Eastern Visayas Leads Growth in Household Spending.
According to the data released by the PSA, Eastern Visayas
posted the highest per capita household final consumption
expenditure growth for 2016 at 8.1%. Among the top 5 are
Central Luzon, Davao, Ilocos, and Central Visayas Regions. To add
to that, the population growth of Eastern Visayas slowed down,
but the economy of the region still grew by 12.4% during that
period, proving that the growth in consumer spending bolstered
growth. This is positive for RRHI (HOLD, P91.60) and PGOLD
(HOLD, P49.40), but most especially from MRSGI (BUY, P4.80)
since they have a strong brand equity in the area.
Cement Battle Cuts CHP profit. CHP reported a -46% drop in
earnings for 1H17, accounting for only 16% of full year
Bloomberg consensus estimates. CHP attributed this to weak
demand and pricing challenges during the period. However, CHP
expects demand to recover in 2H17 as economic activity picks
up, guiding a +3% volume growth in 2017 (+12% volume growth
in 2H17 for this to happen). At the closing price of P 6.30, CHP is
trading at an EV/EBITDA of 7.5x, compared to HLCM (7.9x) and
EAGLE (9.4x). Recommendation to avoid the stock for now as we
think earnings will take time to recover.
EAGLE 2Q17 Results Preview. EAGLE said their 2Q17 revenues
grew by around +6%, a significant slowdown from 1Q17’s +19%.
While this can be viewed as positive since revenues of HLCM (-
21%) and CHP (-12%) both had a steep drop in 2Q17, we are now
expecting EAGLE’s earnings growth to taper from 1Q17’s 30% to
single-digits for 2Q17. We reiterate our expectations that EAGLE
will outperform other local manufacturers in terms of market
share, volume and revenues. But at this point, we are more
inclined to think that cement stocks have to bear the negative
sentiment in the coming months unless there is an improvement
in supply dynamics (and pricing) which will be more beneficiary
to sector earnings, rather than keeping expectations that there
will be an uptick in construction activity by 2H17.
Papa Securities Corp. (Morning Huddle - Daily News) - July 28, 2017
|
Daily Summary
|
US Tracker
US stocks up boosted by a jump in Verizon.
DOW 21,711.01 +97.58 +0.45%
EPHE 36.96 +0.59 +1.62%
PHI 34.05 +0.14 +0.41%
Peso 50.64
TEL Par 1,724 vs 1,709 TEL Last
Corporate News
MWC unit aims to capture 200.0k service connections by 2022. Laguna Water seeks to expand its customer base to at lease 200.0k and become the third largest players by 2022. Laguna Water plans to spend Php5.0bn capex over the next five years. Laguna Water contributed 6.8% of MWC’s revenues as of 1Q17 and have spent Php227.0mn in the same period. Last 32.5.
City of Dreams 2Q17 net revenues at USD176.2mn (+46.6% YoY). We estimate 1H17 at USD333.6mn (+54.7% YoY). Adjusted 2Q17 EBITDA rose 72% to USD62.8mn due to increased casino revenues. Rolling chip volume jumped 88% to USD3.2bn as win rate improved to 3.5% from 3.4% in 2Q16. Mass market increased 26% to USD169.8mn while gaming machines gained 47% to USD759mn. Non-gaming revenue rose 7% to USD28.1mn. BEL and MRP closed at PhP3.68 and PhP9.03, respectively.
PLC 2Q17 net income surged 104% to PhP470.25mn. In 1H17, net income jumped 153% to PhP895.2mn. 2Q17 gross revenues jumped 55% to PhP1.25bn due to strong growth from City of Dreams Manila and improving gaming market. Last PhP1.63
UBP net income down 1.1% in 2Q17 to PhP2.15bn, 1H17 up 15.2% to PhP4.4bn. This is in line at 48% of our FY17E of PhP9.1bn, and 52% of consensus of PhP8.3bn. Net interest income is up 11% in 2Q17 to PhP4.1b, as loans grew 31.5% while deposits expanded 29.1%. Fee income surged 56.1% to PhP1.4bn, while treasury posted losses of PhP206mn. Gross income grew 11.1% to PhP5.9bn but, opex went up 20.6% thus leading to flat bottom line in 2Q17. We maintain our BUY rating and TP of PhP105, based on 1.5x 2017E PBV.
RECENT REPORTS
Immaterial impact on MBT from possible full provisioning of fraudulent loans.
EAGLE continues to enjoy a home court advantage vs. imports
Robust project pipeline supported by strong balance sheet and asset tactical maneuvering
Speculation of interest from foreign banks shore up share price
|
PCCI Newsletter - July 27
The PSEi surged higher yesterday tracking most regional markets boosted by a rally in commodities, the upward momentum from European and U.S. markets from the previous night, and renewed confidence in global economic growth. After reaching a near one-year high in intra-day trading, the benchmark index settled at 8,037.51, adding 65.79 points. Most sectoral indices leaped back into the green led bythe Mining-Oil sector soaring by 131.41 points (+1.02%) followed by the Property and Holdings sectors climbing by 63.94 points (+1.68%) and 60.49 points respectively. The Industrials sector losing by 35.27 points remained the only sectoral loser. MEG, jumping by 5.51% headed the index-related gainersfollowed by LTG and SMPH rising by 3.28% and 1.76% respectively. SMC, falling by 1.56% paced the index-related losers followed by URC slipping by 1.24% and GLO. Value turnover strengthened by 31.3% to P8.17 billion inclusive of 10 block transactions. Foreigners were net buyers for the 78th in 141 trading days of the year in the regular market. The net buying position increased to P20.91 billion.
For index-related stocks, the net buying position also grew further to P15.48 billion.
The PSEi advanced sharply yesterday. It rose above the 1st minor fan line and is still above the 1st major fan line. The previous 5 and the January 2016 price gaps are still unfilled. It remains above both its 5-day and its 10-day moving averages whose bullish crossover is intact. It continues to be above its 40-day moving average. Both Its stochastics and the RSI are inside its trading zones and are bullish for the near-term. Most of the trending and volume oscillators are bullish for the short-term. A continuation of the rise is likely. The immediate resistances are now seen at 8,100 and 8,150. Another minor correction or a consolidation cannot be discounted. The immediate supports are seen at 7,900 and 7,800.
U.S. stocks ended higher last night following the Fed’s expected decision to hold rates steady given low inflation, upbeat new home sales data, better-than-estimated earnings reports from industry
heavyweights such as Boeing, AT&T and Facebook, and the rally of crude prices. The DJIA added
another 97.58 points to end at 21,711.01. The S&P 500 inched up by 0.70 point, closing at 2,477.83.
The U.S. dollar depreciated. U.S. treasury yields declined. Spot commodity prices were generally higher again. Gold climbed to 1,260.53/oz. Copper rose again to 2.8720/lb. LME nickel was higher anew at 9,915/tonne. Crude prices extended its gains. WTI leaped by another 1.80% to 48.75/bbl. Brent jumped by another 1.53% to 50.97/bbl. Most European bourses continued its modest winning streak. Vietnam continued to lead the gains of most markets in the region. Most of the regional currencies depreciated again however. Regional markets and local equities might be mixed to bullish again today behind the global rally continuing to be pushed higher by surging crude prices, and confidence on global economic growth sparked recently by upbeat global earnings reports. Profit-taking following yesterday’s sharp uptrend can however drag down the local market or limit any upward momentum.
PCCI SECURITIES BROKERS CORPORATION
Trading Participant: Philippine Stock Exchange Member:
Securities & Investor’s Protection Fund, Inc.
PSEi PER: 18.25X (2017F)
PBV: 2.19X (2017F)
Div. Yld: 1.41% (2017)
(2016F) (2016F)
The peso depreciated to finish at P50.640 versus the dollar yesterday. The weighted average rose sharply however to P50.586 with total value turnover increasing again to USD932.000 million.
Most of the benchmark treasury yields advanced as investors sold GS to take profit price-wise while re- balancing their portfolios ahead of the results of the 2-day Fed policy meeting.
For index-related stocks, the net buying position also grew further to P15.48 billion.
The PSEi advanced sharply yesterday. It rose above the 1st minor fan line and is still above the 1st major fan line. The previous 5 and the January 2016 price gaps are still unfilled. It remains above both its 5-day and its 10-day moving averages whose bullish crossover is intact. It continues to be above its 40-day moving average. Both Its stochastics and the RSI are inside its trading zones and are bullish for the near-term. Most of the trending and volume oscillators are bullish for the short-term. A continuation of the rise is likely. The immediate resistances are now seen at 8,100 and 8,150. Another minor correction or a consolidation cannot be discounted. The immediate supports are seen at 7,900 and 7,800.
U.S. stocks ended higher last night following the Fed’s expected decision to hold rates steady given low inflation, upbeat new home sales data, better-than-estimated earnings reports from industry
heavyweights such as Boeing, AT&T and Facebook, and the rally of crude prices. The DJIA added
another 97.58 points to end at 21,711.01. The S&P 500 inched up by 0.70 point, closing at 2,477.83.
The U.S. dollar depreciated. U.S. treasury yields declined. Spot commodity prices were generally higher again. Gold climbed to 1,260.53/oz. Copper rose again to 2.8720/lb. LME nickel was higher anew at 9,915/tonne. Crude prices extended its gains. WTI leaped by another 1.80% to 48.75/bbl. Brent jumped by another 1.53% to 50.97/bbl. Most European bourses continued its modest winning streak. Vietnam continued to lead the gains of most markets in the region. Most of the regional currencies depreciated again however. Regional markets and local equities might be mixed to bullish again today behind the global rally continuing to be pushed higher by surging crude prices, and confidence on global economic growth sparked recently by upbeat global earnings reports. Profit-taking following yesterday’s sharp uptrend can however drag down the local market or limit any upward momentum.
PCCI SECURITIES BROKERS CORPORATION
Trading Participant: Philippine Stock Exchange Member:
Securities & Investor’s Protection Fund, Inc.
PSEi PER: 18.25X (2017F)
PBV: 2.19X (2017F)
Div. Yld: 1.41% (2017)
(2016F) (2016F)
The peso depreciated to finish at P50.640 versus the dollar yesterday. The weighted average rose sharply however to P50.586 with total value turnover increasing again to USD932.000 million.
Most of the benchmark treasury yields advanced as investors sold GS to take profit price-wise while re- balancing their portfolios ahead of the results of the 2-day Fed policy meeting.
APS Daily Market Insights July 27
Fed Holds Rate Steady. The US Fed kept its policy rates unchanged,
taking note of the weakness of the US economy which only grew
0.7% last 1Q17, and benign inflation which is still below the target of
2.0%. The more dovish tone of the Fed could sustain the rally of the
PSEi which broke out of its resistance of 8,000 yesterday.
VAT on Low-Cost Housing to Worsen Backlog. The first tax reform package includes the removal of VAT exemption on low-cost housing. If passed, it would worsen the housing backlog in the Philippines which is estimated at 5.6 Mn units as of end-2016, and projected to balloon to 12.3 Bn in 2030. Property developers that offer low-cost housing are HOUSE, VLL, CLI, and FLI.
Multinational Firms Asked to Hike Salaries. DOF asked ROHQ of multinational companies in the Philippines to increase salaries for the managerial position to offset the effect of the proposed removal of the 15% preferential tax treatment under the CTRP. Currently there are 158 ROHQs in the country, employing more than 50,000 workers with a combined $2 Bn employee wages and benefits. PTRs are part of the fiscal and non-fiscal incentives given to ROHQs to entice them to locate in the Philippines. DOF wants to remove the 15% PTR under the first package of the tax reform, which could affect the attractiveness of the Philippines as a location for ROHQs.
PERC Sees 33% More Profit . With its shift to renewable energy from oil and gas exploration, PERC estimates its earnings to grow 33% for 2017. By our estimates, attrib. earnings could reach $ 2.4 Mn (P 117.9 Mn) this year. This translates to a BVPS of P 8.23 for PERC. At 1.2x P/BV (ave. of regional peers based on Bloomberg consensus), the price target for PERC is P 9.50 / share. We like PERC because around 85% of its earnings are now sourced from its RE portfolio, with total capacity at 106 MW. The company is also set to launch another four RE projects with total capacity of 48 MW which costs P 6.8 Bn. PERC is currently in talks with potential off-takers for the projects capacity. However, we note that our key concern on the company is the lack of liquidity.
CLI Acquired 4.6-ha Property in Cebu. Cebu Landmasters (Buy, P 6.10) purchased a 4.6-hectare property in Bogo, Cebu for P 21.29 Mn to be developed into a socialized housing project under the Villa Casita brand. The land acquisition is in line with the company’s expansion plan in the Visayas-Mindanao region. Federal Land JV With Japanese Giants Gets Go Signal. The Philippine Competition Commission has given its go signal for Federal Land to form a joint venture with Isetan Mitsukoshi Holdings Ltd. And Nomura Real Estate Development Co. Ltd. for the P 20 Bn Sunshine Fort Project. The project will have a commercial complex at the base of 4 high-rise residential towers targeted for completion in 2025, with a 60-40 partnership in favor of Federal Land (GTCAP, Buy on Dips, P 1,378*).
VAT on Low-Cost Housing to Worsen Backlog. The first tax reform package includes the removal of VAT exemption on low-cost housing. If passed, it would worsen the housing backlog in the Philippines which is estimated at 5.6 Mn units as of end-2016, and projected to balloon to 12.3 Bn in 2030. Property developers that offer low-cost housing are HOUSE, VLL, CLI, and FLI.
Multinational Firms Asked to Hike Salaries. DOF asked ROHQ of multinational companies in the Philippines to increase salaries for the managerial position to offset the effect of the proposed removal of the 15% preferential tax treatment under the CTRP. Currently there are 158 ROHQs in the country, employing more than 50,000 workers with a combined $2 Bn employee wages and benefits. PTRs are part of the fiscal and non-fiscal incentives given to ROHQs to entice them to locate in the Philippines. DOF wants to remove the 15% PTR under the first package of the tax reform, which could affect the attractiveness of the Philippines as a location for ROHQs.
PERC Sees 33% More Profit . With its shift to renewable energy from oil and gas exploration, PERC estimates its earnings to grow 33% for 2017. By our estimates, attrib. earnings could reach $ 2.4 Mn (P 117.9 Mn) this year. This translates to a BVPS of P 8.23 for PERC. At 1.2x P/BV (ave. of regional peers based on Bloomberg consensus), the price target for PERC is P 9.50 / share. We like PERC because around 85% of its earnings are now sourced from its RE portfolio, with total capacity at 106 MW. The company is also set to launch another four RE projects with total capacity of 48 MW which costs P 6.8 Bn. PERC is currently in talks with potential off-takers for the projects capacity. However, we note that our key concern on the company is the lack of liquidity.
CLI Acquired 4.6-ha Property in Cebu. Cebu Landmasters (Buy, P 6.10) purchased a 4.6-hectare property in Bogo, Cebu for P 21.29 Mn to be developed into a socialized housing project under the Villa Casita brand. The land acquisition is in line with the company’s expansion plan in the Visayas-Mindanao region. Federal Land JV With Japanese Giants Gets Go Signal. The Philippine Competition Commission has given its go signal for Federal Land to form a joint venture with Isetan Mitsukoshi Holdings Ltd. And Nomura Real Estate Development Co. Ltd. for the P 20 Bn Sunshine Fort Project. The project will have a commercial complex at the base of 4 high-rise residential towers targeted for completion in 2025, with a 60-40 partnership in favor of Federal Land (GTCAP, Buy on Dips, P 1,378*).
Papa Securities Corp. (Morning Huddle - Daily News) - July 27, 2017
July 27, 2017
Morning Huddle
Daily Summary
|
US Tracker
US stocks reach all time high on better than expected earnings and unsurprising remarks from the Fed.
DOW 21,711.01 +97.58 +0.45%
EPHE 36.96 +0.59 +1.62%
PHI 34.05 +0.14 +0.41%
Peso 50.64
TEL Par 1,724 vs 1,709 TEL Last
Economic News
Lower TDF demand as banks opt to lend more. Bids for the BSP’s term deposit facility reached just PhP141.2bn, below the PhP180bn offering as banks place money in lending activities and investments in government securities. Both the 7-day and 28-day deposits were undersubscribed with yields of 3.31% and 3.49%, respectively.
Corporate News
CHP 1H17 net income down 46% to PhP486mn. This is below our FY17 estimate of PhP2.36bn (20.6%) and below the consensus forecast of PhP2.6bn (18.7%). Revenue fell 14% to PhP11bn as volume fell 6% and price declined 8%. CHP attributes the decline in sales to delays in government project implementation and policy reversals by the administration. The company guides 3% volume growth this year. Last 7.04.
HLCM’s 1H17 net income fell 43% to PhP2.1bn. This is below our PhP6.2bn (33.4%) and the PhP6.8bn consensus forecast (30.9%) In 2Q17 alone, net income fell 46% to PhP1.2bn. Revenue decline worsened in 2Q17 by 21% from a 12% retreat in 1Q17. 1H17 revenue is now down 17% to PhP17.4bn. Net income margin also declined to 12% from 18% in 1H16. HLCM adds that 2mn ton/year in new capacity would be finished by 2019 and will be located in La Union and Davao. This would bring total capacity to 12mn tons/year.
Comment:
The decline in HLCM's earnings is consistent with our view that the influx of cheap imported cement would threaten its performance. We remain pessimistic on the company for the rest of the year, as it pursues debottlenecking and capacity expansion activities. Last 13.48.
RECENT REPORTS
Immaterial impact on MBT from possible full provisioning of fraudulent loans.
EAGLE continues to enjoy a home court advantage vs. imports
Robust project pipeline supported by strong balance sheet and asset tactical maneuvering
Speculation of interest from foreign banks shore up share price
KEY CALENDAR EVENTS
JULY 2017
|
Papa Securities Corp. (Morning Huddle - Daily News) - July 26, 2017
Morning Huddle
Daily Summary
|
US Tracker
US stocks rise on strong earnings. VIX fear index is now at a 23yr low.
DOW 21,613.43 +100.26 +0.47%
EPHE 36.37 -0.03 -0.08%
PHI 33.91 +0.18 +0.53%
Peso 50.54
TEL Par 1,714 vs 1,698 TEL Last
Industry News
Oil prices rally after 10.2mn drop in US stockpiles. In addition to this, Saudi Arabia has vowed to reduce crude exports in August while OPEC and non-OPEC producers opened the possibility of extending their deal to cut output by 1.8mn bpd beyond Mar2018. If members of the deal are fully compliant, supply may fall by 200k bpd.
Corporate News
RLC's Tacloban Resort gets BoI green light. BoI approved RLC's PhP500mn 5-star hotel facility within the Robinsons Place Complex in Tacloban. The 138-room hotel is due to open in April 2018.
Comment:
This is positive for RLC as it grows its recurring income portfolio. By adding a hotel component to its mall operations in Tacloban, it increases the returns of its commercial business through increased foot traffic. We expect this template to persist throughout the sector where retail is boosted by incremental foot traffic from related businesses. Last 24.75.
RECENT REPORTS
Immaterial impact on MBT from possible full provisioning of fraudulent loans.
EAGLE continues to enjoy a home court advantage vs. imports
Robust project pipeline supported by strong balance sheet and asset tactical maneuvering
Speculation of interest from foreign banks shore up share price
KEY CALENDAR EVENTS
JULY 2017
|
APS Daily Market Insights July 26
TOP NEWS HEADLINES
Stocks Climb on Earnings, Bonds Drop as Fed Meets. S&P 500 surged to fresh records propelled by robust corporate earnings. It is already trading at 19.0x, above its 5-year PER average of 17.9x. Although expensive, investors are pricing in less risks in the US stock market with VIX, which is the ‘fear gauge’, plunging to its 23-year low. US investors’ optimism is mainly due to generally upbeat macroeconomic backdrop and lack of any big, risky events that could potentially fuel volatility. Likewise, investors expect a hawkish tone from Fed after their 2-day meeting tonight with marketimplied probability that Fed will raise rates by year-end is down to 45%. On the local front, rosy growth outlook in the international scene could limit capital inflow to the Philippine equity market. In addition, we expect muted corporate earnings in 2Q2017. Hence, the local market is seen to move sideways amid lack of catalysts.
DoF Hopes For The Swift Approval Of The Tax Reform Package. On the 2nd State of the Nation Address of President Duterte, the president urged the senators for the immediate passing of the tax reform package. The revenue generating provisions expected to be further watered down in the Senate as some senators have openly opposed some of the measures. Given this scenario, the government may be forced to lower their infra spending target or increase borrowing. We believe the government is moving towards the latter, which may further weaken the country’s fiscal position and pose a risk to the investment grade credit rating of the Philippines.
Gov’t Told to Pay Maynilad For Losses. The government will reimburse at least P 3.4 Bn to Maynilad for delayed tariff hikes. In our previous note, we estimated that overdue tariff adjustments have ballooned to over P 10.0 Bn as of 1Q17, as MPI (BUY, P 8.00) previously said that it loses around P 200.0 Mn a month for every additional delay of the arbitration which started last January 2013. We believe Maynilad can still appeal to recover the remaining balance due to the favorable decision. This should be positive for both MPI and DMC which currently owns 52.8% and 25.2% of Maynilad.
RFM Aims to Post P 1.0 Bn Profit This Year. RFM (BUY, P 5.30*) expects growth to be flat this year due to rising raw material prices and softer demand from its pasta (Fiesta and Royal Spaghetti) and flour businesses. This means RFM will be trading at 15.9x its 2017 earnings, still at a discount to the 2017 ave. P/E of consumer F&B (excl. JFC and URC) at 18.3x.
Reminder: CHP 1H2017 results will be released tomorrow.
Stocks Climb on Earnings, Bonds Drop as Fed Meets. S&P 500 surged to fresh records propelled by robust corporate earnings. It is already trading at 19.0x, above its 5-year PER average of 17.9x. Although expensive, investors are pricing in less risks in the US stock market with VIX, which is the ‘fear gauge’, plunging to its 23-year low. US investors’ optimism is mainly due to generally upbeat macroeconomic backdrop and lack of any big, risky events that could potentially fuel volatility. Likewise, investors expect a hawkish tone from Fed after their 2-day meeting tonight with marketimplied probability that Fed will raise rates by year-end is down to 45%. On the local front, rosy growth outlook in the international scene could limit capital inflow to the Philippine equity market. In addition, we expect muted corporate earnings in 2Q2017. Hence, the local market is seen to move sideways amid lack of catalysts.
DoF Hopes For The Swift Approval Of The Tax Reform Package. On the 2nd State of the Nation Address of President Duterte, the president urged the senators for the immediate passing of the tax reform package. The revenue generating provisions expected to be further watered down in the Senate as some senators have openly opposed some of the measures. Given this scenario, the government may be forced to lower their infra spending target or increase borrowing. We believe the government is moving towards the latter, which may further weaken the country’s fiscal position and pose a risk to the investment grade credit rating of the Philippines.
Gov’t Told to Pay Maynilad For Losses. The government will reimburse at least P 3.4 Bn to Maynilad for delayed tariff hikes. In our previous note, we estimated that overdue tariff adjustments have ballooned to over P 10.0 Bn as of 1Q17, as MPI (BUY, P 8.00) previously said that it loses around P 200.0 Mn a month for every additional delay of the arbitration which started last January 2013. We believe Maynilad can still appeal to recover the remaining balance due to the favorable decision. This should be positive for both MPI and DMC which currently owns 52.8% and 25.2% of Maynilad.
RFM Aims to Post P 1.0 Bn Profit This Year. RFM (BUY, P 5.30*) expects growth to be flat this year due to rising raw material prices and softer demand from its pasta (Fiesta and Royal Spaghetti) and flour businesses. This means RFM will be trading at 15.9x its 2017 earnings, still at a discount to the 2017 ave. P/E of consumer F&B (excl. JFC and URC) at 18.3x.
Reminder: CHP 1H2017 results will be released tomorrow.
Chelsea Logistics Holdings Corp.: Initial Public Offering - Implementing Guidelines for Local Small Investors
Place your bets!!! (CLC IPO Price Php 10.68)
| Subject | Chelsea Logistics Holdings Corp.: Initial Public Offering - Implementing Guidelines for Local Small Investors |
|---|---|
| Company Name | Chelsea Logistics Holdings Corp. |
| Reference(s) | Listing Notice LN00152-2017 dated July 21, 2017 |
| LSI Offer Period | July 24 - 28, 2017 |
| Deadline for Submission of Subscription Forms and Payments | Jul 28, 2017 |
| Other Relevant Information |
|---|
BDO Capital & Investment Corporation, the Issue Manager, Lead Underwriter and Sole Bookrunner for the Initial Public Offering of the common shares of Chelsea Logistics Holdings Corp. (“CLC”), provided the Exchange the attached Implementing Guidelines for Local Small Investors.
For your information and guidance. |
Source:
Story:
PSEi Inches Higher (TSTOCK - 07/25/2017)
The Philippine benchmark index (7,971.72, +0.11%) closed higher, albeit ending below its intraday peak. Overall market breadth, however, was negative with losers outnumbering gainers two to one. The sub-indices were mixed for the session. The property sector (3,800.11, +0.73%) outperformed its peers mainly due to ALI (43.20, +1.29%), which closed at a new 52-week high. MPI (6.84, +2.09%), which disclosed that it won the arbitration case regarding the implementation of tariffs for the rebasing period 2013 to 2017, pulled the holding companies index (7,906.13, +0.09%) higher, while the service sector (1,694.30, +0.06%) remained upbeat due to GLO (2,094.00, +2.15%), TEL (1,698.00, +0.47%), and ICT (107.80, +1.13%). The mining and oil index (12,849.09, -0.61%), meanwhile, dropped further as most of its constituent stocks retreated following President Rodrigo Duterte's criticism of mining companies in his State of the Nation Address yesterday. MBT (85.35, -3.01%) and BDO (122.20, - 1.05%) weakened the financial index (1,948.85, -0.73%) further, while JFC (217.80, -0.64%), EDC (5.81, -2.68%), FGEN (17.94, - 2.18%), and FPH (66.40, -2.21%) pulled the industrial sector (11,153.17, -0.36%) lower.
Papa Securities Corp. (Company Notes - 2Q17 Power Earnings Preview)
Papa Securities Corp. (Company Notes - 2Q17 Power Earnings Preview)
2Q17 Power Earnings Preview
Initiating Coverage
|
MER: Likely in line, with slight bias towards outperformance
• According to management, volume growth in 1H averaged 3%, in line with our forecast. Considering 1Q volume growth was just at 2.6%, this means 2Q volume growth may have accelerated to ~3.4.
• We saw some margin compression in 1Q; MER's EBITDA margin was down by 165bps due to expenses related to the construction of its power assets (ie. settling of property taxes and costs from project delays). This will likely persist moving forward, so lower margins may now be the new normal (EBITDA at 12%, core income at 7%).
• We have a fair value of PhP319.00/sh for MER; BUY. Earnings release scheduled on July 31, 3PM.
SCC: Earnings may outperform on better plant capacity factor
• We spoke to SCC and learned that their plant's capacity factor from all units have been exceeding that of 1Q. In part, Unit 1's maintenance shutdown in the first quarter may have aided this.
• We expect 2Q's coal ASP and output to be similar to 1Q. But there may be some downside in 3Q coal ASP as China has tightened document requirements in its importing sites late in June. This has lengthened delivery times, causing consumers to demand a corresponding discount in coal price (management estimates a US$2.0-3.0 reduction, or about 4.4% of SCC's 2017E coal ASP). While the government did not provide reason for stricter regulation, this may be in line with its initiative to reduce smog in the area. If so, we can assume that the stricter requirements are here to stay.
• We have a fair value of PhP180.00/sh for SCC; BUY. Earnings briefing scheduled on August 14, 3PM, but results may be released by August 9.
EDC: Expecting performance similar to 1Q
• EDC's primary earnings driver in 2Q will likely still be lower GAE expenses following its organizational restructuring. Recall that this led to a 34.5% decline in personnel costs in 1Q after ~350 heads were retrenched.
• The drag from spot exposure during 1Q is likely to persist; getting capacity contracted from FG Hydro (60MW), Panlinpinon (30MW), and Nasulo (20MW) is still ongoing and will likely be finalized by 4Q17.
• Damage from the Leyte quake will materialize in 3Q figures. According to management, repairs are progressing on schedule and are now ~30% complete. We expect foregone revenue to amount to PhP1.5bn (4.2% of 2017E sales forecast). Under our worst case scenario where repairs take an extra month to finish, foregone revenue may amount to 2017E sales.
• We have a fair value of PhP6.74/sh for EDC; BUY. Earnings call tentatively scheduled on August 11.
|
Subscribe to:
Posts (Atom)