First Metro Asset Management Inc

The Bellwether 108

Releasing the 8th issue of The Bellwether, as published by FMIC’s IAG-Research. This is a fortnightly publication on market action and outlook.

Contents:

Exchange Traded Funds on Take Off; Draft Rules Out

DMCI Holdings, Inc.

Energy Development Corporation

Exchange Traded Funds on Take Off; Draft Rules Out

Essentially a Mutual Fund and Governed by the Investment Company Act. ETFs are essentially mutual fund companies but not referred to directly as such by regulators (the SEC) as can be gleaned from the Draft Rules and Regulations on ETFs that came out last July 16, 2012. Regulators are especially careful not to refer to ETFs as mutual funds as the nomenclature/term “mutual fund” does not exist in the Investment Company Act. Thus the governing law for ETFs is the same as those for mutual funds and investment companies and is therefore the Investment Company Act.

DMCI Holdings, Inc.

Earnings and new investment trade-off, with potential upside from PPP and nickel and coal price revival. There are earnings uncertainties from the trade-off of DMC’s recurring earnings from Maynilad with its Php5bn planned venture in mining and Small Power Utilities Group (SPUG) (under DMCI Power) that may be long-gestating. But at the same time, we also note below some potential pleasant surprises from the mining and construction order book which are outside of company control.

These are the following:

· China’s economic revival in 2013 pulling up the prices of nickel and coal for DMC’s Semirara’s coal exports and nickel operations of mining subsidiary, DMCI Mining;

  • Pnoy’s PPP platform gaining momentum and helping to boost DMCI’s construction order book to a high range of Php50bn-Php80bn from the current Php10bn, excluding the newly awarded Php25bn MRT Line 7 to financially close by year-end.

Energy Development Corporation

EDC Eyes More than Php7.3bn in 2012 earnings. Though quarter-on-quarter basis, 2Q2012 earnings dropped -19% on flat revenues and Php300m worth of Bacman net losses, the full year earnings will still be a huge improvement from last  year’s Php167m net loss (to equity holders).  This was announced  today (August 14, 2012) by EDC management  in an Analyst Briefing about 1H2012 financial results.

FG Hydro and the Green Core power plants were the earnings kickers in 1H2012 and will continue to be so in the 2H2012.  Php7bn was  EDC’s consolidated profit guidance for 2012 previously. The abovementioned plants make up  a third of  EDC’s 1,198MW installed power generation capacity. FG Hydro’s ancillary contract closed with NGCP in 2H2011 was behind the 485% jump in the hydro plant’s earnings in 1Q2012 of Php1.1bn versus year ago’s  Php191mn, same period. Majority of FG Hydro’s topline in 1Q2012 or Php569mn were from ancillary contracts or 42% of the 1Q2012 operating revenues worth Php1.411bn.

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First Metro Asset Management Inc