Papa Securities Corp. (Morning Huddle - Daily News) - August 17, 2017

August 17, 2017   Morning Huddle Daily Summary

 

US Tracker US stocks close higher on gains from Home Depot and United Technologies. DOW 22,024.87 +25.88 +0.12% EPHE 35.95 +0.49% +1.38% PHI 34.34 +0.31 +0.91% Peso 51.35 TEL Par 1,763 vs 1,740 TEL   Economic News DOF says without tax reform, the government can only fund half of PhP9tn Build Build Build program. According to Finance Secretary Carlos Dominguez, the Senate version of the tax reform proposal (Senate Bill 1408) is expected to generate PhP169bn in the first year of implementation. Expected loss of PhP126bn from personal income tax cuts will be offset by a larger VAT base, adjustment of excise taxes on fuel, automobiles and sugar-sweetened beverages. The Senate has been deliberating on the package since July 24.   Corporate News SCC to construct 50MW coal plant. This will be in Antique and will provide power for the baseload requirements of Semirara Island and surrounding off-grid provinces. The plant will likely take 3yrs to complete. DOE will be constructing the delivery cables costing over PhP1.0bn alongside the plant.   Comment: Using DMC's off-grid generators as benchmark, the 50MW could yield an additional ~PhP2.0bn in revenues (+4.6%) and ~PhP240mn in income (+1.5%).Last 176.0   MWC, IFC eye Asian projects. Manila Water Asia Pacific, a subsidiary of MWC, signed a memorandum of understanding with International Finance Corp. to explore opportunities in providing water, used water, and environmental services in Asia Pacific. Last 31.60.

Papa Securities Corp. (Morning Huddle - Daily News) - August 18, 2017

August 18, 2017   Morning Huddle Daily Summary

 

US Tracker US stocks drop on speculation that Gary Cohn, business friendly advisor to the president, may resign. DOW 21,750.73 -274.14 -1.24% EPHE 35.49 -0.46 -1.28% PHI 34.01 -0.33 -0.96% Peso 51.35 TEL Par 1,746 vs 1,760 TEL   Economic News FDI net inflows of US$206.0mn in July. Foreign portfolio investments or ‘hot money’ posted a net inflow of $206 million in July, an improvement from the $72-million net inflow in June, as investors kept their exposure in the local stock market.   PH GDP grew 6.5% in 2Q17. This is slightly above consensus' 6.4% and within the government's 6.5-7.5% target. 1H17 GDP growth now stands at 6.4%. The services sector (+6.1%) grew slower YoY due to relatively relaxed growth in transport and communication. The industry sector, meanwhile, expanded by 7.3% on robust demand of fuel, metal, electronics, and furniture. Agricultural output rose as well by 6.3% on strong production.   Corporate News SCC looks into entering the RES market. Through its RES arm SCRC, SCC is looking to penetrate the contestable consumer market with a total demand of 3,830MW. This may be in response to its increasing spot exposure, which now accounts for 43% of SLPGC's total volume sales from just 18% last year. Sourcing capacity contracts from the RES market is not a new strategy; EDC and AP have been targeting this space since late last year. SCC last 174.70.   RECENT REPORTS MER: BUY; TP at PhP319.00 Upside from generation imminent   CLC: Head in the CloudsExpensive valuations and steep targets   MBT: BUY; TP at PhP99.0 Immaterial impact on MBT from possible full provisioning of fraudulent loans.   EAGLE: BUY; TP at PhP17.15 EAGLE continues to enjoy a home court advantage vs. imports   MPI: Paving the way; BUY with 12-month TP of Php8.1 Robust project pipeline supported by strong balance sheet and asset tactical maneuvering   EW: Under review Speculation of interest from foreign banks shore up share price

Papa Securities Corp. (Morning Huddle - Daily News) - August 16, 2017

August 16, 2017   Morning Huddle Daily Summary

 

US Tracker US stocks end slightly higher after retail sales in July exceeded expectations (0.6% vs 0.4%). DOW 21,998.99 +5.28 +0.02% EPHE 35.46 -0.06 -0.17% PHI 34.03 +0.27 +0.80% Peso 51.08 TEL Par 1,738 vs 1,740 TEL   Economic News Cash remittances in June up 5.7%. The figure for the first half now amounts to US$6.9mn, higher by 1.9% YoY but below the 4% growth target set by BSP. During the period, the number of OFWs rose by 1.14mn.     Corporate News SHLPH 2Q17 net income dropped 55.1% YoY to Php1.3bn, bringing down 1H17 net income by 17.4% YoY to Php4.2bn, above the consensus estimate of Php7.0bn (60.0%). The planned refinery shut down and lower benefit from inventory gains due to falling crude oil prices drove the double-digit decline in net income. Last 65.25.   DD's 1H17 net income jumped 161% to PhP376mn as revenue soared 131% to PhP1.6bn. An increase in rental revenues drove topline as DD continued to grow its retail portfolio and acquired Hotel of Asia (HOA). HOA is now growing its 2 hotel brands Hotel101 and Jinjiang Inn to 5,000 rooms by 2020. Meanwhile, it has 20 operational malls, 18 of which are under the CityMalls brand. DD will be opening another 12 CityMalls by yearend. In time with the announcement of a follow-on offering, the company upgraded its 2020 net income target to PhP5.5bn from PhP4.8bn as it grew its leasable portfolio target to 1.2mn sqm from 1mn sqm. Last 45.00.   MPI unit starts Harbor Link construction. NLEX Corp. broke ground for the building of the R-10 section of the NLEX Harbor Link Segment 10. The Valenzuela to C3 section of the Harbor Link is expected to finish by 1Q18 while the R-10 section is scheduled to be completed by 4Q18. Last 6.58.

Papa Securities Corp. (Morning Huddle - Daily News) - August 14, 2017

August 14, 2017   Morning Huddle Daily Summary

 

US Tracker US stocks closed flat with the focus still on threats from N.Korea. DOW 21,858.32 +14.31 +0.07% EPHE 35.39 +0.17 +0.48% PHI 33.46 +0.45 +1.36% Peso 50.98 TEL Par 1,706 vs 1,740 TEL   Economic News BSP reassures market of strength of Peso. After breaching 51PHP/USD last Friday, BSP Governor Espenilla says the BSP is ready to use its "huge pile of foreign currency reserves" to stabilize the peso in case of excessive volatility.     Industry News PH records first avian flu outbreak. Around 37,000 fowls have died of the Avian Influenza Type A Subtype H5 in San Luis, Pampanga. Pampanga Gov. Lilia Pineda has declared a state of calamity in the province. A 1km radius quarantine area within San Luis town will be implemented, while another 7km radius controlled area has been declared. According to Sec. Pinol, ~400,000 chickens would be slaughtered but upon actual inspection, 200,000 birds will be culled within the next 3 days to control the virus. Fowls and eggs from the controlled area are not allowed to be brought out.   Comment: Given PF’s climate control technology and strict sanitary inspection for poultry farms, PF confirmed that no poultry farms were affected by the avian flu in Pampanga.     Corporate News AC 1H17 rose 9% to PhP15.1bn, ahead of consensus at 58% of PhP26.1bn, led by ALI and AC Energy.  In 2Q17, net income inched up 2% to PhP8.1bn. BPI was down 8% due to the absence of one-off gains, GLO fell 9.8% on equity losses and spectrum amortization of VTI assets, while MWC inched up 2.3% on higher billed volume. ALI rose 18%, led by property development and commercial leasing, while AC Energy surged 64% on a favorable wind regime, improved efficiencies of coal plants, and earnings from solar plant. AC likewise said it is looking at more unsolicited proposals, same with the C3 elevated expressway project with SM. Last 882.   JGS 1H17 core income after tax was flat at PhP15.9bn, in-line with PhP29.96bn consensus estimate (53%). For 2Q, core income -0.2% to PhP7.76bn.1H’s soft earnings was primarily due to lower net income of CEB as a result of the rise in fuel prices and hedging losses incurred for the period. The 9% and 13.7% decline in net income of RLC and URC, also contributed to the consolidated net income decline.   1H17 net income segment performance: - CEB (-43.6% to PhP4.3bn): Higher aviation fuel expense - RLC (-9% to PhP2.92bn): Decline in residential revenue - URC (-13.7% to PhP6.4): Decline in volumes in BCF Philippines and additional investments in Vietnam - Robinsons Bank (+20.3% to PhP161.33mn): Higher interest income, commission income and trading gains - JGS Petrochem (+31.5% to PhP3.20bn): Increase in the volume of polymers   JGS Earnings Summary             PhP in mn 2Q16 2Q17 YoY 1H16 1H17 YoY Revenue       58,787       66,966 13.9%     119,378.0      134,473 12.6% Gross Profit       24,590       25,664 4.4%        49,900.1         51,572 3.4% Operating Profit       13,778       13,392 -2.8%        28,417.0         27,079 -4.7% Core Income After Tax         7,773         7,756 -0.2%        15,947.0         15,990 0.3% Net income attributable to parent         7,904         7,132 -9.8%        17,534.0         14,644 -16.5% GPM 41.8% 38.3% (350bps) 41.8% 38.4% (340bps) OPM 23.4% 20.0% (340bps) 23.8% 20.1% (370bps) CIATM 13.2% 11.6% (160bps) 13.4% 11.9% (150bps) NIM 13.4% 10.7% (270bps) 14.7% 10.9% (380bps) Source: JGS               LTG posted a flat net income of PhP4.53bn last 1H17, below 2017 consensus estimate of PhP10.2bn. In 2Q17, profit declined 2.1% PhP1.7bn. Contributions from the liquor and banking units were disappointing due to lower ethanol volume and disappointing non-interest income, respectively.   1H17 net income segment performance: - Tobacco (+28% to PhP1.86bn): Higher selling prices - Liquor (-13.7% to PhP105.0mn): Lower ethanol volume and higher alcohol costs - Bank (-38% to PhP2.75bn): Non-interest income plunged 46.7% to PhP3.4bn - Beverage (-44% to PhP401.0mn): Higher opex - Property (+31% to PhP174mn): Higher lease rates at its BPO office buildings   In a press release, RWM disclosed gross gaming revenues in 1H17 reached PhP9.2bn, down 26.4% YoY as its casino had been non-operational for 27 days due to the shooting incident last June 2. Non-gaming revenues inched up 3.9% to PhP2bn. EBITDA amounted to PhP2.2bn, a decline of 37.1% YoY. Detailed financials have yet to be disclosed but we think the plunge in net earnings follows that of EBITDA. Last 3.40.   DMC secures PhP11.7bn worth of contracts in 1H17. This is 2.6x more than the value of contracts during the same period last year. Total order book, however, is slightly down by 4% YoY at PhP26.8bn. Some of DMC's largest projects include CALAX (18km), Sec.1&2 of Skyway 3, ALI's Citygate, and Ortigas & Co.'s The Royalton and Imperium luxury condominiums. DMC says construction projects are so far still being driven by the private sector with only slightly growth from government infra projects. Last 15.68.   Toyota Philippines, a subsidiary of GTCAP, said it is likely to surpass its sales target of 175,000 units this year, or 10% growth. In 1H17, Toyota has sold 85,728 vehicles, translating to 18% growth YoY. Last 1,145.

Papa Securities Corp. (Morning Huddle - Daily News) - August 11, 2017

August 11, 2017   Morning Huddle Daily Summary

 

US Tracker In a broad-based sell-off, US stocks fell below 22,000 after US-North Korea tensions escalated. DOW 21,844.01 -204.69 -0.93% EPHE 35.22 -0.87 -2.41% PHI 33.01 +0.62 1.91% Peso 50.795 TEL Par 1,677 vs 1,712 TEL   Corporate News MEG 1H17 net income rose 11% to P6.7bn, beating the consensus forecast of P12.4bn. This also beat Papa's P11.5bn estimate. The 20% surge in rental income to P5.8bn drove earnings after it hit the 1mn sqm mark. Residential revenue, meanwhile, was flat at P16.8bn.   TEL 1H17 core income up 1.0% YoY to Php11.9bn, in-line with our estimate of Php25.4bn(47%) and consensus estimate of Php22.76bn(53.0%). Recurring income increased by 1.0% as expense management and reduction in subsidies lead to a 10.0% decline in operating expenses, offsetting the 7.0% decline in service revenues. The decline in total mobile subscribers (-14.0% YoY) and blended ARPU (-2.8% YoY) drove the 7.0% decline in service revenues.   RCB 1H17 fell 9.9% to PhP2.4bn, in line with consensus at 52.6% of PhP4.5bn. In 2Q17, net earnings jumped 67% to PhP1.3bn, driven by steady core lending, fees, and managed opex. Loans went up 16%, driven by corporate loans (+15%), SME loans (+26%), and consumer (+14%). NIM improved to 4.26% from 4.06% in end-2016, resulting in net interest income of PhP8.6bn, up 6.7%. However, non-interest income fell 6.9%, thus driving down gross income growth to just 2% to PhP12.4bn. Opex was subdued as it grew just 5% to PhP8.7bn. Capital ratios remained ample with CET 1 of 12.13% and CAR of 15.2%, while asset quality is still solid with NPL ratio of 1.35% and NPL cover at 79.82%.     DMC 2Q17 profit rises 17.94% to PhP4.0bn. This brought 1H17 earnings to PhP7.6bn (+20.8%), in line with consensus estimates (50%). DMC's earnings in the first half were driven by DMCI Homes (+78%), SCC (+24%), and the construction arm (+25%). The remaining segments posted flat to negative income growth. DMC expects a more modest second half as SCC's coal mine is faced with a higher strip ratio. The segments performed as follows:   >The property business was boosted by higher sales and reservations and the switch in accounting method to % of completion. >DMC's construction arm benefited from higher completion of ongoing projects and lower construction costs. >SCC's contribution rose 24% from a strong 1Q despite posting flat growth in the second quarter. >Off grid power fell 5% due to the expiration of Masbate’s ITH. >Nickel mining was down 5% as well due to lower output despite higher nickel prices. >Maynilad’s contribution dropped 31% on the delay of implementing the tariff rate rebasing.   PNB 1H17 dropped 37% to PhP2.7bn, largely behind consensus at 38% of PhP7.1bn. Excluding the one-time gain of PhP2.7bn in 1H16, net earnings would have been up 29.7%. 2Q17 alone is down 11% to PhP1.5bn. Loans went up 16%, while deposits rose 17%, thus net interest income gained 8% to PhP10.3bn. Non-interest income plunged 46.7% to PhP3.4bn in the absence of one-time gains last year. Meanwhile opex grew just 6%. Net NPL ratio remained low at 0.25%, while NPL cover was ample at 130%.     SMC core profit rose 21% in 1H17. Income rose on higher sales volume from its beer and foods business, better production yields from oil, and sustained growth from toll roads. Meanwhile, the power segment saw income drop 15% due to the maintenance shutdown of Ilijan and Malampaya. Last 101.60.   GTCAP posted 1H17 net income to common shareholders fell 20.5% to PhP7.2bn, in line at 48% of consensus of PhP14.97bn. Excluding discontinued operations, core net income is up 19% to PhP7.4bn. Revenues grew 18% to PhP108.2bn, driven by Toyota, Federal Land, Pro-friends, and higher equity contributions from associates. Last 1,168   •  MBT gained 5% to PhP9.5bn on 21% loan growth with NIM improvement. • Toyota net income fell 7% to PhP6.8bn despite strong car sales growth of 18% to 85,728 units. Unfavorable FX rates, increased sales of low margin models, and rise in opex cut net margin to 7.8% from 9.7%. • Federal Land and Profriends net earnings was flat at PhP1.5bn as booked sales grew 18% for FedLand and 14% for Profriends. • AXA posted net income of PhP854mn, up 13% on 28% growth in annualized premium equivalent to PhP3bn. • MPI reported core net income rose 12% to PhP6.98bn due to an expanded power portfolio, robust traffic growth, and sustained growth in healthcare segment   MWIDE 1H17 net income at Php927.0bn (-6.0% YoY), in-line with consensus estimate of Php1.6bn (57.0%).