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Daily Edge Summary - 17 February 2014

Core Content

This document is a financial report dated 17 February 2014, highlighting key market data, analyst insights, and company performance for various sectors, primarily focusing on the Consumer and Banks sectors. It includes financial metrics, earnings performance, and market outlook for selected companies, along with a table of key data and valuations.

Main Sectors and Key Points

Consumer Sector

• Jollibee Foods Corp (JFC):
  • Net Income: PHP4.64 billion in 2013, up 24.5% YoY, slightly below the forecast of PHP4.9 billion.
  • System-wide Sales: Grew by 12.8% in 2013, with a stronger 13.9% YoY increase in 4Q13.
  • Store Growth: Expanded to 2,764 stores worldwide, up 5.2% from the previous year.
  • Same-store sales growth (SSSG): Remained robust at 8–9% in 2013, driven by strong customer volume and spending.
  • Cost Pressures: Increased raw material costs led to flattish operating margins in 4Q13. Beef, cooking oil, and rice prices rose.
  • Price Adjustments: JFC raised prices by 0.5–1% in 4Q13 to mitigate cost pressures, with more increases planned for 2014.
  • Forecast Adjustments: Analysts are reviewing forecasts and target prices but are likely to maintain the BUY rating.
  • Valuation Metrics:
    • EPS Growth: 33.1% in 2013, expected to grow at 15.0% in 2014.
    • PER: 32.4 in 2013, expected to drop to 28.2 in 2014.
    • EV/EBITDA: 16.8 in 2013, expected to decrease to 14.8 in 2014.
    • P/BV: 7.1 in 2013, expected to fall to 6.1 in 2014.
    • Target Price: PHP191.00 (up 25% from current price).
    • Upside: 25% potential.

Energy Sector

• Phoenix Petroleum Phils (PNX):
  • Net Income: PHP665.1 million in 2013, up 2% YoY, below the estimate of PHP722 million.
  • Top-line Growth: Robust with 26% increase in revenues and 31% in volume sales.
  • Operating Income: PHP1.31 billion, up 14% from 2012.
  • Financing Costs: Rose sharply to PHP253 million in 4Q14, up 45% YoY and 93% QoQ.
  • Note: Full financial statements will provide more details.

Market Talk Highlights

Banks Sector

• BSP Policy: Fully lifting branch license restrictions in July 2014 to promote competition and expansion.
• Branch Licensing Fees:
  • Universal/Commercial Branch: PHP20 million.
  • Thrift Bank Branch: PHP15 million.
• Liberalization Goal: To prepare for ASEAN banking integration in 2018.
• Key Banks:
  • BDO: Target price PHP88.00, upside 10%, BUY rating.
  • BPI: Target price PHP93.50, upside 6%, HOLD rating.
  • CHIB: Target price PHP57.75, upside 0%, HOLD rating.
  • EW: Target price PHP310.00, upside 35%, BUY rating.
  • MBT: Target price PHP34.28, upside 17.6%, BUY rating.
  • PF: Target price PHP310.00, upside 35%, BUY rating.
  • DMPL: Target price PHP35.20, upside 52%, BUY rating.
  • RRHI: Target price PHP77.50, upside 25%, BUY rating.
  • CIC: Target price PHP36.50, upside 41%, BUY rating.

Utilities Sector

• EDC (Energy Development Corp):
  • Bulk Energy IPPA: ULGEI gave up the award for Unified Leyte's bulk energy.
  • Strip Awards: EDC was awarded 40 MW of "strip of energy" for Unified Leyte, with a tender of PHP5.21/kWh.
  • 2013 Net Income: PHP5.409 billion, slightly below expectations.
  • Valuation Metrics:
    • EPS Growth: 5.2% in 2013, expected to grow at 6.3% in 2014.
    • PER: 12.4 in 2012, expected to rise to 15.2 in 2014.
    • P/BV: 3.0 in 2013, expected to rise to 4.2 in 2014.
    • Target Price: PHP5.73, upside 6%.

Key Information

Other Highlights

• Market Trends:
  • The PSEi index closed at 6,113.66, up 0.20%.
  • Turnover: PHP4,936.43 million, down 3.90%.
  • PHP/USD Rate: 44.77, up 0.27%.
• Analysts:
  • Luz Lorenzo and others from Maybank ATR KE are the lead researchers.
• Upcoming Events:
  • 18 Feb: Manila Water Company.
  • 19 Feb: Roxas Holdings, Inc. Annual Stockholders' Meeting.

Conclusion

The report underscores the positive performance of Jollibee Foods Corp in 2013, driven by strong same-store sales growth, despite rising costs. Analysts are reviewing their forecasts and valuations, but the BUY rating is likely to remain. In the Banks sector, the BSP's liberalization plan is expected to boost competition and expansion, with several banks showing positive growth and upside potential. The Energy and Utilities sectors also show mixed performance, with PNX reporting flat net income and EDC facing challenges in bulk energy awards but showing resilience in strip awards.