Philippines Market Insights 2017.3.8


News Highlights: PLDT Inc. (TEL) announced a core income of P27.9bn (21% lower YoY) and total annual dividend of P77/sh. for 2016, well in-line with our estimates.  ‘Recurring or normalized core income’ was down 26% to P20.2bn, matching what TEL indicated four months ago. Meanwhile, headline inflation for February reached 3.3%, picking up from the 2.7% registered in January. The inflation rate was within the BSP's forecast range of 3.1% to 3.9% and target range between 2% and 4%. Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that gross international reserves (GIR) reached $81.13bn as of end-February, lower by $0.25bn from the end-January level.





Mart fell on Fed jitters, PSEi @7,294: Local mart declined weighed down by the property sector and slump in TEL share price. PSEi fell 19 points to close at 7,294 (-0.26% day-on-day), with sectors ending mixed. Among actively-traded shares were: ALI (-P0.10 at P35.90); AC (-P3.50 at P819.50); and JFC (-P3.10 at P194.90), on P8.38bn turnover. Losers outnumbered gainers at 109-82, with net foreign buying at P170.75mn.

Mart to trail its sideways movement: Local mart is expected to continue moving sideways with a downward bias ahead of US jobs report, which could confirm the Fed’s move in its meeting next week. Meanwhile, full year 2016 earnings results of Aboitiz Equity Ventures (AEV) and Aboitiz Power (AP) are seen to weigh on investors’ sentiment today. We expect AP’s earnings to grow by about 8% in 2016. AEV and AP collectively accounts for about 7% of the local index. Immediate support 7,250, resistance 7,340.


Marts mixed ahead of economic data releases: Marts ended mixed ahead of key economic data releases, specifically on China’s trade balance and US’ nonfarm employment data.


Equities down ahead of key jobs data: Shares fell amid the drop in energy and telecommunications sectors. Moreover, investors opted to wait on the sidelines ahead of jobs report on Friday.


Crude declined on dampened sentiment: Oil ended lower as concerns on further increases in US production and inventories weighed on sentiment. West Texas Intermediate for April fell $0.06 to close at $53.14/barrel.


TEL’s 2016 core profit down 21%, as expected: PLDT Inc. (TEL) announced a core income of P27.9bn (21% lower YoY) and total annual dividend of P77/sh. for 2016, well in-line with our estimates. ‘Recurring or normalized core income’ was down 26% to P20.2bn, matching what TEL indicated four months ago. Consolidated service revenues, net of interconnection costs, declined by 3% to P147.6bn in 2016, EBITDA slid by 13% to P61.2bn although ‘core’ EBITDA dropped by only 6% to P65.8bn. Looks like year 2016 was the bottom for TEL as company guidance for 2017 shows a mild uptrend if we are to focus on the ‘recurring core’ income, which is set at P21.5bn (+6% YoY). TEL guidance for the usual core income (with potential asset sale) is P25bn this 2017, still lower though YoY.

PSPC rolls out production of new mobile memory device: Phoenix Semiconductor Philippines Corp. (PSPC) has successfully stabilized the commercial production of the new memory device. Planned production for the Embedded Multi-Media Card (eMMC) will commence on 1Q17 at a pace of 5.8mn units after the successful trial done in 2016.


February inflation clocked in at 3.3%; fastest in 27 months: Headline inflation for February reached 3.3%, picking up from the 2.7% registered in January. The inflation rate was within the BSP's forecast range of 3.1% to 3.9% and target range between 2% and 4%. The increase in inflation was mainly due to higher prices of food items, electricity rates and fuel. On the other hand, core inflation, which excludes food and energy prices, increased to 2.7%.

GIR reached $81.13bn as of end-February: Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that gross international reserves (GIR) reached $81.13bn as of end-February, lower by $0.25bn from the end-January level. The latest GIR can cover 9.2 months' worth of imports and payments of services and income.

T-bonds remain oversubscribed: The Bureau of the Treasury (BoTr) fully awarded the reissued three-year Treasury bonds (T-bonds) amid strong demand. Total bids reached P35.78bn for the P15bn offering. Yields for the T-bonds were quoted at 3.873%, 38.1bps higher than the 3.492% despite the looming global uncertainties and the Fed's hawkish statement regarding an almost certain March interest rate hike.

$3.4bn financial support to Phil. infra projects– Chinese minister: Philippines and China signed their 28th Joint Commission of Economic and Trade Cooperation, highlighting the inclusion of a $3.4bn credit facility to support 3 major infrastructure projects. New China Minister of Commerce committed financial support to $53.9mn Chico River Pump Irrigation project; $374mn New Centennial Water Source-Kaliwa Dam Project; and the $3-bn North-South railway – South Line. The first 2 projects are expected to be finalized within the 1st semester of 2017, while the third project is expected to be signed by year-end.

Gina Lopez pushed DOE official for solar project approval: Environment Secretary Gina Lopez asked Mario Marasigan, Renewable Energy Management Bureau director, for an urgent release of the renewable energy service contract for a solar farm project in Zamboanga City. However, this request came without the consultation from DOE Secretary Cusi. EcoGlobal Inc. planned to build a $100mn 30MW solar farm in Zamboanga Freeport Economic Zone in San Ramon, Zamboanga City.

Romulo as new DBP chairman: Former senator Alberto Romulo has sworn into office as new Chairman of the Board of the Development Bank of the Philippines. Romulo served as the secretary of the Departments of Finance, Foreign Affairs and Budget and executive secretary in the Arroyo regime, and returned to head DFA during the Noynoy Aquino administration.









Philippines Market Insights 2017.3.7


Philippines Market Insights 2017.3.9