Philippines Market Insights 2017.2.2


News Highlights: Security Bank Corporation (SECB) earned a record-high P8.55bn net income in 2016, mainly from the bank's core businesses. Net interest income reached P15.9bn, 28% higher YoY. Meanwhile, Megaworld Corporation’s (MEG) expects its rental income to reach P20bn in year 2020 or double in a span of 5 years.





Mart on the sidelines, PSEi @7,227: Local bourse stayed on the sidelines ahead of the US FOMC meeting, having PSEi slipped 2 points at 7,227 (-0.03% day-on-day), with sectors mixed. Among actively-traded shares were: BDO (-P2.10 at P110.50); GTCAP (-P15 at P1,289); and MBT (+P1.50 at P83), with P5.1bn turnover. Market favored winners, 96-83, with net foreign outflows reaching P566mn.

Fed-driven sentiment: Market might trade higher today, following the latest Fed decision to keep rates unchanged. Sentiment might take its cue from Wall Street’s ascent and the recent rally in oil prices. Meanwhile, the Dep’t. of Environment and Natural Resources (DENR) mining audit report set to be released today. Immediate support is 7,180, while resistance is at 7,300.


Mixed before Fed: Asian markets ended mixed as most positioned themselves ahead of the Federal Reserve’s meeting. Some markets, however, remained closed for the Lunar Year holiday.


Equities up after Fed kept rates unchanged: Equities closed higher amid the latest Fed decision to keep interest rates unchanged. Albeit they acknowledged better consumer and business confidence, business investment, however, remained soft, suggesting the US economy still faces a moderate growth path. With 3 rate hikes mentioned last December, Fed is keen on its measured approach, keeping an eye for inflation and other key economic data.


Pullback in production lift oil prices up: Crude futures rallied after US data showed a pullback in weekly domestic crude production despite an increase in stockpiles. US Energy Information Administration reported an increase of 6.5mn barrels in crude stockpiles, while production edged lower by 46,000 barrels/day to 8.9mn barrels/day last week. March West Texas Intermediate (WTI) rose $1.07 to $53.88/barrel.


SECB net income for FY2016 up 11% at P8.55bn: Security Bank Corporation (SECB) earned a record-high P8.55bn net income in 2016, mainly from the bank's core businesses. Net interest income reached P15.9bn, 28% higher YoY. However, trading gains were only at P1.8bn, from the P2.9bn in 2015. With SECB upgrading its information technology and expanding its branch network, cost-to-income ratio was maintained at 50%. Currently, the bank has 292 branches and 622 ATMs. SECB's income figures are in line with our estimates. We maintain our ‘BUY’ rating.

MEG targets P20bn rental income in 2020: Megaworld Corporation’s (MEG) expects its rental income to reach P20bn in year 2020 or double in a span of 5 years. It will be completing nearly 1mn sqm of new rental inventory around its 22 townships and integrated lifestyle communities across the country over the next 3 years. This will bring the total rental space to more than 2.5mn sqm by 2020 and 1.5mn sqm of which will be occupied by office.

CHP secures US$280mn bank loan: Cemex Holdings Philippines, Inc. (CHP) has secured US$280mn worth of senior unsecured peso term loan facility from BDO Unibank (BDO). This is to refinance its long-term loan with New Sunward Holding B.V. It will have a tenor of 7 years and will be obtained in tranches carrying a fixed rate and a floating rate.

RCB redeems $275mn bonds: Rizal Commercial Banking (RCB) redeemed its $275mn senior unsecured bond at 5.25% as part of the company's goal to reduce overall debt and cost of funding. RCB said that it will continue to look for opportunities in exploring low-cost funding alternatives.

PNX posted record sales volume: Phoenix Petroleum reported a record increase in sales volume on the back of its 505 stations opened as of end-2016. Sales volume reached 1.5bn liters (+25%) based on higher retail sales and higher same-store-sales growth. Meanwhile, PNX sold its non-core shipping and industrial park businesses last November to the Udenna Group, its effective parent and majority stockholder, for P3bn to pay debt obligations, hereby allowing the use of its resources to expand its core petroleum business and fund possible acquisitions.

CIC posted 34% profit growth for 2016: Concepcion Industrial Corporation (CIC) reported a net profit growth of 34% for full year 2016 with sales up by 17% YoY. The performance is attributed to margin expansion, cost reduction, efficiency gains and low commodity prices. Double-digit growth rates were seen across all business units.

ROX’s 1QFY17 net loss cut to P112.3mn: Roxas Holdings, Inc. (ROX) announced a consolidated net loss of P112.3mn for the first quarter of its fiscal year 2017. The loss was lower than the P124.8mn reported the prior year and was largely due to improved operating efficiencies & lower costs.

PPC grew its 2016 profit by 59%: Pryce Corporation’s (PPC) net income for 2016 reached P936.14mn, +59% YoY and in-line with its own guidance. Sales volume of LPG rose 30% to 189,000 metric tons (MT) and brought revenues higher by 16.5% to P6.73bn. Operating expenses dropped by 1% to P711.48mn despite the volume growth.


TDFs oversubscribed amid jitters in the global market: Term deposit facilities (TDFs) for both 7-day and 28-day were oversubscribed as investors continue to digest the developments in the global market. For the 7-day TDFs, bids reached P59.17, almost twice the P30bn offering. Average yield was at 3.0306%, slightly higher than the 3.0269% recorded from the previous week. On the other hand, 28-day TDFs bids reached P181.29, with an average yield of 3.432%, lower than the 3.4338% rate last week. The week long TDs were more swarmed by investors ahead of the FOMC meeting in the United States.

National Grid Corp. taps Swiss firm for $27mn transformers: The National Grid Corporation of the Philippines (NGCP) partners with Swiss firm ABB for the $27mn worth of transformers for the upgrade of transmission and reliability of the grid. ABB will design and commission 18 transformers that will increase power capacity and will be installed along NGCP's main substations.

NGCP to build Visayas-Mindanao interconnection project: National Grid Corp. of the Philippines (NGCP) would spend roughly P52bn for the Visayas-Mindanao interconnection project until December 2020. The project that would unify the 3 grids is the biggest transmission line project undertaken by the company. The project has 3 components, including a 92km submarine cable and overhead lines spanning 214km. NGCP, which holds a 25-year concession contract to operate the power transmission network, is a consortium among Monte Oro Grid Resources Corp, led by Henry Sy Jr.; Calaca Higher Power Corp., led by Robert Coyiuto Jr.; and the State Grid Corporation of China.

PSALM to auction Sucat power plant: Power Sector Assets and Liabilities Management (PSALM) will be holding an auction for the sale of the 850MW Sucat power plant in Muntinlupa City in May. Interested parties must submit letters of interest not later than 12p.m. of 24 April, while interested parties may conduct due diligence for the facility from 6 Feb. to 29 May, while the pre-bid conference would be held on 20 March.









Philippines Market Insights 2017.2.1


Philippines Market Insights 2017.2.6