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Daily Edge Summary - August 25, 2015

Core Content Overview

This document provides a summary of the financial performance and outlook for various companies in the Philippine stock market as of August 24, 2015. It includes key financial metrics, analyst insights, and upcoming events.

Key Financial Metrics (August 24, 2015)

Analysts

The analysts involved in the report are:

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

Top Idea: Globe Telecom (GLO)

• Rating: BUY (Unchanged)
• Target Price (PHP): 2,450.00
• Upside: Not specified
• Key Points:
  • Maintained forecasts and target price following the 1H15 results.
  • 2Q15 core net income before preferred dividends grew by 5% YoY.
  • 1H15 core net income reached PHP8.63b, equivalent to 49% of full year forecast.
  • Revenue growth trends were sustained in 2Q15, with operating revenues up 13% YoY.
  • Mobile data revenue increased by 50%, contributing 18.6% of total revenue.
  • Voice revenue also grew by 8%.
  • GLO's market share seems to have increased despite TEL's 2Q15 losses.
  • Profit growth was affected by an acceleration in expense growth, with operating expenses and subsidiaries increasing by 13%.
  • Mobile data revenue is expected to continue growing, with smartphone penetration at ~35% and projected to rise over time.
  • GLO has 10% of its debts (after swaps and hedges) denominated in USD, while 13% of revenue is foreign currency-linked.

Market Talk: Oil Sector

• PNX board approved the registration of PHP3.5b in short-term commercial papers (STCP) and the issuance of $20m in perpetual preferred shares.
• The STCP includes PHP2m issued on 13 Oct 2014 and PHP1.5b issued on 23 Feb 2015, set to expire on 13 Oct 2015.
• The preferred shares will be issued via public offering and require registration with the SEC and listing with the PSE.

The Week Ahead

The following companies are scheduled to report earnings and have important meetings:

• Aug 26: Double Dragon Properties Corp.
• Aug 28: Vista Land and Lifescapes, Inc.
• Sept 4: Federal Resources Investment Group, Inc., Acesite (Philippines) Hotel Corporation
• Sept 10: IRC Properties, Inc., Mabuhay Holdings Corporation
• Annual Stockholders' Meeting: Multiple companies are scheduled, including the above.

Earnings and Valuations Table (as of 24 August 2015)

Key Financial Metrics for Globe Telecom (GLO)

• Core Net Income (2Q15): PHP4,448m (up 5% YoY)
• Core Net Income (1H15): PHP8,629m (up 14% YoY)
• Operating Revenues (2Q15): PHP27,610m (up 13% YoY)
• Operating Revenues (1H15): PHP53,830m (up 13% YoY)
• EBITDA (2Q15): PHP11,645m (up 13% YoY)
• EBITDA (1H15): PHP22,654m (up 19% YoY)
• Core Net Income Margin: 16% (down slightly from 17% in 2Q14)
• EBITDA Margin: 42% (stable)
• EBIT Margin: 25% (up from 24% in 2Q14)
• Net Debt/Equity: 148.6% (as of 2015)

Summary of Key Insights

• GLO has shown sustained growth in operating revenues and core net income.
• Mobile data revenue is a significant driver of growth, with a 50% increase in 2Q15.
• The company's strategy of promoting mobile data usage and partnerships is effective in monetizing data.
• Despite growth, expense growth has limited profit growth.
• The company's financial ratios suggest a reasonable valuation, with a target price of PHP2,450.00 and a 13% core EPS growth in 2015.
• GLO's financial exposure to USD is moderate, with 10% of debts and 13% of revenue being USD-linked.