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Daily Edge Summary - September 4, 2015

Core Content

• Date: September 4, 2015
• Focus: Philippine consumer sector and related market updates
• Analysts: Luz Lorenzo, Ramon Adviento, Michael Bengson, Rommel Rodrigo, Lovell Sarreal, Katherine Tan
• Source: Bloomberg and Maybank ATR Kim Eng Securities

Key Market Data

Main Views

Consumer Sector

• Rating: OVERWEIGHT
• Reasoning: The sector is expected to experience sustainable growth due to the expansion of consumer companies, especially in retailing and foodservice.
• Top Picks:
  • URC (manufacturing)
  • JFC (foodservice/QSR)
  • RRHI and PGOLD (retailing)
• Key Points:
  • Retail chains like SM, PGOLD, and RRHI are expanding aggressively, both in Metro Manila and provincial areas.
  • QSR leader JFC is a first mover in provincial expansion, reaping benefits.
  • URC is diversifying its product portfolio to cater to more affluent consumers.
  • The sector is seeing growth in private consumption and expanding into new formats and acquiring smaller players.

Market Talk

Conglomerates

• AC's Sale: Ayala Corp sold its interest in Luzon Wind Energy Holdings BV to DGA NLREC BV, a subsidiary of Mitsubishi Corporation.
• Impact: AC Energy Holdings, Inc remains the largest owner of NLREC with an economic stake of about 36%.
• Context: Ayala and Mitsubishi have been partners since 1974.

Utilities

• MER's Rates: Likely to remain stable or decrease this month due to higher dispatch levels and less reliance on WESM.
• MSCC Upgrade: MER plans to upgrade its Meralco System Control Center (MSCC) with a budget of PHP40m to improve distribution and outage resolution.
• Smart Meters: Deployment of smart meters is planned for next year, enhancing real-time grid monitoring and faster response times.

Earnings and Valuations (as of 3 September 2015)

The Week Ahead

• Key Events:
  • Sept 4: Federal Resources Investment Group, Inc; Acesite (Philippines) Hotel Corporation
  • Sept 10: IRC Properties, Inc; Mabuhay Holdings Corporation
• Other Events: Annual Stockholders' Meetings for various companies

Key Information

• The Philippine consumer sector is expected to benefit from the growing private consumption and the expansion of retail chains and foodservice companies.
• URC, JFC, EMP, RRHI, PGOLD, RFM, and CIC are recommended as BUYs, while DNL and PIP are HOLDs.
• MER is likely to maintain stable electricity rates due to higher dispatch levels and less reliance on WESM.
• The upgrade of MSCC will improve real-time monitoring and outage resolution.
• Cignal is targeting 2 million subscribers in the next two to three years, with a significant portion of its subscriber base being prepaid.
• The document includes detailed financial data and forecasts for various stocks, including their earnings, growth, and valuations.