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Daily Edge Summary - 16 April 2014

Core Content Overview

This document provides a financial market update and analysis for the Philippines on 16 April 2014, including stock market indices, key company performance data, analyst views, and upcoming events. It covers the banking sector, consumer companies, and property/Utilities segments.

Market Overview

• PSEi: Closed at 6,621.66, with a 0.49% increase.
• Turnover (PHPm): 7,052.45, up 34.20%.
• PLDT ADR (USD): 61.56, down 0.21%.
• PLDT ADR (PHP): 2,738.80, down 0.13%.
• PHP/USD rate: 44.53, down 0.24%.
• Ave interbank rate: 2.13, with 0 bps change.

Key Analysts

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

Top Idea

• Philippine financial markets will be closed on 17–18 April 2014.
• Trading resumes on 21 April 2014.

Banks Analysis

China Banking Corp (CHIB)

• Share price: PHP62.00
• Target price: PHP60.00
• Upside: -3%
• Rating: HOLD
• Key Points:
  • CHIB is raising up to PHP8 billion via a stock rights offer.
  • The rights offer will increase total outstanding shares by 11% or 161.6 million.
  • Proceeds will fund expansion and meet Basel III capital requirements.
  • FY14F net profit is revised to PHP5.5 billion, down 7% from previous estimate.
  • Net interest income is raised to PHP12.2 billion, up 23%.
  • Operating expenses are expected to increase by 9.2%.
  • EPS is expected to dilute by 10% to PHP3.45.
  • BVPS rises by 5% to PHP34.95, while ROE drops to 10.8%.
  • CET1 is expected to improve by 2pps to 14.4%.
  • P/BV is at 1.8x, and PER is at 18.0x.

Other Banks

• BDO: Target price PHP93.50, Upside 6%, Rating HOLD
• BPI: Target price PHP93.50, Upside -2%, Rating HOLD
• EW: Target price PHP77.50, Upside 13%, Rating BUY
• MBT: Target price PHP50.00, Upside 2%, Rating BUY
• EW: Target price PHP77.50, Upside 13%, Rating BUY
• PBB: Target price PHP310.00, Upside 35%, Rating BUY
• RRHI: Target price PHP77.50, Upside 13%, Rating BUY
• CIC: Target price PHP36.50, Upside 2%, Rating BUY
• PGOLD: Target price PHP50.00, Upside 13%, Rating BUY

Consumer Sector Analysis

PIPs (Pepsi-Cola Products Philippines Inc)

• Share price: PHP5.01
• Target price: PHP6.05
• Upside: 21%
• Rating: BUY
• Key Points:
  • 2013 net income rose 6% to PHP903.5 million, aligning with the estimate.
  • 4Q13 net income dropped 21% to PHP123 million.
  • Full-year gross sales increased 16% to PHP26.4 billion, matching the forecast.
  • 4Q13 sales growth was 13% to PHP7 billion.
  • 2013 sales volume increased 20%, while cost of sales rose 16% to PHP19.5 billion.
  • Gross profit increased 13% to PHP6 billion.

Market Talk

• GMA Network Inc (GMAP):
  • 2013 net income increased 3% to PHP1.67 billion, matching the estimate.
  • Total net revenues rose 7% to PHP13 billion, driven by PHP724 million in election-related ads.
  • 4Q13 net revenues increased 16% to PHP3.2 billion.
  • Operating expenses rose 8% to PHP10.6 billion.
  • GMAP is currently trading at 22.2x 2014F PER, higher than peers.
  • Rating: SELL based on 12% potential downside.

Valuation Summary

Regional Peers

What's New & View

• CHIB:

  • Loan growth estimate raised to 31% for 2014F.
  • Net interest income growth is expected to be 23% to PHP12.2 billion.
  • Operating expenses are expected to rise by 9.2%.
  • EPS is expected to dilute by 10% to PHP3.45.
  • ROE drops to 10.8%, while CET1 improves to 14.4%.
  • Maintain HOLD rating due to 3% premium over target price.

• GMAP:

  • Airtime revenues grew 8.1% in 2013, with 20.3% increase in 4Q13.
  • Regular ads grew 1.4%, while international and others declined 1.1%.
  • Production cost rose 12.7%.
  • Maintain SELL rating due to 12% implied downside.

The Week Ahead

• 21 Apr: Lepanto Corporation Annual Stockholder's Meeting
• 22 Apr: Central Azucarera De Tarlac Annual Stockholder's Meeting
• 23 Apr: BDO Leasing & Finance, Inc. Annual Stockholder's Meeting
• 24 Apr: A. Soriano Corporation Annual Stockholder's Meeting

Summary of Key Financial Data

Conclusion

• The document outlines the performance of key financial indices and companies in the Philippines.
• CHIB is undergoing expansion and capital raising, which may affect its EPS and ROE.
• GMAP and PIP are analyzed for their financial results and valuations, with GMAP receiving a SELL rating due to a high PER and potential downside.
• The PSEi and turnover showed moderate gains, while the PLDT ADR declined slightly.
• Market Talk highlights the impact of election-related ads on GMAP's performance and the expected slowdown in growth.
• Analysts are cautious about the future outlook for the banking and consumer sectors, with BUY and HOLD ratings given based on performance and valuations.