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Daily Edge Summary - September 11, 2014

Core Content

• Date: September 11, 2014
• Topic: Market updates and analysis on various sectors including banking, consumer, property, and telcos.
• Source: Bloomberg and Maybank ATR Kim Eng Securities

Key Market Indicators

Analysts

• Head of Research / Economist: Luz Lorenzo
• Analysts:
  • Lovell Sarreal
  • Rommel Rodrigo
  • Katherine Tan
  • Ramon Adviento

Top Idea

• PNB (PHP86.50):
  • PNB shares are on collateral for Philippine Airlines (PAL) as Dr. Lucio Tan plans to buy back 49% of PAL.
  • PNB is considered a prime M&A play.
  • Rating: BUY (unchanged)

Market Talk

Consumer

• PIP:
  • The board of directors approved a venture into snack foods.
  • The company's stockholders had already approved the amendment to include food manufacturing in its primary purpose.
  • Rating: BUY

Conglomerates

• SMC:
  • Considering joining the bidding for UK-based United Biscuits.
  • The deal is still preliminary.

Telecoms

• PLDT:
  • Its investee company, Rocket Internet AG, plans to list on the Frankfurt Stock Exchange later this year.
  • The IPO will raise USD750m in gross proceeds.
  • PLDT and five other shareholders will not sell shares as they have lock-up commitments.
  • PLDT will pay the remaining 50% of its investment in Rocket Internet.

Banking Sector

PNB

• Rating: BUY
• Analyst: Katherine Tan
• What's New:
  • Dr. Lucio Tan is reportedly signing a joint agreement with SMC to buy back a 49% stake in PAL.
  • The deal is worth USD1b, with USD780m in bridge financing from four local banks.
  • PNB will commit USD250m and accept real estate assets as collateral.

Analyst View

• The use of PNB shares as collateral is in line with usual loan practices.
• If the terms of the loan are not onerous, other parties may still acquire PNB.
• If the deal falls through, PNB's M&A potential may be affected, potentially changing the rating.
• Projected ROE for 2016 is only single-digit, but the current rating remains BUY.

PNB Financials (Key Data)

The Week Ahead

• Sept 13: Waterfront Philippines, Inc.
• Sept 16: Alliance Global Group, Inc.
• Sept 18: MRC Allied Industries, Inc.
• Sept 22: APC Group, Inc.
• Sept 24: Liberty Flour Mills, Inc.
• Multiple Annual Stockholders' Meetings are scheduled.

Earnings and Valuations Table (as of 10 September 2014)

Banks

Consumer

Property

Telcos

Summary

This report covers market updates and analysis for September 11, 2014, focusing on the banking, consumer, property, and telco sectors. It highlights the PNB's role in a potential acquisition of PAL, the PIP's venture into snack foods, and the planned IPO of Rocket Internet AG. Analysts maintain a BUY rating on PNB due to its potential in M&A, despite ongoing speculation. The report also provides financial data and projections for various stocks, including earnings, price targets, and valuation metrics. The upcoming week features several company earnings reports and shareholder meetings.