarara Geothermal Plant: Delayed to early 2014, with the main reason being additional equipment tests
• Quezon Power Expansion: Targeted to start construction in late 2014, with MGEN and EGCO involved
• Impact on TA: Minimal effect on TA's forecasts and valuation despite the delay

Market Highlight: Telecom

• GLO Term Loan: Signed a PHP7b loan with LBP, to be used for 2014 capital expenditures
• No Further Details: Loan terms not specified

Market Highlight: Consumer Sector

• RFM's Performance: 3Q13 net income at PHP138m, 9M13 at PHP524m
• Margins: Gross profit margin at 33.5%, operating income margin at 6.4%, net income margin at 5.9%
• Tax Rate: Effective tax rate dropped to 7.4% in 9M13
• Valuation: Implied PER of 22x for 2014F, slightly lower than DCF-based fair value

Market Highlight: Bank Valuation and Earnings

• BDO: Maintained BUY rating, with a target price of PHP98.00 and 35% upside
• BPI: HOLD rating, with a target price of PHP96.00 and 4% upside
• CHIB: HOLD rating, with a target price of PHP57.75 and (3)% upside
• EW: BUY rating, with a target price of PHP31.80 and 25% upside
• MBT: BUY rating, with a target price of PHP107.70 and 44% upside
• PNB: BUY rating, with a target price of PHP111.00 and 35% upside
• RCB: BUY rating, with a target price of PHP67.00 and 55% upside
• SECB: BUY rating, with a target price of PHP122.50 and 7% upside
• UBP: HOLD rating, with a target price of PHP127.00 and 2% upside

Key Information

• RFM Corp is expected to rebound in 2014F despite a slowdown in its ice cream business.
• Banks are seeing increased deposits due to the BSP's SDA restrictions, but may need to adjust strategies if SDA rates drop.
• November inflation spiked to 3.3% due to typhoon impacts on food and utilities.
• Maibarara geothermal plant is delayed to early 2014, but the impact on TA is minimal.
• GLO secured a PHP7b loan with LBP for 2014 capital expenditures.
• Consumer sector valuations for 2014F are around 21x PER, with RFM at 19.1x.
• Upcoming Events: Annual stockholders' meetings for Bankard, Inc., Century Peak Metals Holdings Corporation, and Philcomsat Holdings Corporation on 9, 17, and 19 December, respectively.

Summary Table

Conclusion

The document outlines the financial performance and outlook for several sectors in the Philippine market. Despite challenges in the consumer and banking sectors, there is optimism for recovery in 2014. The utilities sector is experiencing delays in projects, but these are not expected to significantly affect forecasts. The overall market is expected to remain stable, with the central bank's monetary policy likely to stay accommodative.