DA Market Securities 
No Comments DA Market Securities Morning Brief January 28, 2013
US stocks rose for the week on better-than-estimated corporate earnings, economic data and temporary suspension of debt ceiling. AP, CEB, CHIPS, FOOD, OV, OPM, PXP, GTCAP, PBB, PNX, SVN, URC, Reserve Requirement.
International
U.S. stocks rose for the week, capping the longest stretch of daily gains since 2004, amid better-than-estimated corporate earnings and economic data as lawmakers voted to temporarily suspend the federal debt limit.
Local / News
AP expects to sign several loan agreements to finance two crucial coal-fed power plant projects worth a combined $1.82 billion and help fund the capital spending of its distribution utilities.
- Expects to sign by end Q2, a loan agreement for the 300MW coal plant in Davao. Total expenditure is $720 million, of which 75% is expected to be funded by nonrecourse financing while the remaining 25% will be funded by equity.
- By mid-Q3, the co. expects to sign the loan agreement for the $1.1-billion, 600MW coal plant in Subic, which the company is undertaking with MER and Taiwan Cogeneration through a vehicle firm called Redondo Peninsula Energy Inc. (RP Energy), funded by 75% nonrecourse financing. The financial closing for the Subic power project, however, is still dependent on the lifting of the Writ of Kalikasan slapped on it.
- Distribution utilities are looking to raise about P3 billion to P4 billion to fund capex, aimed at serving the high-digit growth rates in the past three to four years.
http://business.inquirer.net/104595/aboitiz-power-to-sign-loan-deals-for-1-82b-projects
CEB has asked government regulators for the reassignment of key flight entitlements to Taiwan, currently allocated but not being used by PAL. CEB wants to take on a total of 1,260 seats a week on flights between Manila and Taipei. The Civil Aeronautics Board (CAB) is set to hear the case on Feb. 13.
http://business.inquirer.net/104437/cebupac-eyes-pals-unused-seats-to-taiwan
Mexican firm Coca-Cola FEMSA, S.A.B. de C.V. has completed the purchase of a 51% stake in Coca-Cola Bottlers Philippines, Inc. (CCBPI) for P688.50 million. FEMSA holds the option to acquire the remaining 49% of CCBPI any time until 2020, as well as a put option to sell its ownership to TCCC anytime in 2019. FEMSA is mulling expanding and renovating CCBPI’s existing facilities. CCBPI holds a majority stake in CBC through wholly-owned Philippine Bottlers Inc.
In 2012, CCBPI produced approximately 530 million unit cases (24 eight-ounce servings per unit case) from its 23 plants nationwide and notched roughly $1.1 billion in sales, serving nearly 800,000 customers in the process.
CHIPS poised to post record profits in 2013 (25% growth target) as it prepares for more acquisitions and another major supply deal with a big client from the United States.
- “All set” to acquire a Bangkok-based semiconductor assembly and test company, but no other details were disclosed. With additional investment in production equipment, the Bangkok company has the potential to generate sales turnover of over $40 million over the next three years.
- The co. also signed a memorandum of understanding with a major US semiconductor company to supply volume requirements from 2013-2017; potential value of the business over five years is estimated at $68 million.
http://business.inquirer.net/104631/cirtek-to-buy-thai-electronics-firm
FOOD creates unit that will handle sales and investments in Singapore. Alliance Select Foods Pte. Ltd. is a general wholesaler and trader and investment holding company. In September last year, Alliance Select said it planned to list Singapore Depository Shares on the Singapore Exchange Securities Trading, Ltd.’s Catalist Board.
Galoc production estimated to have reached close to 10 million barrels as of end 2012, depleting roughly 69% of the 14.4 million barrels of projected reserves in the block covered by Service Contract 14C1. Total production was at 9.94 million barrels as of end-2012 from the 8.46 million barrels reported as of end-2011.
Phase II development is expected to increase production to 5.200 bopd to a combined field rate of 12,000 bopd. Phase II is also expected to lead to the recovery of an additional 8 million barrels of crude from the field. A proposal has been issued to drill a third well after completion of 2 wells. (OPM has a 7.78% stake in Galoc, OV 7.21%, PXP through FEP 2.27%)
http://business.inquirer.net/104439/galoc-oil-field-production-hits-10m-barrels
GTCAP unit Federal Land plans to spend P12 billion on projects this year, about a third more than 2012 level of P9 billion, as it remains bullish in 2013. Bulk will be for construction of condominium developments and retail and office buildings. Funding will be from internal cash flow and borrowings. The company plans to launch another 12 property projects this year from 12 last year.
Reservation sales remained robust in 2012, growing by over 50% driven by strong demand for our residential projects in Metro Manila and Cebu. Net income grew by an even larger margin, buoyed by the strong sales and some extraordinary income. Federal Land more than doubled its net income to P6.86 billion as of September last year from P2.64 billion.
http://www.bworldonline.com/content.php?section=Corporate&title=Federal-Land-to-spend-P12B&id=64852
Biz-Buzz, Inquirer
PBB (IPO) – Based on forward valuations, offer price will not be far from current market comparables, and knowing the generosity of PBB owner, Ambassador Alfredo Yao, money will be “left on the table” for IPO investors. This may be shaping to be another EastWest Bank IPO for happy investors courtesy of Ambassador Yao.
http://business.inquirer.net/104643/biz-buzz-reunion-with-bill-gates
PNX will inject P242 million into its shipping arm, Chelsea Shipping Corp., for a brand new 14,000-metric ton tanker vessel, which shall strategically support and serve the importation logistics requirements of the corporation. PNX acquired Chelsea in July last year to secure its logistics chain.
SVN plans to spend nearly P1.5 billion this year, an increase of 50% from 2012, to build more stores in Luzon and the Visayas, as well as refurbish current branches. The co. opened 140 stores last year, mostly in Luzon, bringing its end-2012 store count to 830. The co. expects to expand further in Cebu and elsewhere in the Visayas, a regional market it entered only last year. Currently it has 20 stores in Cebu and has no presence yet in Mindanao. Net income grew by 28.43% to P224.43 million as of September last year from P174.75 million.
URC is looking to invest internally-generated $1.5 million per megawatt (MW) or around $60 million (P2.44 billion) for the proposed facility, which will run on sugarcane byproducts, or bagasse. The company will need only half of the capacity of the power plant for its operations. Selling excess power capacity – or about 4 to 5 MW – to the grid may start in 2014, the first year of the power plant’s operation. Excess power sold to the grid could rise to about 6 MW to 22 MW after the third year. Construction of the facility will take about 3 years. URC may also put up similar facilities in other company-owned sugar mills.
Local / Economy
DBS sees a hike in bank reserve requirement to mop up excess liquidity in the domestic market. This means banks have less funds to lend out and, thus, affects interest rates and borrowing activities. Universal and commercial banks are required to maintain cash reserves equivalent to 18% of demand deposits, savings deposits and time deposits. The BSP maintained policy rates – overnight borrowing rate is currently at 3.5% while the overnight lending rate is at 5.5%.
http://business.inquirer.net/104455/hikes-in-bank-reserve-requirement-seen-in-13
Good Read: The Philippine story: ‘Sick man of Asia’ now transforming, revitalized, dynamic
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