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Daily Edge Summary - 21 March 2014

Core Content

This document provides a summary of the financial performance and outlook for several companies and sectors, including the Philippine Stock Exchange Index (PSEi), Manila Electric Co (MER), and Travellers International Hotel Group Inc (TIHG). It also outlines key events and financial metrics for other stocks, such as RWM, BDO, BPI, MBT, and others, across different sectors like Banks, Property, and Utilities.

Key Financial Data

PSEi and Currency Rates

• PSEi: 6,417.35 (-0.70%)
• Turnover (PHPm): 7,120.42 (+30.15%)
• PLDT ADR (USD): 60.81 (+0.81%)
• PLDT ADR (PHP): 2,742.53 (+1.37%)
• Ave interbank rate: 2.00 (0 bps change)
• PHP/USD rate: 45.07 (-0.54%)

Analysts

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

Top Idea: Utilities Sector

Manila Electric Co (MER)

• Core Income Growth: Excluding one-time charges, MER's consolidated core income increased by 5% to PHP17.02b in 2013.
• Earnings: Slightly lower than forecasted PHP17.72b but within the company's profit guidance.
• Distribution Revenues: Rose 15% to PHP56.10b due to a 4% increase in volume sales (34,084 GWh) and a 10% increase in average distribution rates (PHP1.65/kWh).
• Costs and Expenses: Increased by 3%, primarily due to higher depreciation charges (+10%) and other expenses (+16%).
• Net Other Charges: Declined by 94% to PHP177m, mainly due to lower interest expenses and income, and equity in net earnings from associates.
• Net Cash: PHP26.2b as of end-2013.
• Rating: HOLD
• Target Price (TP): PHP280.00
• Upside: Slight premium to TP, leading to HOLD rating.

Market Talk: RWM (Travellers International Hotel Group Inc)

• 4Q13 EBITDA: PHP215.3m (-94% YoY, -89% QoQ)
• FY13 EBITDA: PHP6.7b (-27% YoY), or 73% of the full year estimate.
• Net Profit: Negatively impacted by forex losses; no disclosure yet.
• Analyst Briefing: Scheduled for 4 p.m. on 21 Mar 2014.
• Rating: BUY (unchanged)
• TP Adjustment: Reduced from PHP12.94 to PHP11.83, assuming a 11% annual decrease in EBITDA and 15% in net profit.
• Reason for EBITDA Decline: Poor VIP win rate (2.6% vs assumed 2.9%) and cost escalations.

What's New: RWM

• VIP Win Rate: 2.6% in FY13, which was below expectations.
• Promotional Allowances: ~1.8% of mass market volume, higher than assumed 1.55%, to mitigate Typhoon Haiyan's impact.
• Salaries and Wages: Grew 37% YoY, higher than assumed 30%.
• General Marketing: ~1.65% of VIP volume, slightly higher than assumed 1.55%.

Market Highlights

• Upcoming Events:
  • 21 Mar: Analyst and Investors' Briefing for TIHG.
  • 24 Mar: Annual Stockholders' Meeting for Trans-Asia Oil and Energy Development Corp.
  • 31 Mar: Annual Stockholders' Meeting for Col Financial Group Inc.

Earnings and Valuations Table (as of 20 March 2014)

Key Insights

• MER: Strong performance in 2013 due to increased volume and distribution rates, but regulatory risks remain for 2015.
• TIHG: Poor performance in 4Q13 due to low VIP win rate and cost escalations; TP may be cut, but still rated BUY due to potential recovery.
• RWM: The company faces challenges in EBITDA and net profit, with a potential downward revision in estimates.
• Market Trends: The document highlights the importance of EBITDA and core income in assessing performance, especially for regulated utilities and gaming sectors.
• Analyst Briefing: TIHG is expected to provide more insights on its performance, which could affect future estimates and ratings.