First Metro Asset Management Inc

The Bellwether – 120

Releasing the 20th issue of The Bellwether, as published by FMIC’s IAG-Research.

This is a fortnightly publication on market action and outlook.

The following are the highlights of the issue:

Pepsi’s volume opens strong in month of January 2013, profit outlook upbeat in election year

Lopez Holdings, Inc. (LPZ) Election spending and power generation lift LPZ’s profit outlook

Atlas Consolidated Mining and Development Corporation (AT) eyes close to Php5bn 2013 earnings

Pepsi’s volume opens strong in month of January 2013, profit outlook upbeat in election year

2012 Results Exceeded Expectation

Pepsi Cola Products Philippines Inc. (PIP) has exceeded its 2012 earnings target as early as nine months into 2012, with overall sales growth of both carbonated and non-carbonated beverages overtaking the Coke brand of Coca Cola Bottlers Philippines Inc. (CCBPI) in the last seven quarters. 9mo2012 earnings were 209% up over that of 2011, to Php696mn. Whether the full year 2012 bottomline managed to climb above the historic net profit high of Php1bn is yet to be disclosed.

Lopez Holdings, Inc. (LPZ) Election spending and power generation lift LPZ’s profit outlook

Strong Profit Outlook

We estimate earnings could almost double to Php4.85bn this year given the strong profit outlook of the media company ABS-CBN in an election year (2013) and the power business, the latter lodged in layers of investee companies heavily invested in the Philippine power sector. Lopez’ investee companies include election spending beneficiary ABS-CBN (58%-owned) seen to make net profits of more than 2012’s expected Php2bn to Php2.5bn this year. On the other hand, Php7.4bn earnings for First Philippine Holdings (FPH) this year are within striking distance given Bacon Manito geothermal plant’s re-commissioning with an expected profit contribution of a little less than Php3bn on a likely 9mo2013 earnings impact, consolidation of Rockwell, now 83%-owned by FPH and First Gen Holdings’s (FGEN) Php8.9bn projected earnings. LPZ owns 46.6% of FPH, which owns 66% of FGEN, which in turn owns 100% of the 1,500MW natural gas-fired power plants FGP and FGPC, 43% of 1198MW Energy Development Corp. (EDC) and 40% of the 132MW Pantabangan- Masiway Hydropower plant in Nueva Ecija.

Atlas Consolidated Mining and Development Corporation (AT) eyes close to Php5bn 2013 earnings

Higher Earnings

Atlas Mining Corporation (AT) validated our 2013 earnings forecast of Php4.8bn, based on an all-in net profit margin of $1/lb. of copper concentrate and shipment of 120m lbs. AT made Php2.54bn in 2012 versus Php1.66bn in 2011. We project this year will be better. With or without an improvement in the global price of copper, but which is predicted to rise to $4/lb. by mid-2013 by foreign banks’ research houses from Atlas selling price of $3.6/lb., earnings will rise. See also our mining sector report to be emailed today. For this, we like AT whose PE is 9.2x on market cap of Php46bn. EPS growth at our own projected Php4.8bn earnings over 2012’s consensus estimate of Php3.7bn is 29%. The bigger production comes ahead of schedule, 2Q13 versus the original target of 2H2014. Atlas hopes to bring back its daily throughput to the record high of 100k tonnage in the years to come

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Oriental Petroleum (OPM) may Double Earnings on Galoc 2’s Commercialization in 2014

Doubling of Daily Output in 2014.

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First Metro Asset Management Inc