Philippines Market Insights 2017.3.14
News Highlights: Ayala Corporation (AC) posted a net income of P26bn for full year 2016, 17% higher YoY. This was mainly driven by the double-digit growth contributions from its real estate and banking units. Meanwhile, the Bangko Sentral ng Pilipinas (BSP) is on course of applying tighter regulations for risk management, which encompass the Basel 3 regime.
Select buying lifts local shares, PSEi @7,233: Local equities gained as investors backed on buying SM stocks after its large selloff. SM, comprising 9.95% weights on the index, grew 7.76% after its 9.2% drop last Friday. PSEi closed 86 points higher to 7,233 (+1.21% day-on-day), with all sectors also in the green. Meanwhile, among actively-traded shares were: SM (+P46.50 at P645.50); PGOLD (unch at P45); and AGI (+P0.18 at P12.50). Turnover slowed to P6.5bn, with equal advances and decliners at 94-94. Net foreign outflows receded to P282mn.
Wary on Fed approach: Market is still seen on a sideways range until we see a clearer stance on Fed’s approach on raising rates this year. Focus would now be on whether the Fed would be hiking more than 3 times or above the quarter of a percentage point indicated in their previous statements. At home, local marts might want to look further on the implementation of the administration’s infrastructure spending plan as gauge on better prospects for the year. Immediate support 7,200, resistance at 7,290.
Up on Monday: Regional markets ended Monday trade on a positive note, but remained its cautious tone ahead of the much awaited outcome from the FOMC meeting this week.
Marts slightly moved: US equities showed little changes on Monday trading as most investors brace themselves for the widely expected Federal Reserve rate hike on Wednesday (1400H E.T.). Dow Jones closed 21 points lower (-0.10%), while Nasdaq Comp. and S&P 500 inched higher by 0.24% and 0.04%, respectively.
Oil still lower: Crude futures continued to post session losses as Energy Information Administration (EIA) showed an increase in output forecast of around 109K barrels/day for US shale production in April. West Texas Intermediate (WTI) on Monday settled to $48.40/barrel (-0.19%).
AC reports 17% growth in 2016 net income: Ayala Corporation (AC) posted a net income of P26bn for full year 2016, 17% higher YoY. This was mainly driven by the double-digit growth contributions from its real estate and banking units. Recall that banking unit Bank of the Philippine Islands (BPI) and property arm Ayala Land (ALI) earlier announced their own profit growth of 19% and 21%, respectively, while AC Energy’s profit soared by 25% and newly set up AC Industrials’ grew by 29%. BPI and ALI continued to account for the bulk (combined contribution of 64%) of AC’s equity earnings.
ICT reports +13% at $293.4mn in gross revenues from port in 4Q16: International Container Terminal (ICT) reported a 13% growth in consolidated gross revenues at US$293.4mn from port operations in 4Q16, driven by improvement in trade activities at most of its Philippine terminals, new contracts with shipping lines and services at the terminals in Indonesia, Pakistan, Ecuador and Mexico, as well as tariff rate adjustments at certain terminals and increase in storage and special services revenues at the Honduras terminal. For 2016, gross revenues from ports increased 7% to US$1.128bn. In other news, ICT and PSA International (PSA) opened their joint venture terminal, Puerto Aguadulce, in the Port of Buenaventura, Colombia. The first phase of this US$550mn terminal can handle mega container vessels with capacities of up to 18,000 TEUs.
CNPF debuts on FTSE index: Century Pacific Food (CNPF) is set to debut on FTSE Global Equity Index Series for Asia Pacific ex-Japan. CNPF will be added to FTSE Index’s Small Cap and AllCap categories effective 20 March 2017. Earlier, CNPF also made its debut on the MSCI Philippine Small Cap Index last 31 May 2016.
Senate approves Smart franchise extension: Senate approved PLDT, Inc. (TEL) unit, Smart Communications, to extend its franchise for another 25 years as it compels the telco to specifically expand coverage on calamity-prone areas. First amendment is inclusive of the deletion of the term co-use in the application of the franchise so that “this seemingly innocuous word cannot be invoked in employing anti-competition practices.”
SMC unit posted P17.7bn net income in 2016: San Miguel Brewery, Inc., the brewery unit of San Miguel Corp. (SMC) recorded P17.7bn net income for FY16, 31% higher YoY. Sales volume reached record high of 202.6mn cases. On its international operations, the brewery made better revenues due to price adjustments and higher exports. On its expansion plans, the company will invest $300mn for beer breweries in Cagayan de Oro and Laguna. The Cagayan de Oro brewery will have a capacity of 3mn hectoliters.
PSPC signs contract for Phase 2 project: Phoenix Semiconductor Philippines (PSPC) signed a KRW 2.65bn (US$2.31mn) contract with Hyosung Corporation in connection with the Phase 2 manufacturing plant construction project in Clark Freeport Zone (CFZ). Under the contract terms, Hyosung Corp. shall supply newly manufactured diesel engine generators.
NOW teams up with Tata Communications: Now Corporation (NOW) signed with Tata Communication to provide its existing and future clients’ access to the latter’s global managed network services, managed security services and unified communications and collaboration offering. Tata Communications is a lead global provider of A New World of Communications to multinational enterprises and service providers.
Basel 3 rollout could be beyond 2019 target: The Bangko Sentral ng Pilipinas (BSP) is on course of applying tighter regulations for risk management, which encompass the Basel 3 regime. Early adoption is voluntary and big banks are required to meet all standards by 01 Jan 2019. However, some of the stricter standards might not be available yet for some. BSP would further calibrate reforms to meet local conditions, especially in infrastructure related reforms.
T-bills oversubscribed: The Bureau of the Treasury (BoTr) auctioned its Treasury bills (T-bills) and it was well received by the market, with bids reaching P35.34bn combined for the 91-day, 182-day and 364-day tenor. 91-day T-bills bids reached P17.44bn for the P6bn facility and fetched a rate of 2.374%. Bids for the 182-day reached P11.235bn for its P5bn facility and yields fetched 2.606%. Lastly, the 364-day T-bills received P6.665bn, while yields were at 2.799%.
Bank loans more exposed to property in 2016: Preliminary data from the BSP indicated that banks in the Philippines incurred P1.81tn loans for the real estate, 19.5% higher from the P1.52tn recorded in 2015. Home loans were registered at P529.90bn, 18.8% higher, while commercial property lending increased by 18.4% to P1.02tn. On the other hand, non-performing loans for properties were lower at 1.86% from the previous measure of 2.08%.
Installed capacity on power plants +13% – DoE: Total installed capacity in the country’s power plants stood at 21,423MW (+13%) for 2016, but dependable capacity only reached 89% to 19,097MW. Dep’t. of Energy (DoE), however, said that some of the power plants declared a derating in capacity, showing minimal discrepancy with what they are producing and are expected to deliver, and such deductions were not showed on the DoE data.
Sen. Villar keen on downstream mining development: Sen. Cynthia Villar is in favor of developing domestic mineral processing plants. These could be in line with the government's goal of shifting from export to processing which could generate jobs and increase the mining sector's contribution to the country. However, processing plants will require series of feasibility studies first before it can be established.