The Bellwether Volume 3 No. 5 – May 31, 2015

Dear all, Releasing the 5th issue of The Bellwether Volume 3, as published by FMIC's Research Department. This is a monthly publication on market action and outlook.   The following are the highlights of the issue:     Philippine Property Industry: Onwards, Upwards The real estate industry grew 15.2% last 1Q2015 (GDP accounting) despite BSP’s tightening regulations: 1) Real Estate Stress Test and 2) lower loan-to-value (LTV) ratio. This was matched by the 13.6% year-to-March returns in the Philippine Property Index. This was faster than 1Q2014’s 11.7% and FY 2014 9.6% growth. Private Construction (@ 14.2% growth) brought up the overall Construction Spending growth to 5.7%, given the slump in public construction, -24% yoy. Robust demand for property remained due to higher remittances from OFWs and growing Business Process Outsourcing (BPO) sector. The BSP forecast OFW remittances to hit above 5% growth while BPO revenue is estimated to exceed USD22bn.   Improved Liquidity on US Hike View 1Q2015 GDP disappointed at 5.2% growth, far below the consensus expectations at 6.6%. This will trigger quick profit trading. Despite IMF revised up its PH 2015 inflation forecast, we think that upward risks remain muted. BSP said that May inflation will likely be between the 1.6-2.2% range after hitting a historical low of 2.2% last month. This will likely put downward pressure to yields, especially at the front-end. At the global front, volatility will persist as data from the United States remained mix.   Ayala Land, Inc. (ALI): Earnings driven by higher margins Ayala Land, Inc. (ALI) achieved net income of PHP4.21bn in 1Q15, 19% higher than PHP3.46bn in 1Q14 and in line with their previous guidance of 20% annual net income growth. This was just slightly below consensus target of PHP4.29bn.  ALI targets PHP40bn in earnings by 2020, which requires a 20% CAGR from the PHP11.74bn attained in 2013. The company had a solid start in 2014 as net income grew by 26%.   Melco Crown (Philippines) Resorts Corp. (MCP):  CoDM development seen mounting losses for 2015 We estimate the company to incur more losses until year-end as it plans to increase its manpower to 5,442 from 5,172 employees as of end-March 2015. Note that the company booked Php1.1bn in employee benefit expenses in 1Q15, already half of the total revenues for the quarter. We estimate MCP to turn a profit by 2Q16 as it stabilizes casino and retail operations.   GT Capital Holdings, Inc. (GTCAP):  Banking, Automobile business drives income to new territories GTCAP reported a consolidated net income attributable to equity holders amounting to Php2.8bn in 1Q15, a 61% increase year-on-year backed by 15% growth in consolidated revenues from Php31bn to Php35.8bn. Double digit growth in net income were registered by Toyota Motor Philippines Corporation (TMP), Global Business Power Corporation (GBPC), AXA Philippines and Toyota Financial Services Philippines Corporation.   PDF found here: http://firstmetro.com.ph/the-bellwether-03-05