2014-05-22 – The Bellwether Volume 2 No. 6

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Dear All, Releasing the 6th 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

• Surprise Credit Rating Upgrade Led to Treasury Rally

• ABS-CBN: 7% Earnings Growth in 1Q14

• Filinvest Land: Rides Property Upturn 
• D&L Industries: Keeping up the positive trends

Market Outlook. PSEi looks poised to breach 6900-7000 range which we earlier predicted as our year-end target. Positive statements from the third major credit rating agency, Moody's Investors Services Inc., that Philippine reforms are sustainable beyond 2018 is raising the probability of a breakout above 7,000 to a possible 7,200-7,400 territory by year-end.   Surprise Credit Rating Upgrade Led to Treasury Rally. We see downward trend across the board generally persisting until the end of May, as the market expects Moody's and Fitch to follow S&P in recognizing Philippine strong macroeconomic fundamentals, and BSP indicating that it doesn't plan additional prudential measures to aggressively siphon liquidity at this time. Also, government fiscal position, inflation expectation and forex rates will remain favorable for GS market rates.   ABS-CBN: 7% Earnings Growth in 1Q14. We expect recurring net income to post 25% growth to Php2bn this year. We remain bullish for the company until the medium-term, as its aggressiveness in market and product development strategy results to brighter 2015 prospects. Its revenue mix target is 25%-75% in the next 5-10 years, in favor of non-broadcast businesses.   Filinvest Land: Rides Property Upturn. FLI, a low-cost to middle-income housing developer in the price points of Php2-5mn/unit, is boosting recurring income comprising 30% of total revenues by more than doubling its BPO office space to 870k sqm by 2018.   D&L Industries: Keeping up the positive trends. For the first quarter of 2014, D&L Industries, Inc. (DNL) posted a revenue growth of 34% and net income growth of 20% driven by double-digit volume growth across all segments. Revenues and net income hit Php1.3bn and Php377mn, respectively. The charge was led equally by DNL's two biggest businesses - food ingredients and specialty plastics - both posting volume growth of 25%.   Download the full PDF here! DOWNLOAD