2014-04-30 – The Bellwether Volume 2 No. 5

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Dear All, Releasing the 5th issue of The Bellwether Volume 2, as published by FMIC's Research Department. This is a fortnightly publication on market action and outlook.   The following are the highlights of the issue:

• Market Outlook

• Yields to Inch Up as the Market Remains Edgy

• Bank of the Philippine Islands: Php20bn Net Income or 6% Growth for 2014

• Manila Electric Company: 1Q14 Industrial Energy Sales up +5.2%, But Core Income Flat on Lower Tariff and +2% Overall Volume

Market Outlook. PSEi will achieve 6900 - 7000 by year-end. The Philippine market remains on solid ground, backed by strong fundamentals  and reasonable valuation at forward PE (2015) of 16x.   Yields to Inch Up as the Market Remains Edgy. We expect liquidity to be raised in the short-end on short duration strategy because of a potential 10-15 bps uptick in yields due to higher inflation expectation for May because higher food prices, from a lower 4.1% in April. Market will be generally edgy and on a wait-and-see towards the 1Q 2014 GDP announcement.   Bank of the Philippine Islands: Php20bn Net Income or 6% Growth for 2014. BPI expects a 6% jump in net income to Php20bn. However, ROE may decline to 15% (from 18.1%) driven by its recent Php25bn stock rights offering, which increased its capital by almost 25%. But through this share sale, BPI's tier 1 CAR will expand to 18.6% (from 14.7%).   Manila Electric Company: 1Q14 Industrial Energy Sales up +5.2%, But Core Income Flat on Lower Tariff and +2% Overall Volume. We think increasing demand for retail space, housing, residential high-rise due to Phil. demographic trends, rising affluence and growing urbanization point to increased energy sales. Meralco is building 3,000 MW power generation capacity to meet that demand by 2018-2020. Download the full PDF here! DOWNLOAD