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Daily Edge Summary - July 30, 2015

Core Content

This report provides an overview of the Philippine stock market performance for July 29, 2015, and includes detailed analyses of specific stocks, particularly Security Bank (SECB) and PNX, along with market highlights and upcoming events.

Key Financial Indicators (July 29, 2015)

Analysts

• Luz Lorenzo
• Ramon Adviento
• Michael Bengson
• Rommel Rodrigo
• Lovell Sarreal
• Katherine Tan

Top Idea

• Security Bank (SECB): 2Q15 earnings fell 41% YoY due to no extraordinary trading gains, but the company maintained a BUY rating with a target price of PHP200, equivalent to 2.0x 2016F P/BV.

Market Talk

Utilities: PNX

• PNX's 1H15 results were strong with EBITDA and sales volume growth of 19% and 25%, respectively.
• The company added 25 stations to reach 443 by the end of 2Q15.
• Forecasts were slightly cut due to higher finance costs and depreciation, but the company is expected to grow earnings by 36% in 2015 if oil prices remain stable.
• A pending legal case regarding the CEO's alleged non-payment of customs duties could affect investor sentiment.

Mining: PX

• 1H15 net income fell 3% YoY to PHP607m.
• Total revenues dropped 15% to PHP4.9b.
• Gold and copper production slightly increased and decreased, respectively, with metal prices also declining.
• The company's 2Q15 profits fell 26% to PHP278m and revenues were 13% lower to PHP2.5b.

Property: ALI

• ALI launched a new luxury residential project in Bonifacio Global City, West Gallery Place, with 430 units for sale at PHP234,000/sqm.
• The company also announced the opening of its first mall in Bicol by December.
• Turnover is expected to be in 3Q21.

What's New – Security Bank (SECB)

• 2Q15 net income fell 41% to PHP1.3b, but 1Q15 saw a 136% increase to PHP3.4b, boosting 1H15 earnings to PHP4.7b.
• Loan growth was 20%, driven by 18% in corporate/commercial lending and a 90% surge in consumer loans.
• Deposit growth was 18%, leading to an LDR of 81%.
• NIM compression persisted with 1H15 NIM at 3.2%, down from 3.4% in the previous year.
• Trading income dropped 76% to PHP315m, but the total trading gains for 1H15 reached PHP3b, exceeding the forecast.
• Operating costs rose 13% in 2Q15, but were lower than the 46% growth in the previous quarter.
• Asset quality remained strong with a net NPL ratio of 0.14% and NPL cover of 196%.
• Consolidated CET1 is at 13% and CAR is 16.5%, both above regulatory requirements.

What's Our View – Security Bank (SECB)

• 1H15 results align with forecasts, with no extraordinary trading gains expected in 2H15.
• The company's 1H15 profits represent 62% of FY15F and 63% of consensus estimate.
• The BUY rating is maintained with a target price of PHP200.

Market Highlight – PNX

• PNX's 1H15 results were strong, with EBITDA and sales volume growth of 19% and 25%, respectively.
• The company aims to reach 500 service stations by year-end and expand to be the third largest player in the downstream oil industry by 2017.
• The BUY rating is unchanged.

Earnings and Valuations Table (as of 29 July 2015)

Upcoming Events (Week Ahead)

• July 30:
  • Easycall Communications Phils., Inc.
  • Philippine Seven Corporation
  • Macay Holdings, Inc.
  • Makati Finance Corporation
• July 31:
  • Leisure & Resorts World Corporation
  • Anglo Philippine Holdings Corporation
  • Annual Stockholder's Meeting (multiple companies)

Summary

• SECB had a 20% loan growth and 18% deposit growth, but 41% decline in net income due to no extraordinary trading gains.
• PNX reported strong 1H15 results with 19% EBITDA growth and 25% sales volume growth, but reduced forecasts due to higher finance costs and depreciation.
• The BUY rating is maintained for SECB and ALI.
• ALI is launching a new luxury residential project and its first mall in Bicol.
• Globe Telecom launched a free SIM card for tourists and OFWs to enhance connectivity.
• The PSEi and turnover were stable with 0.05% and 24.54% changes, respectively.
• The PHP/USD rate was 45.48, with a 0.06% change.