Philippines Market Insights 2017.3.18


News Highlights: SM Investments Corp. (SM) has obtained the Philippine Competition Commission’s (PCC) approval for its acquisition of a controlling stake (62.2%) in Philippines Urban Living Solutions, Inc. (PULS), the developer and operator of MyTown dormitories. Aboitiz Equity Ventures (AEV) hikes its capital expenditures to P76.7bn versus P42bn spent last year amid sustained optimism on the country’s growth prospects, particularly in power and infrastructure. On the economic side, the foreign debt of the Philippines declined to $74.76bn in end-2016 (6-year low) from the $76.6bn level the prior quarter and $77.47bn the prior year. The Bangko Sentral ng Pilipinas (BSP) is looking to revise its balance of payments (BOP) position, gross international reserves (GIR), foreign direct investments forecasts for 2017, among others.





Mart up as investors seek higher risk, PSEi @7,345: Local bourse ended higher as investors continued to search for risky stocks on the back of less hawkish stance from the Fed. PSEi rose 66 points at 7,345 (0.91% day-on-day), with all sectors ending in green except for industrials (-0.22%). Among actively-traded shares were: ALI (+P0.65 at P36.55); BDO (+P2.20 at P125.00); and SMPH (+P0.25 at P28.95), on P14bn turnover. Gainers outnumbered losers at 103-78, with net foreign buying at P169mn.

Might see dampened sentiment: Local mart is seen to digest the discussions done by various finance ministers and central bankers during the G20 meeting last weekend. We might see a bit of disappointment today as ministers failed to tackle the issue on the looming protectionist policies of the US and ended the meeting without a commitment to bolster free trade among countries. Immediate support at 7,270, resistance 7,400.


Marts closed broadly higher despite cautiousness: Most marts ended higher despite some investors turning cautious ahead of the G20 meeting.


Equities mixed on muted trades: Shares ended mixed as investors wait for any new catalysts that could bolster the market.


Crude relatively flat despite higher output: Oil prices closed marginally higher even after Baker Hughes reported weekly U.S. rig count rising by 14 oil rigs to a total of 631. West Texas Intermediate rose $0.03 to settle at $48.78/barrel.


SM gets PCC approval to acquire MyTown: SM Investments Corp. (SM) has obtained the Philippine Competition Commission’s (PCC) approval for its acquisition of a controlling stake (62.2%) in Philippines Urban Living Solutions, Inc. (PULS), the developer and operator of MyTown dormitories.
While the PCC has given its approval, it took note of the inability of SM to provide additional information requested by its Mergers & Acquisitions Office during the first phase of the review. PULS opened its first building under the MyTown brand in 2013. It targets to triple its inventory to 4,500 bedspaces by mid 2018. The plan is to develop 12 more properties near BGC under MyTown, which currently has 3 operating dormitories with 1,500 bedspaces.

AEV pegged 2017 capex to P76.7bn: Aboitiz Equity Ventures (AEV) hikes its capital expenditures to P76.7bn versus P42bn spent last year amid sustained optimism on the country’s growth prospects, particularly in power and infrastructure. About P59bn is earmarked for its power unit, Aboitiz Power (AP), with its ongoing projects this year, while P8.1bn would be allotted in AEV’s newest infrastructure unit. Meanwhile, its land segment would get around P5bn to fund its industrial and residential acquisitions in other areas outside Cebu. The rest would be to support the growth prospects of its banking & financial services and food segments.

LTG net income at P9.39bn for FY16 (+42%): LT Group, Inc. (LTG) reported P9.39bn in 2016, 42% increase from the previous year. The contribution of the Philippine National Bank (PNB) on LTG's net income reached P4.14bn, 11% higher from 2015. Tobacco business remained strong at P2.58bn, 149% higher YoY mainly due to the improved sales mix of Marlboro. Beverage segment earned P1.76bn, 60% higher YoY mostly from the extraordinary gain from the revaluation of beer assets at P594mn. Vitamilk and Cobra remained the market leader in their respective segments. Eton Properties Philippines, Inc., LTG's property arm, earned P390mn for 2016, 25% higher YoY. Higher revenues were due to the higher lease rates on its fully-leased out BPO office buildings.

SCC pays $2.65bn royalty payments: Semirara Mining and Power Corp. (SCC) turned over P2.65bn worth of royal payments to the Energy Department (DoE) for 2016. More than P1bn went to local government units where SCC operates 20%-45%-35% sharing between the province of Antique, Municipality of Caluya and Barangay Semirara, respectively. Smart data revenues +26% in 2016: Smart Communications, a PLDT, Inc. (TEL) unit, reported a 26% growth to P25.5bn in mobile data revenues in 2016 amid its attractive data offers and affordable smartphones. Mobile internet revenues, meanwhile, rose 42% to P17bn. Mobile data usage improve to 148,000 terabytes, 49% higher YoY, highlighting the popularity of data usage as well as the huge potential to grow mobile data revenues, particularly in mobile internet.

PNX to spend P10bn for expansion: Phoenix Petroleum (PNX) would spend P10bn over the next 3 years for expansion and possible acquisitions. P2bn is earmarked for this year as it continues its plan to increase its retail network, storage and logistic capacities. PNX earlier announced the plans to open new depots in Tayud, Cebu and General Santos City in 1Q and 4Q, respectively, while it plans to expand the Calaca, Batangas terminal in 3Q. BC proposes landfill: Benguet Corp. (BC) proposes a final rehabilitation plan to one of the Antamok open pits involving an engineered sanitary landfill and a renewable waste-to-energy project. The pit would then have the capacity of 535,400 cubic meters that could handle an expected daily disposal volume of 150 to 200 metric tons not only from Itogon and Baguio, but also from the surrounding areas. BC submitted the proposal to Baguio City and Itogon town and a final proposal would be submitted for approval of the mayors and their respective city councils prior to implementation.


Foreign debt dropped to 6-year low: The foreign debt of the Philippines declined to $74.76bn in end-2016 (6-year low) from the $76.6bn level the prior quarter and $77.47bn the prior year. There were more offshore borrowings settled and the stronger dollar pulled down the gross debt. About 65% of the external debt is in USD while 12% is in yen. The debt was equivalent to 24.6% of GDP in 2016 compared with 26.5% in 2015.

BSP to revise BOP amid positive global outlook: The Bangko Sentral ng Pilipinas (BSP) is looking to revise its balance of payments (BOP) position, gross international reserves (GIR), foreign direct investments forecasts for 2017, among others. BSP is expecting a BOP surplus of P1bn, and current account position of $800mn surplus for 2017. The need to revise forecasts was due to the improvement in the global economy, with global GDP growth seen at 3.4% for 2017 and 3.6% for 2018 from the 3.1% reading in 2016.

Banks must comply on BSP's 21 April deadline for CICS: The Bangko Sentral ng Pilipinas (BSP) gives extension for banks to upgrade to the check image clearing system (CICS) until 21 April, from the original deadline of March. CICS aims to clear checks within the day from the previous transaction of 3 to 5 days. Banks are required to issue new checks to the clients that will have embedded security features readable under the electric clearing software.

Subsidies to GOCCs reached P103bn in 2016: Subsidies to governmentowned and -controlled corporations (GOCCs) registered at P103.19bn in 2016, 32% higher from the 2015 figures. The Philippine Health Insurance Corp. (PhilHealth) received most of the subsidies at P43.78bn, followed by the National Irrigation Administration at P16.91bn and National Housing Authority (NHA) with P12.04bn.









Philippines Market Insights 2017.3.17


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