The Bellwether – Issue 26

Releasing the 26th issue of The Bellwether, as published by FMIC's IAG-Research.

This is a fortnightly publication on market action and outlook.

The following are the highlights of the issue:

1Q2013 GDP Growth Momentum Peaks in 2Q2013

Manila Electric (MER)’s earnings boosters

Petron Corporation (PCOR) may hit Php8bn to Php10bn in earnings

1Q2013 GDP Growth Momentum Peaks in 2Q2013

The Philippines grew 7.8% in the first quarter of 2013, which is the third fastest growth since the 8.9% GDP growth rate in 2010; the latter is the restated GDP growth rate on the 2000 base price. On the demand side, consumer (Php1.1tn, +5.1% y-o-y) and government (Php183.5bn, +13.2% y-o-y) spending strengthened by increased investments in construction (Php139.3bn, +33.7% y-o-y) and durable equipment (Php191.7bn, +9.4% y-o-y), fueled growth. Another booster was industry, +up 10.9%, propped up by construction (Php89.4bn, +32.5% y-o-y) and finance (Php114.6bn, +13.9% y-o-y).

Manila Electric (MER)’s earnings boosters

Nigeria Distribution Business in the Works

Adding more power generation footprint overseas, Meralco eyes to hike its 5% stake in Nigeria-based Integrated Energy Distribution and Marketing Ltd. to 20% to gain exposure in the latter’s growing franchise area in that country by the third quarter of this year.

Petron Corporation (PCOR) may hit Php8bn to Php10bn in earnings

We estimate Petron Corp. could make Php8bn-Php10bn earnings this year. PE is 14.9x at that earnings level. A turnaround in the Malaysian operations (68%-owned Esso Berhad) is possible this early. Esso’s EBITDA contribution to PCOR may reach Php2.8bn, a reversal of the Php1bn losses in 2Q12 alone, the latter due to inventory losses caused by Brent crude --Esso Berhad’s benchmark -- volatility.

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