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Daily Edge Summary - July 21, 2015

Core Content Overview

This document is a financial report from Maybank ATR Kim Eng, dated July 21, 2015, summarizing key market data, analyst insights, and company performance updates. It includes details on stock prices, earnings, and valuations for various sectors and companies in the Philippines.

Market Summary

Key Market Indicators

• PSEi: 7,541.17 (-1.00%)
• Turnover (PHPm): 12,755.02 (+84.78%)
• PLDT ADR (USD): 64.72 (+0.15%)
• PLDT ADR (PHP): 2,927.29 (+0.11%)
• Ave interbank rate: 2.53 (+3.13 bps)
• PHP/USD rate: 45.26 (+0.01%)

Analysts

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

Top Idea

• Mining SCC (PHP177.79): Wall failure at Panian mine
  • Event: Northern part of the mine collapsed on 17 July 2015 due to excessive rains.
  • Impact: Mining operations were suspended. Assuming a six-month suspension, 2015F net income could be reduced by 15%, with a minimal 0.5% cut in NAV to PHP176.86.
  • Update: A briefing is scheduled for Thursday to review estimates. No rating change for now.

Market Talk

Oil

• PNX (Buy): 2Q15 net income of PHP195m (+3% YoY), 1H15 net income of PHP425m (+6%), equivalent to 45% of full-year forecast.
• Growth: 1H15 total volume grew 25%, with 443 stations at the end of 2Q15.
• Target: PNX aims to reach 500 stations by year-end.

Banks

• BDO (Buy): Completed acquisition of One Network Bank (ONB) via share-swap, enhancing presence in Mindanao with 98 branches.
• BDO's Net Income: 2014: PHP22,466m, 2015F: PHP25,723m, 2016F: PHP30,147m.
• EPS Growth: 2014: 6.27, 2015F: 7.18, 2016F: 8.42.
• P/BV: 2014: 48.56, 2015F: 53.71, 2016F: 60.93.

Conglomerates

• FPH (Buy): Second arbitration ruling in favor of First Philippine Holdings Corp (FPH) in ICC proceedings against SunPower Philippines Manufacturing Ltd (SPML).
• FPSC: Joint venture between First Philec (75.54%) and SPML (14.49%) to slice silicon solar wafers.
• Arbitration Outcome: SPML to pay USD23.2m to First Philec and USD7.1m to individual shareholders for their 10.97% stake.

Telcos

• Smart (Hold): Signed a partnership with Xiaomi to exclusively offer Xiaomi products to its subscribers.
• Mi 4i Features: 5-inch 1080p screen, 3120mAh battery, MIUI 6-based system.
• Plans: Smart will announce postpaid plan details and prepaid offers soon.

Mining Sector Analysis

Semirara Mining and Power Corp (SCC)

• Analyst: Ramon Adviento
• Rating: BUY (Unchanged)
• Key Events:
  • Wall Failure: Northern portion of the Panian mine collapsed on 17 July, resulting in 6 deaths and 3 missing.
  • Impact: Mining operations are suspended. SCC has 2m MT of coal inventory and third-party contracts with force majeure clauses.
• Earnings Forecast:
  • Current 2015F Net Income: PHP10,051m
  • 6-Month Suspension Impact: Net income reduced by PHP1,530m to PHP8,521m (-15%).
• NAV Estimation:
  • Current NAV: PHP265,450m
  • 6-Month Suspension NAV: PHP266,980m
  • Price per Share: PHP177.74 (current), PHP176.86 (6-month scenario)
• Future Outlook: Panian mine will be depleted by end-2016; development of Bobog mine can be accelerated.

Earnings and Valuations Table (as of 20 July 2015)

The Week Ahead

• July 22: Oriental Petroleum and Minerals Corporation
• July 27: Manila Electric Company
• July 28: F&J Prince Holdings Corporation, Centro Escobar University
• July 29: Global Ferronickel Holdings, Inc., DMCI Holdings, Inc.
• July 30: Easycall Communications Phils., Inc., Philippine Seven Corporation
• July 31: Macay Holdings, Inc., Makati Finance Corporation, Leisure & Resorts World Corporation, Anglo Philippine Holdings Corporation

Key Financial Metrics

• Revenue: FY13A: PHP27,331.2m, FY14A: PHP28,585.3m, FY15E: PHP28,739.9m, FY16E: PHP33,410.3m, FY17E: PHP35,210.2m
• Core Net Profit: FY13A: PHP7,519.6m, FY14A: PHP6,861.3m, FY15E: PHP10,050.9m, FY16E: PHP10,606.0m, FY17E: PHP10,918.1m
• Core EPS (PHP): FY13A: 7.04, FY14A: 6.42, FY15E: 9.40, FY16E: 9.92, FY17E: 10.22
• Core EPS Growth (%): FY13A: 18.3, FY14A: -8.8, FY15E: 46.5, FY16E: 5.5, FY17E: 2.9
• Core P/E (x): FY13A: 17.6, FY14A: 19.2, FY15E: 13.1, FY16E: 12.4, FY17E: 12.1
• P/BV (x): FY13A: 6.6, FY14A: 5.8, FY15E: 4.6, FY16E: 3.8, FY17E: 3.2
• ROAE (%): FY13A: 40.6, FY14A: 32.0, FY15E: 39.3, FY16E: 33.5, FY17E: 28.6
• ROAA (%): FY13A: 18.6, FY14A: 14.2, FY15E: 16.8, FY16E: 14.9, FY17E: 12.8
• EV/EBITDA (x): FY13A: 10.2, FY14A: 20.5, FY15E: 9.6, FY16E: 8.1, FY17E: 8.2
• Net Debt/Equity (%): FY13A: 62.8, FY14A: 69.3, FY15E: 50.0, FY16E: 49.4, FY17E: 57.5

Summary of Key Points

• Mining Sector: SCC faces a potential 15% net income cut due to a wall collapse at Panian mine, with a six-month suspension impacting earnings significantly.
• Oil Sector: PNX reports strong earnings growth, with plans to expand its station network.
• Banking Sector: BDO completes acquisition of ONB, enhancing its presence in Mindanao.
• Conglomerates: FPH secures a second arbitration ruling, indicating progress in resolving disputes with SPML.
• Telcos: Smart forms a partnership with Xiaomi to offer its devices to subscribers.
• Valuation Metrics: Various financial indicators and valuation ratios are provided for different sectors and companies, aiding in investment decisions.