Papa Securities Corp. (Morning Huddle - Daily News) - August 8, 2017

August 8, 2017   Morning Huddle Daily Summary

 

US Tracker US stocks close higher as stronger-than-expected corporate earnings continue. DOW 22,118.42 +25.61 +0.12% EPHE 36.48 +0.17 +0.47% PHI 32.92 +0.19 +0.58% Peso 50.355 TEL Par 1,658 vs 1,640 TEL     Corporate News MBT 1H17 up 4.8% to PhP9.5bn, in line with our estimates (48%) and consensus (47%). 2Q17 net earnings is up 3.3% to PhP3.9bn. Loans went up 21.5%, as corporate segment grew 24% while retail went up 17%.  We estimate NIM improved 9bps YoY and 2bps QoQ to 3.22%. This resulted in net interest income growth of 15.7% to PhP29.6bn. 1H17 non-interest income fell 10.8% as fee income came in flat while trading gains dropped 30% to PhP2.5bn. Note however that MBT was able to generate trading gains of PhP1.4bn in 2Q17, up 34%. Opex grew just 9% while provisions for credit losses declined 22% to PhP2.5bn. Asset quality still solid with NPL ratio at 0.9% while NPL cover is ample at 109%. CET 1 is strong at 13.2%.   Comment: As earnings came in line with our forecasts, we maintain our FY17 net earnings estimate of PhP19.6bn (+9% YoY) and TP of PhP99.00, based on 1.38x PBV. MBT’s lending operations continues to beat peers as loan growth of 21.5% came in higher than the industry’s 19%, BDO’s 17%, and BPI’s 16.9%. We also estimate MBT’s asset yield continues to lead peers in 2Q17. Maintain BUY. Last 87.     GLO 1H17 core income down by 10.0% YoY to Php8.0bn, below our estimate of Php18.4bn (43.0%) but in-line with the consensus estimate of Php15.0bn (53.0%). Higher interest expense depreciation charges coupled with the share in equity losses and spectrum amortization related to the SMC telco asset acquisition offset the 6.0% YoY EBITDA growth.   Comment: We have a NEUTRAL recommendation on GLO with TP at 2,090.0. Last 2,046.   MAXS 2Q17 net income up 14.9% YoY to PhP155.7mn. This brings 1H17 net income to PhP331.72mn (+12%YoY), slightly below our estimates (46.4%) and of consensus forecast (46.1%). 2Q earnings were driven by 11% (PhP6.05bn) topline growth and 12% improvement in systemwide sales (PhP8.29bn) driven by 20 new store openings in PH and 3 in abroad. Restaurant sales and commissary sales grew 11% and 7% to PhP5.04bn and PhP674.04mn, respectively. This is due to new store openings especially additional franchised outlets and stable same-store sales performance. This was achieved despite higher input costs due to the increase in prices of key raw materials.   Comment: We currently have a BUY rating on MAXS with a TP of PhP24.00. At current price, MAXS trades at 22x 2017E PE. Meanwhile, MAXS currently operates a chain of 650 outlets with 51 located overseas. This is in-line with our 688 store outlet in 2017E. Last 19.3   DNL 1H17 recurring net income +7.5% to PhP1.35bn, below 2017 consensus estimates of PhP3.08bn (43.2%). In 2Q17 alone, net income was flat at PhP688.0mn. Consolidated GP contracted -1.9ppts to 17%. Also, majority of DNL's business segment food ingredients, oleochemicals, and specialty plastics experienced GP margin pressures during the period (FI -2.1ppts to 13%, Oleochemicals -0.4ppts to 16.4%, and SP -1.5ppts to 29%) due to decline in volume. Meanwhile, revenues grew by 24% YoY(PhP6.3bn), driven by strong domestic demand. Last 12.22   URC 1H17 profit -13.7% YoY to PhP6.4bn, below consensus’ estimate of PhP14.26bn (43.9%). In 2Q17 alone, net income down 23% to PhP2.88bn due to lower operating income and foreign exchange gains, and higher net finance costs and income tax provision. Consolidated EBIT also declined 7.9% to PhP7.6bn, EBIT margin dropped 300bps YoY due to decline in volumes in BCF Philippines and additional investments in Vietnam to recover the business. Meanwhile, revenues were up 9.6% to PhP60.8bn as a result of strong performances from Thailand and the consolidation of Snackbrands into the business. Last 151.50.   CNPF 1H17 net income +7.9% YoY to PhP1.47bn, in-line with consensus forecast (50.2%).  In 2Q17 alone, net income up 6% YoY to PhP769mn. Growth in net income was driven by robust demand for its branded food products - marine, meat, and milk. 2Q17 revenues grew by 29.7% to PhP8.6bn, supported by the strong performance of its exports and a healthy increase in the CNPF’s branded sales. However, 2Q17 GPM and EBITM contracted 460bps to 25.6% and 190bps to 47.2%, respectively, due to higher input costs and the faster growth of lower margin OEM businesses. More details after briefing on August 10. Last 18.04.     ALI's 1H17 net income reached PhP11.51bn (+18% YoY), in line with the PhP24.18bn consensus forecast (48%). New bookings, project completion and lot sales drove the 29% growth in property development revenues to PhP46.58bn. Sustained demand growth from BPOs drove office leasing revenue 14% higher to PhP2.93bn, even as ALI did not aggressively tap POGOs. Meanwhile, foreign travel advisories and the conflict in Mindanao weighed on the hotels and resorts business, which grew 6% to PhP3.40bn. Last 41.85.   SMPH's 1H17 net income hit PhP14.39bn (+14% YoY). This is in line with the PhP27.44bn consensus forecast (52.4%). Consolidated revenue grew 10% to PhP43.25bn, driven largely by 10% growth in mall rentals to PhP21.75bn and 26% rise in amusement and merchandise sales to 1.58bn. Same mall sales growth was logged at 7%. Residential revenue grew 5% to PhP13.91bn on the back of higher construction accomplishments as outlook remains positive on 22% growth of reservation sales to PhP27.55bn. Last 34.   RLC's 1H17 net income hit PhP2.92bn (-9% YoY), below the FY17 consensus forecast of PhP6.39bn (46%). Earnings sustained its slide on a 9% decline in residential revenue to PhP3.34bn as the company rebuilt its team. Malls continued to account for bulk of revenue, growing 6% to PhP5.25bn, followed by offices (+9% at PhP1.51bn) and hotels (+7% at PhP919mn). RLC also entered the warehousing business with a 32k sqm facility in Muntinlupa, due for completion in 1Q18. On top of this, it will soon start development of the 18ha Sierra Valley township in Cainta Rizal. Last 24.95.

Papa Securities Corp. (Morning Huddle - Daily News) - August 7, 2017

August 7, 2017   Morning Huddle Daily Summary

 

US Tracker US stocks rise on strong jobs data. DOW 22,092.81 +66.71 +0.30% EPHE 36.31 +0.23 +0.64% PHI 32.73 +0.45 +1.39% Peso 50.16 TEL Par 1,642 vs 1,630 TEL   Economic News July headline inflation was at 2.8%, slightly faster than 2.7% in June. This is in line with market expectation of 2.6%-3.0% for the month. YTD average is at 3.1%, in line with the BSP’s 2%-4% target range. The higher inflation is attributed to the PNR fare increase, increase in electricity rates due to higher generation charges, and higher rental rates for housing. Food prices eased on ample supply.     Corporate News NIKL books PhP1.5bn earnings in 1H17. Despite being a turnaround from just PhP24mn last year, this is slightly below consensus, accouting for 46% of the full year estimate. NIKL sold 4.4% more NIKL ore in 1H17 at an ASP of US$4.4/lb, 12.2% higher YoY. A stronger dollar (+6.8%) helped boost earnings as well. Last 6.20.   MPI 1H17 core net income grew to Php7.8bn (+17.4% YoY), above our full-year estimate of Php14.2b (54.9%) and consensus estimate of Php13.4bn (58.1%). In 2Q17 alone, core net income grew to Php4.6bn (+49.0% YoY) driven by robust traffic growth on all managed toll roads, expanded power portfolio through increased investment in Beacon Electric, and continuing growth in the Hospital Group. Meanwhile, better-than-expected operations of the logistics and other operating segments drove the outperformance in this quarter. MPI moved the IPO of the Hospital Group from 2018 to 2019 as they look for various options to fund its expansion. MPI also submitted an unsolicited proposal to build a 4.6-kilometer expressway connecting Cavitex to Sangley Point in Cavite City. We have a BUY recommendation on MPI with a 12-month TP of 8.10 for a potential upside of 21.0%. Last 6.69.

Papa Securities Corp. (Morning Huddle - Daily News) - August 4, 2017

August 4, 2017   Morning Huddle Daily Summary

 

US Tracker US stocks end flat after an intensifying probe on Russian involvement in US elections. DOW 22,026.10 +9.86 +0.04% EPHE 36.08 +0.02 +0.06% PHI 32.28 -0.11 -0.34% Peso 50.27 TEL Par 1,623 vs 1,610 TEL   Corporate News Philippines Renewable Energy Holdings Corp. (PREHC) is acquiring 23.5%-31.7% of EDC’s outstanding voting shares at 7.25/sh (22% premium to market price and 7.6% to PAPA’s fair value). FGEN will sell 10.6% of its existing stake in EDC, while the remaining 21.1% will be sourced from public ownership through a tender offer. In the event that all minority shareholders choose to sell their shares, the scale back provision will apply, where the number of tendered shares will be pro rated. If PREHC is able to acquire the full 8.9bn common shares during the tender offer, FGEN’s proceeds could range from PhP11.4bn-14.4bn, depending on the amount of shares the public minority is willing to sell.   MER reported core earnings of PhP5.5bn in 2Q17, 4.8% lower YoY. This brings 1H17 core profit to PhP10.1bn (-2.6% YoY), in line with both PAPA (53%) and consensus (53%) estimates. Lower income was recorded as revenue growth (+9.5%) failed to outpace greater expenses (+11.1%). Volume growth for the first half came in at 3.1%, while distribution revenue grew by 2.9%. We have a BUY rating on MER with TP at PhP319.00/sh. Last MER 279.60.     PX records 3.4% decline in 1H17 core profit. Core income during the period came in at PhP748mn, below consensus estimate (40%). In 2Q17, the level of ore mined continued to fall by 10% as the deeper draw points affected PX's ability to mine while terrain in newer draw points were harder to operate in. Consequently, revenue and core profit in 2Q17 fell 7.7% and and 24.8% respectively despite better copper and silver ASP. Last 8.86.     BPI 1H17 down 7.7% to PhP11.7bn, in line at 51% of FY17E consensus of PhP23.1bn. We estimate 2Q17 is down 27.9% to PhP5.5bn. Loan growth of 16.9% came in lower than the industry’s 19% pace, while deposits inched up just 8%.  Net interest income rose 13.5% to PhP23.5bn. As expected, non-interest income dropped 18.4% to PhP11.8bn in the absence of hefty PhP4.8bn trading gains in 2Q16 last year as BPI sold some HTM securities. Opex growth was managed at just 5%, while provisions for credit losses declined 19% to PhP2.5bn. CET 1 of 12.8% is near the regulatory minimum of 9.33% (8.5% min + 0.83% for D-SIB). Last 105.4

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 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       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 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       KEY CALENDAR EVENTS JULY 2017