20140305-Maybank_KERPL-Philippine_Long_Distance_Telephone_Co_11页_2mb

Philippine Long Distance Telephone Co (PLDT) Summary

Core Financial Highlights

• Share Price: PHP2720
• Target Price: PHP3090 (+14%)
• Market Cap (USD): 13.1B
• Dividend Yield: 6.6%
• Dividends Paid (PHP/sh): 179
• Core Net Income (FY13): PHP38.72b (up 5% YoY)
• Core Net Income (FY14): PHP40.57b (slightly higher than guidance of PHP39.5b)
• 4Q13 Core Net Income: PHP9.93b (up 8% YoY)

Performance Overview

• 4Q13 Service Revenues: PHP42.45b (up 4% YoY)
• 4Q13 Non-SMS Data Revenues: PHP9.5b (up 17% YoY), driven by broadband (up 18% YoY) and corporate data (up 14% YoY)
• 4Q13 Voice Revenues: PHP20.2b (up 4% YoY), offsetting declines in SMS (down 2.5% YoY) and other service revenues (down 10% YoY)
• Full-Year 2013 Service Revenues: PHP164.05b (up 2.7% YoY)

Financial Ratios

Key Drivers of Growth

• Non-SMS Data: The main growth driver, up 17% YoY to PHP9.5b in 4Q13
• Broadband Segment: Led the growth in non-SMS data, rising 18% YoY to PHP7.1b
• Corporate Data: Grew 14% YoY to PHP2.4b
• Mobile Subscriber Base: Total reached 70.04m by end-2013, up 4% YoY
• Smart Postpaid Subscribers: Increased 30% YoY to 890k
• ARPU (Average Revenue Per User): Blended ARPU improved to PHP130 in 4Q13, the highest for the year

Challenges and Exceptions

• Reported Net Income: Declined 2% YoY to PHP35.42b due to forex and derivative losses, and damage from Typhoon Haiyan
• 4Q13 Net Income: Declined 17% YoY to PHP6.47b due to tax provisions
• Non-Recurring Items: Included forex losses, derivative losses, and PAS 19 adjustments

Capital Expenditure and Future Outlook

• 2014 Capex: Projected at PHP31-32b (18-20% of service revenues)
• Capex Growth: 8-11% increase from PHP28.8b in 2013
• Investment Areas: 3G coverage expansion, fiber network growth, new international cable system, and strengthening of transport and support facilities

Dividend Policy

• Dividend Payout: 100% of core income for the seventh consecutive year
• Total Dividends (2013): PHP179/sh, slightly higher than the estimate of PHP175/sh
• Dividend Yield: 6.6%, one of the highest among the stocks covered

Subscriber Trends

• Mobile Subscribers: Total reached 70.04m in 2013, up 4% YoY
• Talk 'N Text: Declined 7.6% QoQ but up 4% YoY to 29.48m
• Sun Cellular: Declined 4.9% QoQ and 4.1% YoY to 15.06m
• Smart Prepaid: Declined 2% YoY but up 3.1% QoY to 24.61m
• Smart Postpaid: Grew 30% YoY and 2.7% QoQ to 890k

Market Position and Share Price Performance

• Share Price Movement:
  • 1 Month: +3.9%
  • 3 Months: +0.6%
  • 12 Months: -6.8%
• Relative to Country:
  • 1 Month: -4.4%
  • 3 Months: -4.0%
  • 12 Months: -3.3%
• Maybank Consensus Target Price: PHP3,090
• Market Recommendations: 8 Positive, 2 Neutral, 0 Negative

Conclusion

• Investment View: Maintain BUY rating with a target price of PHP3,090, offering a potential 14% upside
• Growth Expectations: Implied growth of 4.5% for 2014, excluding discontinued operations
• Attractive Dividend Yield: 6.6%, supported by consistent payout policy
• Strategic Focus: Continued investment in non-SMS data and infrastructure to sustain growth and profitability

Key Data Summary