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 15, 2017

August 15, 2017   Morning Huddle Daily Summary

 

US Tracker US stocks rise after Pentagon says it is working towards a diplomatic solution with N.Korea. DOW 21,993.71 +135.39 +0.62% EPHE 35.52 +0.13 +0.37% PHI 33.76 +0.30 +0.90% Peso 51.08 TEL Par 1,724 vs 1,730 TEL   Economic News Tax collections inch towards target. BIR's tax collections rose 14.1% to PhP134.2bn last month, just 0.4% lower than that period's target. This was in part helped by partial payment worth PhP3.4bn of Mighty Corp.'s tax deficiency. 7M17 collections now amount to PhP987.8bn, 9.3% higher YoY and 4.9% below government target.   The Investment Coordination Committee (ICC) has approved six projects worth PhP57bn involving roads, bridges, procurement of equipment, and other programs. These projects will now be elevated to the NEDA Board before they can be implemented. Since June 2016, the NEDA Board has approved 18 infrastructure projects worth a combined PhP463bn that are ready for implementation.     Corporate News EDC 1H17 core income at PhP5.2bn, up 11% YoY. This is in line with PAPA (52%) but higher than consensus forecast (54%). Revenue rose by 4.1% from higher sales volume from Unified Leyte and better ASP from Bacman. Net margin now stands at 29.4%, 174bps higher YoY. We suspect EDC's organizational restructuring, which led to a 206bps improvement in operating margins last quarter, was the main driver. Growth in the second half will likely be much slower due to the Leyte quake. Provided repairs go according to schedule, we are looking at revenue declining by 3.6% by year-end. More details to follow on the earnings call this afternoon. Last 6.82.   FLI's 1H17 net income rose 7% to Php2.6bn, behind the PhP5.9bn consensus forecast (44%). The drag came from a 17% decline in real estate revenue in 2Q17 to PhP2.81bn, despite 1H17 being up 8% to Php7.5bn. Rentals surged 25% to PhP2bn on the back of new capacity of office spaces. Last 1.81.     VLL's 1H17 net income hit PhP4.5bn (+15% YoY), in line with the consensus forecast of PhP8.8bn (51%). 16% topline growth (to PhP18.2bn) drove earnings, as recurring revenue jumped 37% (to PhP2.9bn) while real estate sales rose (PhP14.4bn). VLL now has 951k sqm in recurring GFA and will add 50k more by yearend to 1mn sqm. This will grow 30% in 2018 to 1.3mn sqm. Current mix is 80% malls/retail with the balance in office. Last 5.81.     WLCON's 1H17 net income hit PhP763mn, beating our PhP710mn estimate. This comes on the back of strong same store sales growth at 5.7%, helping bring 1H17 revenue 11% higher to PhP8.5bn. GP margin remained consistent at 30%.  Last 8.33.   RRHI core income +9.6% to PhP1.15bn in 2Q17. This brings 1H17 earnings to PhP1.99bn (+14.1%) in-line with PhP5.34bn full year consensus’ estimate (%). 2Q17 net income rose 4% YoY, while revenues up 8% YoY. Consolidated SSSG decelerated during the quarter (+2.2%) vs 1Q17 (+3.2%) bringing 1H17 SSSG to 2.7%. Meanwhile, RRHI opened 91 stores QoQ bringing their total store count to 1,619 plus 1,954 The Generics Pharmacy stores. Note that 1H numbers of RRHI historically accounted for ~41% of full-year results. Last 86.50.   PGOLD net income +9.8% YoY to PhP2.49bn in 1H17. This is in line with both PAPA and consensus estimate (40%). In 2Q17 alone, net income up 9% YoY to PhP1.21bn. The improvement came from the 10.8% YoY increase in revenues to PhP56.6bn and strong SSSG for the quarter (PGOLD 4%; S&R 10%). Meanwhile, operating margin and the net margin remained flattish at 6.0% and 4.2%, respectively. Note that 1H numbers of PGOLD historically accounted for ~41% of full-year results. Last 47.00.   SSI 1H17 net income up 13.7% to PhP274mn, below 2017 consensus estimate of PhP609.8mn (44.9%). Revenues were down -1.91% to PhP8.42bn driven by the rationalization program and slower sales from casual, footwear, accessories, and luggage segment. Meanwhile, profit and operating margin expanded 50bps to 3.3% and 7.8%, respectively, driven by a 6.2% decrease in opex. Last 4.12.   PIZZA 1H17 recurring income up 10% YoY to PhP386mn, in-line with full-year consensus forecast of PhP750.50mn (51.4%). Revenues rose 20% YoY to PhP3.4bn, due to 8% SSSG and expansion on local store network. Meanwhile, GP and operating margins jumped 120bps to 30.1% and 180bps to 17.6%, respectively. However, net income margin saw a decline of 100 bps to 11.4% primarily due to interest expense incurred beginning mid-2016.  As of end-June, PIZZA opened a total of 11 stores, in-line with 2017 guidance of 20 stores. Last 12.62.   JFC profit up 18.1% to PhP1.96bn in 2Q17. For 1H17, net income +14.2% YoY to PhP3.49bn in 1H17 in line with both PAPA (47%) and consensus estimates (51%). Strong profit over the quarter was driven by the 13.6% YoY rise in revenues to PhP61.84bn, store network expansion, and SSSG of 6%. Systemwide sales grew by 13.5% while the foreign business grew by 25.6%. Last 222.00.

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.