TUESDAY, 26 MARCH 2013 Headlines: GMA7: FY12 results disappoint on poor 4Q performance Economy: March inflation is expected to be steady Economy: Budget deficit significantly rises from last year RFM: Management guiding Php800Mil in net profits for FY13 Economy: SEC publishes relaxed foreign ownership draft rules Technical Spotlight: Corrective Trends: Knowing your ABC s (As of March 25, 2013) INDICES Close Points % YTD% PSEi 6,597.59 Close Points 78.88 1.21 % 50.91 YTD% PSEi All Shares 4,137.49 5,210.89 38.23 21.52 0.93 0.41 35.88 19.19 All Financials Shares 1,748.03 3,459.02 18.17 14.18 1.05 0.41 80.41 13.60 Financials Holding Firms 5,751.48 1,304.87 49.10 5.26 0.86 0.40 64.16 34.67 Holding Industrial Firms 9,976.69 4,369.45 110.29 10.57 1.12 0.24 41.02 24.71 Industrial Mining & Oil 21,395.90 7,907.14-95.56 21.75-0.44 0.28-8.97 11.77 Property 2,713.94 60.60 2.28 83.22 Mining & Oil 23,177.28-59.86-0.26-1.39 Services 1,939.82 20.89 1.09 20.01 Property 1,908.65 31.58 1.68 28.85 Services 1,783.59-1.00-0.06 10.35 Market Summary The PSEi continued its rally, increasing by another 78.88 points or 1.21% to close at 6,597.59. Index gainers led decliners 24 to 5 while only 1 issue remained unchanged. The Property sector (+2.28%) was the strongest during the last trading session. Significant gainers were led by ALI (+3.69%), BLOOM (+3.68%), AGI (+3.34%), MPI (+2.84%), and MBT (+2.75%). On the other hand, notable decliners were SCC (-1.15%) and MER (-0.64%). Value turnover declined to Php9.9Bil from Php9.3Bil last Friday. Foreigners were net buyers, acquiring of Php219Mil worth of shares. INDEX GAINERS Ticker Company Price Price %% SMPH ALI SM Ayala Prime Land Hldgs Inc 30.90 13.60 3.69 4.29 RLC BLOOMBloomberry Robinsons Land Resorts Corp 14.10 18.46 3.68 2.56 MPI AGI Metro Alliance Pacific Global Inv IncCorp 20.40 4.20 3.34 1.94 MEG MPI Megaworld Metro Pacific Inv Corp 5.43 2.15 2.84 1.90 MBT ICT Metrobank Int'l Container Term 115.80 2.75 71.70 1.85 INDEX LOSERS Ticker Company Price %% URC SCC Universal Semirara Robina Mining Corp 258.00 59.45-1.15-3.25 SCC MER Semirara Manila Electric Mining Co 312.00 220.00-0.64-2.65 BDO BDO Unibank Inc 87.45-0.51 DMC DMCI Hldgs, Inc 57.90-1.53 DMC DMCI Hldgs Inc 53.70-0.37 GLO MWC Globe Manila Telecom, Water CoInc 1,135.00 36.75-0.14-1.13 JFC Jollibee Foods Corp 105.80-1.12 EVENTS CALENDAR DATE TICKER COMPANY EVENTS 13-Mar-13 MPI Metro Pacific Investments Corp Ex-date Php0.02 Cash Dividend 14-Mar-13 AP Aboitiz Power Corp Ex-date Php1.66 Cash Dividend 14-Mar-13 AEV Aboitiz Equity Ventures Inc Ex-date Php1.44 Cash Dividend 14-Mar-13 AEV Aboitiz Equity Ventures Inc Ex-date Php0.56 Cash Dividend 14-Mar-13 TEL Philippine Long Distance Telephone Co Ex-date Php112 Cash Dividend 14-Mar-13 DTEL Philippine Long Distance Telephone Co Ex-date Php112 Cash Dividend 15-Mar-13 UBP Union Bank Of Philippines Ex-date Php3.50 Cash Dividend 19-Mar-13 AT Atlas Consolidated Mining & Development Ex-date Php0.25 Cash Dividend 19-Mar-13 PHN Phinma Corp Ex-date Php0.40 Cash Dividend 21-Mar-13 MER Manila Electric Co Ex-date Php6.10 Cash Dividend 21-Mar-13 TA Trans-Asia Oil & Energy Development Annual Shareholdings Meeting 22-Mar-13 DFNN DFNN Inc Annual Shareholdings Meeting 22-Mar-13 LR Leisure & Resorts World Corp Annual Shareholdings Meeting 25-Mar-13 FOOD Alliance Select Foods International Inc Annual Shareholdings Meeting 26-Mar-13 PNC Philippine National Construction Corp Annual Shareholdings Meeting 27-Mar-13 CMT Southeast Asia Cement Hldgs Annual Shareholdings Meeting TOP 5 MOST ACTIVE STOCKS Ticker Company Turnover AC SM SM Ayala Inv Corporation 703,952,900 378,414,800 ALI AGI Alliance Ayala Land Global Inc Inc 702,494,500 232,134,500 URC Universal Robina Corp 556,876,600 RLC Robinsons Land Corp 207,296,400 TEL Phil Long Distance Co 526,280,700 BDO BDO Unibank, Inc 192,199,500 RLC Robinsons Land Corp 457,627,100 TEL Phil Long Distance Co 183,260,600
GMA Network, Inc: FY12 results disappoint on poor 4Q performance FY12 results disappoint on poor 4Q performance. GMA reported FY12 net profits of Php1.61Bil, much lower than consensus estimate of Php2.26Bil. The decline was largely due to higher operating expenses incurred in the 4Q12. This more than offset the better than expected revenue growth of 6.5% for FY12 to Php13.9Bil. Exhibit 1: Results Summary in PhpMil FY11 FY12 %Change % of Full Year Forecast COL Consensus Revenue 13,083 13,929 6.5-107.7 Operating Income 4,104 4,336 5.7 - - Operating Margin (%) 31.4 31.1 (0.2) - - EBITDA 3,076 3,397 10.4-93.5 EBITDA Margin (%) 23.5 24.4 0.9 - - Net Income 1,705 1,617 (5.2) - 71.4 Net Margin (%) 13.0 11.6 (1.4) - - Source: GM A, Bloomberg Higher 4Q12 operating expenses drag down FY12 results. Net profits in the 4Q12 declined by 79% to Php30Mil largely due to higher operating expenses incurred during the period. According to GMA, the rise was due to an upsurge in amortization of program rights and the increase in depreciation charges from the commissioning of its Media Asset Management System (MMS). While overall operating income rose by just 5.7% in the FY12, EBITDA level grew at a faster pace of 10.4% to Php3.39Bil. Revenues come in higher than expected; 2013 to be a good year. Revenues came in higher than expected as GMA network managed to post a 7.0% increase in airtime sales to Php12.7Bil. Management cited data by AC Nielsen that continues to show GMA s dominance with higher ratings over main competitors ABS and TV5. In fact, according to GMA Chairman Gozon, the momentum continues to show in first two months of the year with GMA7 hitting an all time high in February alone. Consensus has a HOLD rating. Consensus has a HOLD rating on GMA7 with a FV estimate of Php9.00/sh. EDMUND LEE edmund.lee@colfinancial.com Tuesday, 26 March 2013 page 2
RFM Corporation: Management guiding Php800Mil in net profits for FY13 Management guiding Php800Mil in net profits for FY13. RFM Corp expects back-to-back banner years with the company set to record its highest revenue and profit total for FY13. The food and beverage company is targeting revenues and profits to rise by 15-20% for FY13 with overall net income to breach the Php800Mil mark this year. According to EVP and COO Nacino, economic growth has been driven by domestic consumption and the company plans to capitalize through the launch of new products under its existing brands. Election spending is also expected to contribute to sales particularly in its beverage lines. Consensus has a BUY rating. Consensus has a BUY rating on RFM with a FV estimate of Php6.03/ sh. Based on management s guidance of Php800Mil in net profits, the company is trading at 18.8X FY13 P/E, a significant discount to the 25.7X average consumer P/E in the Philippines. EDMUND LEE edmund.lee@colfinancial.com Economy: SEC publishes relaxed foreign ownership draft rules As was hinted earlier in the year, the Securities and Exchange Commision (SEC) published a more relaxed draft guideline regarding foreign ownership limits. In the said draft, the foreign ownership limit on covered companies will be applied on both total voting outstanding shares and also on total voting and non-voting outstanding shares. The draft rules also specified that the percentage of ownership of a company is measured specifically by voting stocks. With these relaxed draft rules, we believe that SEC will no longer require companies to adhere to the foreign ownership limit on each class of shares, one of the biggest issues a handful of corporations were facing last year. Since these said companies (TEL, GLO, MWC, ICT and ALI) have voting preferred shares to dilute total voting shares, they should be effectively well within the specified 40% foreign ownership limit. KERVIN SISAYAN kervin.sisayan@colfinancial.com Economy: March inflation is expected to be steady The Bangko Sentral ng Pilipinas said that they expect March inflation to fall within 2.8-3.7%. The BSP added that the upward adjustment in electricity rates will most likely be offset by lower dometic oil prices and price reductions in selected food items. This is quite favorable for the economy as it gives the BSP room to keep key policy rates low in order to boost the economy. KERVIN SISAYAN kervin.sisayan@colfinancial.com Tuesday, 26 March 2013 page 3
Economy: Budget deficit significantly rises from last year The government reportedly incurred a budget deficit of Php19.5 Bil in January, up by 22.5% from the deficit incurred on the same period last year. Although the spending outpaced tax collection growth, overall this is still positive for the economy as increased government spending should boost economic growth. In addition, the deficit of Php19.5 Bil is still just 8% of the deficit cap of Php238 Bil. KERVIN SISAYAN kervin.sisayan@colfinancial.com Tuesday, 26 March 2013 page 4
Technical Spotlight Corrective Trends: Knowing your ABC s More on our A-B-C s: Corrective motions in markets are commonly patterned after the basic reactive swings of the Elliot Wave Theory; these show corrections to be driven by three process waves known as an A-B-C (as shown on the right) The three wave correction is first began by a breach of our short to medium term support (A), and then opening into a quick oversold rally into short term averages (B) then completing the corrective curve with another reactive or consolidating base-out swing (C) In the short term we may have completed the first part of this corrective wave know as the A (sample A s are shown in page 7) The B-wave rally is a technical rebound brought about by the hasty decline of A usually into oversold levels this rebound on occasion may be traded for a possible bounce to its short term averages (32 or 16-day MAs) (see B samples in page 7) These rallies however may be fickle and brief and if traded, must be entered into as soon as the bounce is identified and commonly triggered by the presence of a key support like a previous low, key moving average or a 38% to 50% Fibonacci retracement zone (it is essential to move in only on well traded issues that seems to have upward potential to its next resistance) Then the C wave After the oversold bounce, sellers waiting for better prices (along with those who bought into the rebound looking to take short term profits) will come back and take control of the corrective wave These reactive swings may need some time to unfurl and may extend the decline either close to or at and even below the lows of the A wave In stronger trends (like our market today) stocks may just use the C wave swings to prepare a second try at support with a higher-low or a retest of the base A then try to slowly resume their upward poise once again This is more likely to happen for stocks that can keep themselves hoisted over their medium term (65-day) moving average Keep in mind however that breaks below the 130-day Moving Averages are usually more tender conducting wider reactive drives that show less spirit into rebounds Tuesday, 26 March 2013 page 5
Technical Spotlight Corrective Trends: Knowing your ABC s The protracted C decline: Keep in mind however that breaks below the 65-day Moving Averages are usually more tender conducting wider reactive drives that show less spirit into rebounds When markets or industries show continuing fallibility due to cyclical weakness or sectoral pressures, corrections may hold out longer than usual and drive thru a Full ABC swing with a new C low base, if not even a 5-wave extended channel on the way down MPI in 2010 showed this example (see sample 3 below) as it broke below its 3.70 low and 65-day MA and forced on a longer reaction which later needed a retest action to turn itself around Looking for the stronger option with two firm feet: With the strength recently exhibited by local stocks, it seems more likely that many issues may contain their reactions and rallies into the first two types (higher-lows and retest possibilities) Try to keep sighted on issues standing over their 65-day MA in preference to those not doing so Keep in mind that B rallies may be fleeting and that a possible 2nd reaction may yet come off the brief rebound as we need two legs to stand firmly on A higher-low base or a clear double support test may open better chances of a major bottom showing and should correspondingly offer a window for more solid and well volumed trades Tuesday, 26 March 2013 page 6
Investment Rating Definitions BUY HOLD SELL Stocks that have a BUY rating have attractive fundamentals and valuations, based on our analysis. We expect the share price to outperform the market in the next six to twelve months. Stocks that have a HOLD rating have either 1.) attractive fundamentals but expensive valuations; 2.) attractive valuations but near term earnings outlook might be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely inline or underperform the market in the next six to twelve months. We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to twelve months. Important Disclaimers Securities recommended, offered or sold by COL Financial Group, Inc.are subject to investment risks, including the possible loss of the principal amount invested. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the judgment of COL s Equity Research Department as of the date of the report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. COL Financial ans/or its employees not involved in the preparation of this report may have investments in securities or derivatives of securities of securities of the companies mentioned in this report, and may trade them in ways different from those discussed in this report. 2401-B East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City 1605 Philippines Tel: +632 636-5411 Fax: +632 635-4632 Website: http://www.colfinancial.com Tuesday, 26 March 2013 page 7