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Daily Edge Summary - June 26, 2015

Core Content Overview

This document is a financial update report from Maybank ATRKE, dated June 26, 2015, focusing on the Philippine stock market and specific sectors. It includes data on stock indices, key financial metrics, analyst insights, and upcoming events.

Key Financial Data

Analysts

• Luz Lorenzo: Head of Research / Economist, contact: (632) 849 8836, Email: luz_lorenzo@maybank-atrke.com
• Ramon Adviento: Contact: (63) 28498845, Email: ramon_adviento@maybank-atrke.com
• Michael Bengson: Contact: (63) 28498840, Email: michael_bengson@maybank-atrke.com
• Rommel Rodrigo: Contact: (632) 849 8839, Email: rommel_rodrigo@maybank-atrke.com
• Lovell Sarreal: Contact: (632) 849 8841, Email: lovell_sarreal@maybank-atrke.com
• Katherine Tan: Contact: (632) 849 8843, Email: kat_tan@maybank-atrke.com

Top Idea: Media Sector

• Sector Outlook: The media sector is expected to post strong earnings growth of 27% in 2015F and 39% in 2016F.
• Drivers: Election-related spending, sustained regular airtime growth, and effective cost management.
• Rating: Maintain OVERWEIGHT.
• Preference: Prefer ABSP over GMAP due to better upside and cheaper valuation.

Market Talk

Economy

• The policy rate was maintained at 4% for overnight borrowing and 6% for overnight lending.
• The SDA rate was unchanged at 2.5%.
• Reserve requirement ratios remained steady at 20%.
• The central bank cited subdued inflation and stable domestic demand as reasons for the decision.
• Liquidity and planned public spending are expected to support economic growth.

Utilities

• Manolo Fortich hydro facility (68.8MW) commenced construction, worth PHP12.5b, with two phases expected to be operational by 2017–2018.
• SCPC seeks ERC approval for a 10-year power supply agreement with Tarelco II, providing 15,000 kW of capacity from a 2×150MW coal-fired plant in Limay, Bataan.
• The target commercial operations date is August 2016.
• The baseload rate is PHP4.6/kWh.

Mining

• Apex Mining Co Inc (APX) acquired Itogon mine, gaining 98% ownership of ISRI.
• The acquisition includes mining claims, mill, and production facilities in Sangilo, Itogon, Benguet.
• PHP238m in new equity is to be infused to pay down debts and reopen mining operations.

Media Sector Details

• ABSP and GMA Network Inc reported combined 1Q15 revenue increase of 3.2% YoY to PHP11.4b.
• Regular airtime sales improved by 4.7%.
• Sector earnings grew by 12.4% to PHP1.1b.
• Election-related spending is expected to contribute 4% of total airtime revenues in 2015 and 12% in 2016.
• Political ads are anticipated to have a significant impact from 2H15.
• Regular advertisers, especially FMCG companies, are expected to accelerate spending as seen in past election seasons.
• International revenues are expected to remain flat for the full year.
• Production costs are expected to stay flat.
• Digital TV transmission rules were implemented at the start of the year.
• ABSP launched a digital box in February 2015, and sold over 300k units as of early May.
• ABSP expects to reach 1m sales by the end of the year.
• GMAP has not yet launched a major mobile initiative, but may partner with telcos.

What's Our View

• Rating: OVERWEIGHT for the Philippine media sector due to strong earnings growth in 2015F-16F.
• Preference: ABSP over GMAP due to better upside potential and cheaper valuation.

Earnings and Valuations Table (as of 25 June 2015)

The Week Ahead

• June 26: Annual Stockholders’ Meeting for Arthaland Corporation, Asia United Bank Corporation, Cosco Capital, Inc., Vivant Corporation, Vitarich Corporation, Jollibee Foods Corporation, Cebu Air, Inc.
• June 29: Annual Stockholders’ Meeting for Starmalls, Inc., Rizal Commercial Banking Corporation, MJC Investments Corporation, Max's Group, Inc., Del Monte Pacific Limited
• June 30: Annual Stockholders’ Meeting for Agrinurture, Inc., MRC Allied Incorporated, Century Pacific Food, Inc., Manila Jockey Club, Inc., Megawide Construction Corp., Philippine Realty & Holdings Corporation, Apex Mining Company, Inc., Basic Energy
• July 1: Annual Stockholders’ Meeting for Ipeople, Inc.
• July 3: Annual Stockholders’ Meeting for EEI Corporation
• July 9: Annual Stockholders’ Meeting for Top Frontier Investment Holdings, Inc., Abacore Capital Holdings, Inc.

Summary

• The media sector is expected to benefit significantly from election-related spending and cost management, with strong earnings growth projected for 2015F-16F.
• ABSP is highlighted as a better investment choice due to its stronger upside and cheaper valuation.
• Economic stability is supported by unchanged policy rates, steady domestic demand, and planned public spending.
• In the utilities sector, Manolo Fortich and SCPC are key players with construction projects and power supply agreements.
• Mining sector sees APX expanding its operations through the acquisition of Itogon mine.
• The media sector is capitalizing on digital TV transmission and mobile content access, with ABSP leading in digital box sales.
• The financial data for ABSP and GMAP shows positive growth expectations and target prices.