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Daily Edge Summary - 10 February 2014

Core Content

The document provides an overview of financial market insights and analysis for the Philippines, focusing on key stock performance, analyst views, and future projections for selected companies. It includes barometer data, analyst contacts, and detailed analysis of Aboitiz Equity Ventures (AEV) and other major companies across different sectors.

Key Information

Barometers

• PSEi: 6,011.14 (1.63% change)
• Turnover (PHPm): 5,997.00 (16.64% change)
• PLDT ADR (USD): 58.74 (1.26% change)
• PLDT ADR (PHP): 2,642.42 (0.82% change)
• Ave interbank rate: 2.03 (-3.12 bps change)
• PHP/USD rate: 45.04 (0.43% change)

Analysts

• Head of Research / Economist: Luz Lorenzo
• Analysts: Laura Dy-Liacco, Rommel Rodrigo, Lovell Sarreal, Katherine Tan, Ramon Adviento

Top Idea

Conglomerates

• AEV (PHP52.60): Maintained HOLD rating for 2014 due to expected lower earnings, but raised target price to PHP49.10, factoring in higher earnings from new power projects expected in 2015 and improved performance from its banking unit.

Market Talk

Utilities

• TA: Reported a 21% increase in profits to PHP572m in 2013, exceeding estimates.
• SC: Declared the MER-NPC settlement agreement as valid, which could lead to the recovery of PHP14b from consumers, depending on the Energy Regulatory Commission (ERC) decision.

Conglomerates

• ANS: Issued "treasury" shares through its subsidiary Anscor, which holds 49.56% of ANS's issued common shares.

Consumer

• URC: Declared a PHP3/sh cash dividend, translating to a 2.5% yield, with plans to shift to semi-annual dividends.

AEV Analysis

What's New

• Revised forecasts for AEV to reflect changes in its subsidiaries, including Aboitiz Power Corp (AP) and Union Bank of the Phils (UBP).
• Core net income forecasts adjusted slightly downward to PHP20.46b for 2013 and PHP18.53b for 2014.
• Target price for AEV raised to PHP49.10 from PHP48.40.

What's Our View

• AEV's 2014 profits are expected to be affected by higher tax provisioning on AP due to expiring tax holidays.
• The banking unit's performance is also impacted by lower trading gains.
• Future outlook is positive with increased earnings expected in 2015 from both AP and UBP.

Short-term Prospects

• Short-term performance is weighed down due to tax issues and lower trading gains.
• Despite this, the company has a strong dividend yield and future projects that may improve its prospects.

Expansion Plans

• AEV plans to develop 1,195 MW of additional power capacity over the next five years.
• AboitizLand, a newly acquired subsidiary, has signed a joint venture (JV) with Ayala Land Inc (ALI) for a mixed-use project in Cebu.

Attractive Dividend Yield

• AEV offers a 3.5% dividend yield, one of the highest among conglomerates.
• The company follows a 50% payout policy based on previous year's core net income.

Key Financial Data

Figure 1: Earnings Contribution by Business Segment

Figure 2: AEV's NAV Estimate

Figure 3: Key Data - AEV

Figure 4: Earnings and Valuations Table

Continued Table

Summary of Key Points

• AEV is expected to maintain a HOLD rating for 2014 due to lower earnings, but the target price was raised to reflect improved performance from new power projects and UBP.
• The power segment contributes the majority of AEV's earnings (73%), and tax provisions will impact 2014 profits.
• AEV's dividend yield is attractive at 3.5%, and future expansion plans could increase its NAV.
• URC declared a higher dividend than previous years and may increase its dividend payouts.
• The settlement agreement between MER and NPC is a significant point for the utilities sector, potentially affecting consumers' electricity costs.
• ANS issued treasury shares, increasing its ownership stake in the company.
• Various stocks across different sectors are analyzed, with their financial metrics and projections for the next few years.