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Daily Edge Summary - July 20, 2015

Core Content Overview

This report provides an overview of stock market performance and analyst insights for various sectors, focusing on the Consumer and Utilities sectors, as well as key financial metrics for several listed companies. It also highlights upcoming events for companies scheduled to hold annual stockholder meetings or investor briefings.

Main Points and Key Information

Market Performance

• PSEi Index: Rose by 0.77% to 7,617.13.
• Turnover: Declined by 18.74% to PHP6,902.66 million.
• PLDT ADR (USD): Increased by 1.80% to USD64.62.
• PLDT ADR (PHP): Increased by 1.87% to PHP2,924.06.
• Ave Interbank Rate: Remained at 2.50% with no change.
• PHP/USD Rate: Declined by 0.14% to 45.26.

Analysts

• The report lists several analysts and their contact details from Maybank ATR Kim Eng, including:
  • Luz Lorenzo
  • Ramon Adviento
  • Michael Bengson
  • Rommel Rodrigo
  • Lovell Sarreal
  • Katherine Tan

Top Idea: Consumer Sector

CIC (PHP72.00)

• Performance in 2Q15: Indications show a rebound in performance with net sales up 15–20% YoY and net income up 10–15% YoY.
• Guidance: Maintained a ~15% earnings growth guidance for 2015.
• Rating: BUY.
• Target Price: PHP72.00.
• Forecast:
  • Revenue is expected to grow from PHP10,800.7 million in FY14 to PHP13,714.6 million in FY17.
  • Core net profit is forecasted to increase from PHP768.4 million in FY14 to PHP1,080.7 million in FY17.
  • Core EPS is expected to grow from PHP2.26 in FY14 to PHP3.18 in FY17.
• Growth Targets:
  • Sales to reach PHP45.9 billion by 2020.
  • Earnings to hit PHP3.8 billion by 2020.
• Challenges:
  • 2H15 could be challenging due to delays in BIS segment deliveries.
  • Port congestion and delays in construction material importation affected 1Q15 performance.

Market Talk

Mining

• SCC (Semirara Mining and Power Corp):
  • Experienced an unfortunate incident at the Panian pit on July 17.
  • Three bodies were recovered, and six are still missing.
  • SCC is coordinating with authorities and providing support to victims.
  • Operations at the Panian pit are suspended pending investigation.

Consumer

• RFM Corp:
  • 1H15 net profit rose 11% YoY to PHP471 million.
  • 2Q15 net profit increased by 12.7% YoY to PHP292 million.
  • Sales grew 10% YoY to PHP5.5 billion, and EBIT increased by 17.5% to PHP665 million.
  • Sales growth in ice cream and pasta led to the increase.
  • Target price for RFM is PHP5.60, with an upside of 38%.

Utilities

• Pagbilao Energy Corp:
  • On track to complete the 420MW Pagbilao 3 coal-fired power project by 2018.
  • The project started last year and is expected to take about 42 months.
• Meralco:
  • Scouting for opportunities to expand its distribution area through acquisitions.
  • Targeting electric cooperatives and private distribution utilities in North and South Luzon.
• Maibarara Geothermal:
  • Expansion of the 10MW geothermal plant is scheduled for mid-2017.
  • PetroEnergy Resources Corp holds 65% interest in MGI, while TA holds 25% and PNOC Renewables 10%.
  • PERC confirmed sufficient steam for the expansion.

What's New: CIC

• At the CIC annual stockholders meeting, management reported:
  • 2Q15 net sales growth of 15–20% YoY.
  • Net income growth of 10–15% YoY.
  • Sales of air conditioning units under the consumer segment grew 15–20% YoY, rebounding from a 17% decline in 1Q15.
  • Sales for air conditioners in the BIS segment remained strong at 20–25% growth, although lower than the 38% jump in 1Q15.
  • Refrigerator sales grew over 10% in volume, mainly from more affordable small-sized units.
• Net Margin: Lower YoY due to product mix and higher operating expenses.
• Earnings Guidance: Maintained at ~15% for 2015, but noted it's more difficult to achieve.
• Long-term Growth: Targeting sales of PHP45.9 billion and earnings of PHP3.8 billion by 2020 (5x 2014 levels, 31% CAGR).

What's Our View

• The report maintains forecasts, a target price of PHP72.00, and a BUY rating for CIC.
• Key financial data for CIC:
  • Core P/E (x): 37.9 (FYE 31 Dec 2014) to 17.9 (FY17E).
  • P/BV (x): 8.5 (FYE 31 Dec 2014) to 4.0 (FY17E).
  • Core EPS Growth (%): 24.8 (FY13A) to 15.0 (FY17E).
  • Net Dividend Yield (%): 5.0 (FYE 31 Dec 2014) to 1.5 (FY17E).
  • ROAE (%): 28.5 (FY13A) to 24.3 (FY17E).

The Week Ahead

• July 20: San Miguel Corporation, Iripple, Inc. - Analysts/Investors Briefing, Annual Stockholders Meeting.
• July 22: Oriental Petroleum and Minerals Corporation - Annual Stockholders Meeting.
• July 27: Manila Electric Company, 8990 Holdings, Inc. - Analysts/Investors Briefing, Annual Stockholders Meeting.
• July 28: F&J Prince Holdings Corporation, Centro Escalar University - Annual Stockholders Meeting.
• July 29: Global Ferronickel Holdings, Inc., DMCI Holdings, Inc. - Annual Stockholders Meeting.
• July 30: Easycall Communications Phils., Inc., Philippine Seven Corporation, Macay Holdings, Inc., Makati Finance Corporation - Annual Stockholders Meeting.
• July 31: Leisure & Resorts World Corporation, Anglo Philippine Holdings Corporation - Annual Stockholders Meeting.

Earnings and Valuations Table (as of July 16, 2015)

Summary

The report highlights the improved performance of the Consumer and Utilities sectors, with CIC showing a rebound in 2Q15 earnings and sales. Despite challenges in the second half of the year, the company remains optimistic about long-term growth. In the Mining sector, SCC faced a tragic incident, but is working closely with authorities to manage the situation. RFM Corp also reported strong performance, with net profit growth and a positive outlook for the year. In the Utilities sector, Pagbilao Energy Corp is on track to complete its coal-fired plant, while Meralco is exploring distribution utility acquisitions. Maibarara Geothermal is set to expand its operations by mid-2017. The report also provides detailed financial forecasts and target prices for several companies, with a focus on growth potential and valuation metrics.