Philippines Market Insights 2017.1.5


SECB ‐ Initial Coverage: We are initiating BUY rating for Security Bank Corporation (SECB). Key elements: (1) the bank’s strategic plan of expanding its branch network across Metro Manila and key areas in Visayas and Mindanao, (2) the P36.9bn equity investment of Bank of Tokyo‐Mitsubishi UFJ (BTMU), and (3) target P/B multiple of 1.59x based on 2017E BV/sh of P140.82.

BLOOM‐ Company Update:  We cut our target price (TP) for BLOOM by 4% to P7.54/sh. Nonetheless, our revised estimate still translates to double‐digit upside potential of 18%. Despite BLOOM’s latest strong interim financial performance, we are prompted to reduce our TP to reflect the reversion to the original gaming tax structure, dragging EBITDA estimates used in our valuation.

News Highlights:  On the corporate  front, Aboitiz  Power (AP) said that it has passed  its surveillance  audit for its 2 subsidiaries,  namely,  Therma  Luzon and Therma South.  Meanwhile, banks swarmed the first term auction of the central bank (BSP), following several undersubscribed auctions last month.





A spillover optimism pushed PSEi up:  Local  equities  gained  buoyed  by  upbeat economic  data in US and spilled over optimism  from latest China's  manufacturing data.   PSEi rose 169 points to close at 7,030 (+2.47%  day‐on‐day),  with all sectors ending in green, primed by property (+3.60%) and services (+2.94%). Among actively‐ traded shares were: SMPH (+P1.15 at P29.60); BDO (+P2.90 at P114.90); RRHI (‐P0.05 at P73.85), on P7.59bn turnover.  Net foreign inflows reached P184mn.

Modest gains seen: Local mart is seen to rise modestly today as stronger economic data globally keep on trickling in. With strong US auto sales, positive reception from the  Fed  minutes,  and  upbeat  Japan  manufacturing   gauge,  we  might  see  some optimism  into today's  trades  and encourage  investors  to accumulate  more shares that  have  been  beaten  down  in  the  past  few  weeks.  Immediate  support  6,940, resistance 7,080.


Bourses rose following Wall Street's ascent: Marts rose broadly tracking overnight Wall Street's ascent. Meanwhile, Japan rose nearly 500 points on weaker yen and upbeat manufacturing data.


Equities  up  following  the  release  of  auto  sales  and  Fed  minutes:  Shares  ended higher following upbeat auto sales and the release of Fed minutes. According to the minutes,  the  Fed  may  raise  interest  rates  faster‐than‐expected,   which  reaffirms Chair Yellen's hawkish statement.


Crude up amid expectations of lower crude inventories:   Oil prices rose on speculations that US crude stockpiles are decreasing, coupled with expectations that major oil producers will abide with the output cut agreement. West Texas Intermediate (WTI) for February rose $0.93 to settle at $53.26/barrel.


AP passes 3rd party audit:  Aboitiz Power (AP) said that it has passed its surveillance audit for its 2 subsidiaries, namely, Therma Luzon and Therma South.   The audit, conducted  by TUV Rheinland  Philippines,  Inc., ensures the public that AP continues to conform to the standards of their ISO 9001 certifications.     The scope of the audit covers fuel management, ship unloading and coal yard, among others.

RFM sells additional treasury shares:  RFM Corporation (RFM) is selling an additional  4.363mn  treasury  shares at P5/sh. or a total of P21.815mn  in value. The shares sold represent less than 1% of the listed shares.

PAL pleads more South Korea flights: Philippine Airlines (PAL) sought Civil Aeronautics  Board  for  more  flight  frequencies  between  Philippines  and South  Korea  amid  strong  travel  demand.  PAL seeks  an additional  1,730 weekly seats from January ‘til 18 February and another 1,270 weekly seats from  19  February  onwards.    PAL’s  request  was  in  accordance  with  its existing  air services  agreement  between  the governments  of Korea  and the Philippines.


Term deposit oversubscribed: Banks swarmed the first term auction of the central bank(BSP), following several undersubscribed auctions last month. The week‐term auction offering P30bn gathered P43.991bn total tenders at a yield of 3%‐3.1%. The month‐term auction of P150bn reached P217.523bn at a yield within 3%‐3.495%.

SEC issues new code for listed firms:  SEC announced a new corporate  governance code for publicly listed firms to strengthen the country’s regulatory framework and corporate governance practices.  The new code would improve the functioning of boards, strengthen shareholder protection and promote full disclosure in financial and non‐financial reporting, which would take effect on 1 January. SEC said firms should state in their annual corporate governance reports whether they complied with the code provisions, identify any area of non‐compliance  and explain the reasons for non‐compliance, to be able to raise standards to be at par with its regional and global counterparts.  Under the new code, all publicly listed companies are required to submit a new manual on corporate governance to the SEC on or before 31 May.

Tighter  power  supply  next month: Luzon should be bracing itself for a tighter power supply next month amid shutdowns of several power plants and the repair of Malampaya natural gas plant. Dep't. of Energy(DoE) said that a ‘yellow’alert might be declared in the Luzon grid for the 5‐day critical period amid Malampaya shutdown starting 28 January to 17 February. Meanwhile, critical period would run from 13‐17 February. Power generation rates are also expected to increase by P1.20/kWh in the March billing, with the use of more expensive fuel and the aftermath of the tight supply.

Government highlights infra spending targets: The Philippine government, in its latest issue of‘EconomyPH’, highlights the increasing infrastructure spending until the end of the term of the current administration  in year 2022. From an infra spending of 4.3% of GDP in 2015 to 5.1% in 2016 and to 5.4% estimate for this year, it is expected to rise further and consistently to 7.1% in 2022. The government is hoping to roll out 17 PPP deals between July 2016 to end‐2017.









Philippiness Market Insights 2017.1.4


Philippines Market Insights 2017.1.6