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Daily Edge Summary - 3 March 2014

Core Content

This document is a financial report from Maybank ATR Kim Eng, covering market updates and analysis for various sectors and stocks in the Philippines. It includes data on stock performance, analyst ratings, and insights into specific companies and their financials.

Main Points

Market Overview

• PSEi: Closed at 6,424.99, up 1.10% from the previous day.
• Turnover: Increased to PHP11,037.75, with a 42.25% change.
• PLDT ADR (USD): Closed at USD60.20, up 0.12%.
• PLDT ADR (PHP): Closed at PHP2,686.73, up 0.04%.
• Ave interbank rate: At 2.03%, with a 3.13 bps change.
• PHP/USD rate: At 44.66, with a slight decrease of 0.01%.

Analysts

• The report is authored by Maybank ATR Kim Eng analysts, including:
  • Luz Lorenzo
  • Laura Dy-Liacco
  • Rommel Rodrigo
  • Lovell Sarreal
  • Katherine Tan
  • Ramon Adviento

Top Idea: Conglomerates

• DNL (PHP7.95): Delivered as promised with a 41% increase in 2013 earnings to PHP1.4b, aligning with the forecast and above the consensus. The company's performance was driven by volume growth, shifting sales mix, and better margins. The target price (TP) remains at PHP8.9, with a BUY rating.

Key Information on DNL

2013 Performance

• Net Income: PHP1.4b, up 41% YoY after excluding PHP296m one-off gains.
• 4Q13 Profits: PHP360m, more than doubling YoY.
• Growth Drivers:
  • Robust volume growth, especially in the food business.
  • Sales mix shifted towards higher-margin products.
  • Improved overall margins.

Revenue Breakdown

• Total Revenues: PHP10.8b, remaining flat YoY.
• Food Business:
  • Accounted for 72% of total revenues.
  • Earnings grew 38% to PHP569m.
  • Specialty fats and oils contributed 50% of food revenues and saw 20% volume growth.
  • Refined vegetable oil business, which made up 44% of food revenues, experienced 40% volume growth.
• Plastics Business:
  • Revenue declined 2% to PHP2.5b.
  • Volume growth moderated to 2% from 4% in 9M13.
  • Earnings increased 29% to PHP540m.
• Aerosols Business:
  • Revenue reached PHP434m, 4% of total.
  • Earnings grew 70% to PHP88m.
• Chemrez Technologies Inc (COAT):
  • 34% owned.
  • Profit growth of 30% to PHP318m.
  • Volume increased 34%, sales rose 12% YoY.

Financial Improvements

• Gross Margin: Improved 3pps to 18.6%.
• Operating Margin: Increased 3.1pps to 14.9%.
• Net Margin: Increased 3.9pps to 13%.
• Operating Income: Grew 25% to PHP1.6b.
• Finance Costs: Dropped 61% to PHP44m due to debt repayment from IPO proceeds.

2014 Outlook

• DNL aims for mid to high-teens YoY growth in both volume and earnings.
• The company is on track to meet its 2014 guidance based on 1Q14 performance.
• The target price remains at PHP8.9, with a BUY rating.

Market Talk Highlights

Consumer Sector

• DMPL (PHP22.60): Maintained a BUY rating with a revised target price of SGD0.85.
• Del Monte Pacific (DMP): Completed USD1.675b bid to acquire Del Monte Foods (DMF).
• 4QFY13 Results: Minor disappointment due to increased competition.
• Synergy Gains: Expected to yield USD20m annually from cost savings.
• Key Plans: Entry into fruit beverages, South America, and product range expansion.
• EBITDA Target: USD260m over the next 3-4 years.
• P/E Ratio: Traded at 12.6x, below global peers at 15.3x.

Utilities Sector

• EDC: Declared PHP0.10/sh cash dividends, yielding 1.7%.
• Dividend Yield: Lower than estimated at PHP0.14/sh, but included special dividends from last year.
• Reclassification: 3b common shares reclassified to preferred shares with PHP10/sh par value.

Conglomerates Sector

• MPI: Started phase 2 of Harbour Link construction.
• Project Details:
  • Segment 10.1: 5.6-km NLEX segment.
  • Total project cost: PHP14b, with PHP7b funded through bond issuance.
  • Phase 1: 30% complete.

The Week Ahead

• Several companies are set to host analysts' and investors' briefings, including:
  • Philippine Long Distance Telephone
  • Integrated Micro-Electronics, Inc.
  • Phoenix Petroleum Philippines, Inc.
  • Ayala Corporation
  • Aboitiz Equity Ventures
  • Aboitiz Power Corporation

Financial Summary Table (as of 28 February 2014)

Summary

The report highlights the performance of DNL, a conglomerate, with a strong 2013 earnings growth and a continued BUY rating. It also discusses the broader market trends, including the PSEi and PLDT ADRs, and provides insights into the consumer, utilities, and other sectors. Key financial indicators such as revenue, gross profit, operating profit, and net income are detailed, along with the company's growth strategies and future outlook. The report also lists upcoming events for several companies, including briefings and stockholder meetings, and includes a financial summary table for a range of stocks.