DA Market Securities 
No Comments DA Market Securities Morning Brief February 21, 2013
US stocks lower after Fed Reserve raised worries that CB might scale back bond-buying program. CMT, MEG, SCC, SM, SMDC, SMPH, HP, BEL, Web, MIning, National Debt, Market Outlook.
International
U.S. stocks ended lower Wednesday after Federal Reserve meeting minutes raised worries the central bank might scale back its bond buying program. The Dow Jones Industrial Average fell 108 points, or 0.8%. The S&P 500 fell 1.2% and the Nasdaq lost 1.5%.
Local News
CMT will sell its shares in associate Lafarge Republic Inc (LRI) and in another subsidiary to give the listed firm flexibility to restructure its assets. CMT board authorized:
- Sale of up to 1.11 billion of its shares in LRI, representing about 19% of the latter’s outstanding capital stock.
- CMT will sell the shares to major shareholder Calumboyan Holdings Inc and Southwestern Cement Ventures Inc, a related party of LRI, or another related party.
- CMT will also sell a maximum of 100 million LRI shares to the public, including institutional investors, in one or several tranches.
- Calumboyan owns 61.95% of CMT, while LRI owns 33.97%. CMT is facing suspension from trading after failing to comply with minimum public ownership of 10%, with only a 2.41% currently.
http://www.interaksyon.com/business/55480/seacem-board-clears-sale-of-shares-in-lafarge-republic
MEG is doubling its investment in a 16-ha township project in Cebu to P20 billion, to be developed over the next 7 years. MEG earlier announced that it will spend P35 billion in capital expenditures as it looks to launch 10 residential projects in the first half of 2013.
SCC has set up a new subsidiary, Semirara Energy Utilities Inc., that will pursue power projects around the country. Semirara Mining said its new unit would act as the QTP, alternative electric service provider authorized to serve remote and unviable areas, over barangays of Semirara, Tinogboc and Alegria, all in Semirara Island, Caluya, Antique.
http://www.interaksyon.com/business/55490/sec-approves-creation-of-semirara-minings-power-subsidiary
SMDC Consolidated net income of P4.9 billion in 2012, a 17.5% increase, reflecting a healthy net margin of 22.7%.
- Net income from real estate sales reached P4.7 billion, up 16.4% from P4.0 billion in 2011.
- Revenues from real estate sales reached P21.6 billion, up 33.3% from P16.2 billion
- Return on equity was at 13.0% from 12.0% in 2011
- Assets reached P79.4 billion, up 47.3%
- Net debt to equity ratio 29% to 71%
- Number of units sold reached 12,614, up 7.6% from 11,726 units in 2011
- Reservation sales reached P31.7 billion, up 20.8% from P26.3 billion
SM’s plan to merge its mall (SMPH) and property (SMDC, SM Land, HP, BEL) will likely dislodge Ayala (ALI, market P437 billion) as the largest real estate firm in the country. A combined market cap of SMPH, SMDC and BEL is P334 billion. RLC is at over P90 billion.
WEB reported a net income of P1.1 billion for 2012, 20% higher year-on-year, with all divisions contributing to the growth, especially its new businesses in the Asia-Pacific region. It is paying a dividend of P0.10 to stockholders on record as of March 5, payable on March 15.
http://business.inquirer.net/108631/philweb-posts-20-profit-jump
Mining
The governor of South Cotabato province, which hosts the Tampakan copper-gold project, rejected the ECC that the DENR issued on Feb. 19. The ECC allows Sagittarius Mining Inc. (SMI) to start commercial operations at the US$5.9 billion mine. The grant of the ECC was delayed for over a year largely due to the open pit ban imposed by the local government of South Cotabato.
The start of commercial operations was recently pushed back to 2015. The project, which represents one of the largest undeveloped copper-gold deposits in the Southeast Asia-Western Pacific region, is estimated to have 15 million tons of contained copper and nearly 18 million ounces of gold.
Note: AT has 5 million tons contained copper, while PX has ~800,000 ounces in Padcal and 9M ounces in Silangan
The total tax and royalty revenue to the Philippines over the 20-year life of the project is estimated at P346 billion or US$7.2 billion
SMC has a 10.1% stake in Indophil; while ACR recently hiked up its stake to 20% in Indophil. Indophil in turn has a 37.5% of the project.
Economy
National government had P5.437 trillion outstanding debt at yearend, below 2012′s debt program of P5.52 trillion, and a 9.8% increase from the 2011 level of P4.951 trillion.
domestic debt increased by 20.7% or P595 billion to P3.468 trillion from P2.873 in 2011
foreign debt declined by 5.3% to P1.969 trillion from P2.078 trillion
The Aquino administration is aiming to slash the budget deficit to P241 billion this 2013 from the emerging deficit of P235.3 billion in 2012.
Market Outlook
COL sees PSEi hitting 10,000 in 7.5 years if the market continues to trade at its historical average of 14 times earnings. But with the market’s price-earnings ratio at 18 times, hitting the 10,000 mark is possible in three years (2016). “We could suffer from outflows [of foreign capital] given that valuations are already on the high side,” said head of research April Tan. Nevertheless, the long-term outlook for the Philippines is good, with ample liquidity supporting the bull run, aided by record-low interest rates and benign inflation, said Tan. COL Financial’s stock picks are as follows: MBT, MPI, EEI, PGOLD, SMPH, BDO, AGI, MEG, MER, TEL, DNL.
Read more at itrade.ph