SMPH reported 4Q15 earnings that met COL estimates, with full-year net income up 13.6% to PHP 20.9 billion. Earnings growth slowed in 4Q15 due to lower real estate revenues, though rental revenues grew 12.2%. COL maintains a HOLD rating on SMPH with a target price of PHP 21.7. AEV raised earnings estimates for 2016-2017 due to a lower tax rate for AP's geothermal plant and the accretive acquisition of Republic Cement. PX released inferred mineral resource estimates for its Bumolo project that could potentially extend the mine life of its Padcal mine by 2 years, though further testing is required.
SMPH reported 4Q15 earnings that met COL estimates, with full-year net income up 13.6% to PHP 20.9 billion. Earnings growth slowed in 4Q15 due to lower real estate revenues, though rental revenues grew 12.2%. COL maintains a HOLD rating on SMPH with a target price of PHP 21.7. AEV raised earnings estimates for 2016-2017 due to a lower tax rate for AP's geothermal plant and the accretive acquisition of Republic Cement. PX released inferred mineral resource estimates for its Bumolo project that could potentially extend the mine life of its Padcal mine by 2 years, though further testing is required.
SMPH reported 4Q15 earnings that met COL estimates, with full-year net income up 13.6% to PHP 20.9 billion. Earnings growth slowed in 4Q15 due to lower real estate revenues, though rental revenues grew 12.2%. COL maintains a HOLD rating on SMPH with a target price of PHP 21.7. AEV raised earnings estimates for 2016-2017 due to a lower tax rate for AP's geothermal plant and the accretive acquisition of Republic Cement. PX released inferred mineral resource estimates for its Bumolo project that could potentially extend the mine life of its Padcal mine by 2 years, though further testing is required.
SMPH reported 4Q15 earnings that met COL estimates, with full-year net income up 13.6% to PHP 20.9 billion. Earnings growth slowed in 4Q15 due to lower real estate revenues, though rental revenues grew 12.2%. COL maintains a HOLD rating on SMPH with a target price of PHP 21.7. AEV raised earnings estimates for 2016-2017 due to a lower tax rate for AP's geothermal plant and the accretive acquisition of Republic Cement. PX released inferred mineral resource estimates for its Bumolo project that could potentially extend the mine life of its Padcal mine by 2 years, though further testing is required.
SMPHs revenue and income growth slowed to 4.7% and 10.3% respectively in 4Q15 from 9.2% and 14.9% as of 9M15. This was due to a drop in real estate revenues in 4Q15. Nevertheless, full-year net income was up 13.6% to Php20.90 Bil and this is equal to our estimate but missed consensus estimate on lower than expected revenues. We maintain our HOLD rating on SMPH with a fair value estimate of Php21.70. We like SMPH for being the biggest beneficiary, among property companies, of the strong consumption in the Philippines. SMPH is the biggest mall operator in the Philippines and continues to grow its portfolio at a good pace. However at the current price of Php20.75, upside to our fair value estimate is limited to 4.5% therefore we maintain a HOLD rating despite strong fundamentals of the company.
(As of February 22, 2016)
INDICES INDICES PSEi All Shares Financials Holding Firms Industrial Mining & Oil Property Services
AEV: Increasing estimates on lower income tax rate for AP
and cement business JV
Due to the lower than expected income tax rate of the Tiwi-Makban, we are raising APs 2016E and 2017E net income forecast for the said years by 2.5% and 4.4% to Php19.4Bil and Php22.4Bil respectively. We increased our FV estimate for AP by 3.1% to Php45.15/sh. Meanwhile, given AEVs 74% stake in AP and its earnings accretive investment in Republic Cement, we are raising our 2016E and 2017E earnings forecast for AEV by 3.2% and 4.9% to Php20.4Bil and Php24Bil respectively. We are also raising our FV estimate on AEV by 5.7% to Php52/sh.
INDEX GAINERS Ticker URC PCOR ALI
Company Universal Robina Corp Petron Corporation Ayala Land Inc BLOOM Bloomberry Resorts DMC DMCI Hldgs Inc
Index gainers led decliners 14 to 13 while 3 issues remained unchanged. Sector performance was mixed with Financials (-1.80%) and Mining & Oil (-1.55%) leading decliners and Industrial (+1.22%) making solid gains. Significant decliners were MBT (-3.29%), BPI (-3.10%), AGI (-1.92%), SMC (-1.89%), and MPI (-1.86%). On the other hand, notable gainers were URC (+3.29%), PCOR (+3.15%), and ALI (+1.75%). Value turnover was thin, declining to Php4.4Bil from Php6.5Bil the previous session. Foreigners were net sellers, liquidating Php82Mil worth of shares.
Price 194.40 9.49 31.90 4.33 12.46
% 3.29 3.15 1.75 1.41 1.30
INDEX LOSERS INDEX LOSERS
PX: Releases inferred mineral resource estimates for Bumolo project
The PSEi took minimal losses on Monday as the release of unimpressive earnings results from some companies did little to deter profit taking by investors. The index slipped 8.98 points or 0.13% to close at 6,783.08.
-4.62 -4.82 -8.72
INDEX GAINERS
TOP STORY:
MARKET SUMMARY:
1.40 1.45 1.47
YTD% -2.43 -1.97 -1.62 -2.97 0.53 1.65 -7.35 0.63
Ticker MBT BPI AGI SMC MPI
Company Metrobank Bank of the Phil Islan Alliance Global Inc
San Miguel Corporation
Metro Pacific Inv Corp
Price 76.45 87.60 14.32 70.00 5.79
% -3.29 -3.10 -1.92 -1.89 -1.86
TOP 5 MOST ACTIVE STOCKS
TOP 5 MOST ACTIVE STOCKS Ticker URC SMPH JFC ALI MPI
4Q15 earnings up 10.3% to Php5.44 Bil. SMPHs revenue and income growth slowed to 4.7% and 10.3% respectively in 4Q15 from 9.2% and 14.9% as of 9M15. This was due to a drop in real estate revenues in 4Q15. Nevertheless, full-year net income was up 13.6% to Php20.90 Bil and this is equal to our estimate but missed consensus estimate on lower than expected revenues.
Richard Laeda, CFA
Ticker: SMPH Rating: HOLD Target Price: Php21.70
Exhibit 1: Results summary
in Php Mil
Revenues Core Net income
4Q14
4Q15
% change
FY14
FY15
% change
18,441 4,934
19,301 5,444
4.7% 10.3%
66,240 18,391
71,500 20,900
7.9% 13.6%
% of estimate COL Consensus 100.0% 95.3% 100.0% 91.6%
source: SMPH, COL estimates, Bloomberg
Residential revenues drop in 4Q15 while rentals remain strong. Total revenue growth dropped to 4.6% in 4Q15 due to a 9.8% decline in real estate revenues. This was due to lower revenue recognition from the almost-completed projects that were launched in 2011 and 2012. Because of the drop in 4Q15, real estate revenues were flat compared to 2014. Despite this, SMPH remains optimistic this year as they expect to see an acceleration in booking of revenues from projects launched in tha past three years. Projects of SMDC continued to enjoy strong sales which boosted its reservation sales in 2015 by 15% to Php39.8 Bil from Php34.6 Bil. On the other hand, other core businesses maintained their strong performance during the quarter with revenues from rental and cinema and event ticket sales respectively growing 12.2% and 37.5% respectively. Growth in rental revenus came from the 12.65% y/y expansion in Philippine mall GFA from 6.5 Mil sqm as of end FY14 to 7.3 Mil sqm as of end last year. Excluding new malls and expansion, same-store rentals grew 7% y/y. Exhibit 2: FY15 Revenue breakdown
4Q14
4Q15
% change
FY14
FY15
% change
Rental revenues Real estate
10,055 6,183
11,285 5,576
12.2% -9.8%
36,497 22,152
40,700 22,200
11.5% 0.2%
Cinema and event ticket sales
1,004
1,380
37.5%
4,269
4,781
12.0%
Other revenues Total
1,203 18,445
1,059 19,301
-11.9% 4.6%
3,323 66,240
3,819 71,500
14.9% 7.9%
in Php Mil
source: SMPH
Maintain HOLD and FV estimate of Php21.70. We maintain our HOLD rating on SMPH with a fair value estimate of Php21.70. We like SMPH for being the biggest beneficiary, among property companies, of the strong consumption in the Philippines. SMPH is the biggest mall operator in the Philippines and continues to grow its portfolio at a good pace. However at the current price of Php20.75, upside to our fair value estimate is limited to 4.5% therefore we maintain a HOLD rating despite strong fundamentals of the company.
TUESDAY, 23 FEBRUARY 2016
page 2
PHILIPPINE EQUITY RESEARCH
AEV: Increasing estimates on lower income tax rate for AP and cement business JV Due to the lower than expected income tax rate of the Tiwi-Makban, we are raising APs 2016E and 2017E net income forecast for the said years by 2.5% and 4.4% to Php19.4Bil and Php22.4Bil respectively. We increased our FV estimate for AP by 3.1% to Php45.15/sh. Meanwhile, given AEVs 74% stake in AP and its earnings accretive investment in Republic Cement, we are raising our 2016E and 2017E earnings forecast for AEV by 3.2% and 4.9% to Php20.4Bil and Php24Bil respectively. We are also raising our FV estimate on AEV by 5.7% to Php52/sh.
George Ching Ticker: AEV Rating: HOLD Target Price: Php52.00
Raising AP earnings estimates on Tiwi-Makbans lower than expected income tax rate. The income tax holiday of the Tiwi-Makban geothermal plant will end in June 2016. However, given that the plant already obtained the Certificate of Endorsement (COE) from the ERC as a renewable energy (RE) producer, it will only need to pay 10% income tax (vs the 30% income tax of traditional power producers) once its income tax holiday expires. This is a positive development as we assumed a 30% income tax rate for the Tiwi-Makban. Republic Cement acquisition to be earnings accretive. In September 2015, AEV CRH Holdings Inc, the cement business joint venture of AEV and Irish building materials company CRH PLC, completed the acquisition of a 99.09% stake of Republic Cement (formerly Lafarge Republic Inc. or LRI). Net of finance cost, the acquisition of Republic Cement should boost AEVs earnings by Php303Mil for 2016E (1.5% of earnings), and by Php406Mil for 2017E (1.7% of earnings). TOP STORY:
PX: Releases inferred mineral resource estimates for Bumolo project
Releases inferred mineral resource estimates for Bumolo project . Philex Mining Corp. disclosed the release of a maiden inferred mineral resource estimate (MRE) as a result of its on-going drilling at the Bumolo porphyry copper-gold project. The MRE resulted to 21.7Mil tonnes of ore at 0.2% copper and 0.3g/ton of gold, at a 0.274% copper equivalent cut-off grade. The project is part of PXs on-going resource definition drilling program, which is aimed to provide additional ore to the Padcal Mine. The Bumolo deposit is located in the Baguio Mineral District and is 1.5km to the east of the Sto. Tomas II deposit of the Padcal Mine. PX is continuing the program to increase the inferred resources and to upgrade it to measured and indicated resource estimates.
Angelo Lecaros Ticker: PX Rating: HOLD Target Price: Php4.85
Results positive but still needs to be confirmed. The potential addition of resources bodes well for PXs Padcal Mine given that it is currently estimated to last only until 2022, with an estimated remaining reserve of 66.8Mil tons of ore as of end-2015. Assuming that the inferred 21.7Mil tonnes are proven to be mineable, it will extend the Padcal Mines life by around two more years (or until 2024). This translates to an estimated additional Php22.0Bil in metals revenues. However, the disclosed figure is still an inferred estimate and further tests will need to be done to classify these resources as confirmed. Maintain HOLD rating. Though the potential extension of the Padcal Mines life is positive for PX, we remain cautious over its profitability because of the persistent decline in metal prices. We are maintaining our HOLD rating on PX with a FV estimate of Php4.85/sh.
TUESDAY, 23 FEBRUARY 2016
page 3
PHILIPPINE EQUITY RESEARCH
Calendar of Key Events
FEBRUARY MON
TUES
WED
THURS
FRI
SAT
2 VMC: Annual Shareholders Meeting
3 UBP: Ex-date Php1.50 Cash Dividend
4 LOTO: Ex-date Php0.60 Cash Dividend
9 TECH: Ex-date Php0.005 Cash Dividend
10
11 HOUSE: Ex-date Php0.25 Cash Dividend
12 TFC: Annual Shareholders Meeting
13
15 PF: Ex-date Php1.20 Cash Dividend
16 WEB: Ex-date Php0.20 Cash Dividend
17 GLO: Ex-date Php22.00 Cash Dividend
18 IMI: Ex-date Php0.2204 Cash Dividend
19 MFC: Ex-date Php0.185 Cash Dividend
20
22
23 URC: Ex-date Php3.15 Cash Dividend
24
25
26 SLF: Ex-date Php0.39 Cash Dividend
27
29
TUESDAY, 23 FEBRUARY 2016
page 4
PHILIPPINE EQUITY RESEARCH
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 COLs 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
