WEDNESDAY, 26 NOVEMBER 2014

Another unexciting earnings season

Larger number of companies missed estimates

For the fourth period in a row, the earnings performance of listed companies in 9M14 remained
generally disappointing. Of the 55 companies that we cover, around 24 or 43.6% reported below
expected profits, 17 or 30.9% reported better than expected profits, while 14 or 25.5% reported
profits that were in line with expectations.
Nevertheless, there were some positive, noteworthy developments and outperformers. Competition
in the retail industry showed signs of easing, allowing PGOLD and COSCO to deliver better than
expected results. Meanwhile, Lopez owned power companies EDC, FGEN and FPH continued to
outperform expectations due to the better than expected performance of most of their power plants
and lower than expected operating expenses. DNL also outperformed due to the better than expected
performance of it recently consolidated subsidiary Chemrez.
In contrast, numerous banks continued to deliver below expected results either due to rising operating
expenses or weaker than expected non-interest income. Several companies owned by the Andrew
Tan group (AGI, RWM and EMP) also delivered below expected results due to competition. TEL also
delivered disappointing results due to competition.
Exhibit 1: 9M14 Earnings Summary

Above

Inline

SECB

BDO

Below
BPI

ABS

EW

CHIB

GMA7

CEB

MBT

COSCO

NIKL

PNB

CNPF

GTCAP

RCB

DNL

CIC

UBP

PGOLD

JFC

ICT

GLO

RFM

MWC

AP

BLOOM

PX

EDC

CPG

AT

MER

FLI

SCC

ALI

MEG

AC

FGEN

RLC

AGI

FPH

SMPH

SM

JGS

EMP

URC

PIP

MPI

RRHI
BEL
MCP
RWM
VLL
TEL
EEI
DMC

Total
Percentage

17

14

24

30.90%

25.50%

43.60%

Head of Research:
April Lynn Tan, CFA

Analysts:
George Ching
Richard Laeda, CFA
Charles William Ang, CFA
Jed Frederick Pilarca
Garie Ouano
Meredith Hazel Cua

PHILIPPINE EQUITY RESEARCH

Banking Sector: Core lending business remains strong,

but problems remain for some
Banks generally reported higher earnings for the third quarter. Among the nine banks that we monitor,
seven registered double-digit growth rates in earnings while only two (PNB, RCB) booked lower
profits. Growth was largely driven by higher interest earning assets and stable margins, which
allowed net interest income to grow by 15% on the average. Nevertheless, five out of the nine
banks that we monitor delivered weaker than expected year to date profits. BPI, CHIB, and PNB
delivered below expected results due to higher-than-expected operating expenses. Meanwhile, MBT
and UBP disappointed due to lower-than-expected non-interest income. SECB was the only bank
to outperform our expectations, primarily due to huge trading gains booked in 3Q14 as the bank
unloaded Php37Bil worth of investment securities.

Property Sector: Residential and leasing businesses remain strong

With the exception of CPG, all property companies in our coverage list registered higher 3Q14
profits. Average growth reached 18% during the period in review. For the first nine months of the
year, average net income growth reached 16%, higher than the 14.7% growth registered in 1H14.
Growth was largely driven by the strength of real estate revenues (derived from the sale of residential
properties) which accounted for the bulk of property companies revenues. Despite concerns of
oversupply, property companies real estate revenues grew by 25.2% during 3Q14. Take-up sales
also remained strong, with growth accelerating to 19.9% during 3Q14 from an average of 11.5% in
1H14. Recurring income of property companies from their leasing business also grew strongly by
9.6% y/y to Php16.1 Bil in 3Q14, driven primarily by expansion in leasable space.
Out of the six companies in our coverage list, ALI performed better than expected while SMPH,
MEG, FLI, and CPG performed in line with expectations. Only VLL underperformed due to lower than
expected real estate revenues and higher than expected effective tax rate.

Power Sector: Mixed results

Power companies delivered mixed 9M14 results. EDC and FGEN continued to deliver better than
expected results due to the higher than expected revenues and lower than expected operating costs.
MER also delivered better than expected results as higher than expected tariffs offset weaker than
expected sales volume. Meanwhile, AP and SCC delivered below expected operating profits due to
the worse than expected performance of their power generating businesses. Power plants of both
companies suffered from unplanned outages.

WEDNESDAY, 26 NOVEMBER 2014

PHILIPPINE MARKET STRATEGY

page 2

PHILIPPINE EQUITY RESEARCH

Consumer Sector: Earnings up strongly on higher revenues;

competition in the retail industry easing
The consumer sector continued to perform strongly in 3Q14, with of all but one of the companies
that we monitor delivering double digit earnings growth. PGOLD and SM Retail showed noteworthy
improvements in their 3Q14 earnings performance as competition in the retail industry eased. Despite
this, 9M14 profits of EMP, PIP and SM Retail remained weak as their strong 3Q14 performance
was still unable to offset their poor performance during 1H14. Aside from the three, all consumer
companies that we monitor delivered double digit earnings growth during 9M14.
Out of the 10 companies that we monitor, three outperformed expectations while three underperformed
expectations. CNPF and DNL outperformed due to company specific factors while PGOLD
outperformed due to easing competition in the retail sector. On the other hand, EMP performed below
expectations due to weak sales brought about by competition while PIP suffered from contracting
margins. Although there were signs of easing competition in the retail sector, SM Retails strong
3Q14 performance was still unable to offset its poor performance in 1H14, as discussed earlier.

Gaming Sector: Profits increase due to different factors

For the first nine months of 2014, combined net profits of the four gaming companies that we cover
increased to Php3.80 Bil from Php1.94 Bil during the same period last year. Growth was largely
brought about by the higher earnings of BLOOM, RMW, and BEL. However, the three companies
had different drivers of net income growth. BLOOM was able to grow its profits due to the higher
gross gaming revenues. Note that its Solaire casino is currently only in its second year of operations
and is still in the process of maturing. During 9M14, BLOOMs gaming revenues jumped 131.7% to
Php21.5 Bil. On the other hand, RWMs net profit increased largely due to better operating efficiency.
Revenues were lower than expected, falling by 14.1% to Php20.8 Bil, and was responsible for the
companys underperformance. Meanwhile, BELs profits rose as it booked higher interest income on
finance lease accounting. However, the delay in the opening of City of Dreams (CoD) Manila and the
turnover of the Phase 2 building to MCP led to its underperformance.

WEDNESDAY, 26 NOVEMBER 2014

PHILIPPINE MARKET STRATEGY

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PHILIPPINE EQUITY RESEARCH

Appendix 1: 9M14 Earnings Table

In PhpMil
Banks and Financials
BDO
BANCO DE ORO
BPI
BANK OF PHILIPPINE ISLANDS
CHIB
CHINA BANKING CORP
EW
EAST WEST BANKING CORP
MBT
METROPOLITAN BANK & TRUST
PNB
PHILIPPINE NATIONAL BANK
RCB
RIZAL COMMERCIAL BANKING CORP
SECB
SECURITY BANK CORP
UBP
UNION BANK OF THE PHILIPPINES
Commercial and Industrial
ABS
ABS-CBN BROADCASTING CORP
AT
ATLAS CONSOLIDATED MINING
CEB
CEBU AIR
EEI
EEI CORPORATION
GMA7
GMA NETWORK INC
ICT*
INTL CONTAINER TERM SVCS
MWC
MANILA WATER COMPANY
NIKL
NICKEL ASIA CORP
PX
PHILEX MINING CORPORATION
SCC
SEMIRARA MINING
Conglomerates
AEV
ABOITIZ EQUITY VENTURES INC
AC
AYALA CORPORATION
AGI
ALLIANCE GLOBAL
COSCO
COSCO CAPITAL, INC.
DMC
DMCI HOLDINGS INC
FPH
FIRST PHILIPPINE HLDGS
GTCAP
GT CAPITAL HOLDINGS INC
JGS
JG SUMMIT HOLDINGS
MPI
METRO PACIFIC INVESTMENTS
SM
SM INVESTMENTS CORP
Consumer
CIC
CONCEPCION INDUSTRIAL CORP.
CNPF
CENTURY PACIFIC FOODS, INC
DNL
DNL INDUSTRIES, INC
EMP
EMPERADOR, INC
JFC
JOLLIBEE FOODS CORPORATION
PGOLD
PUREGOLD PRICE CLUB INC
PIP
PEPSI-COLA PRODUCTS PHILS INC
RFM
RFM CORP
RRHI
ROBINSONS RETAIL HOLDINGS, INC.
URC**
UNIVERSAL ROBINA CORPORATION
Gaming
BEL
BELLE CORP.
BLOOMBERRY RESORTS CORP
BLOOM
MCP
MELCO CROWN (PHILS) RESORTS
RWM
TRAVELLERS INTERNATIONAL HOTEL
Telecoms
GLO
GLOBE TELECOM INC
TEL
PHILIPPINE LONG DISTANCE TEL
Power
ABOITIZ POWER CORP
AP
EDC
ENERGY DEV CORP
FGEN*
FIRST GEN CORPORATION*
MER
MANILA ELECTRIC COMPANY
Property
ALI
AYALA LAND INC
CPG
CENTURY PROPERTIES GROUP INC
FLI
FILINVEST LAND INC
MEG
MEGAWORLD CORP
RLC**
ROBINSONS LAND
VLL
VISTA LAND & LIFESCAPES
SMPH
SM PRIME HOLDINGS

Net Income
9M13
9M14

% Change

2014 Income Estimate

COL
Consensus

FY14 (% of Full Yr Est) 2015 Income Estimate

COL
Consensus
COL
Consensus

18,194
15,763
3,913
1,737
20,690
4,974
4,728
4,166
7,339

16,753
12,802
3,370
1,646
13,077
3,622
3,009
6,428
5,005

-7.9%
-18.8%
-13.9%
-5.2%
-36.8%
-27.2%
-36.4%
54.3%
-31.8%

23,058
18,132
5,120
2,187
18,636
5,961
6,371
7,134

21,853
18,473
5,125
2,406
16,336
6,046
4,929
6,184
7,323

72.7%
70.6%
65.8%
75.3%
70.2%
60.8%
100.9%
70.2%

76.7%
69.3%
65.8%
68.4%
80.1%
59.9%
61.0%
103.9%
68.4%

26,044
21,194
6,157
2,566
20,655
7,349
7,646
7,798

25,269
21,517
6,004
2,894
18,727
7,478
5,973
7,009
7,840

1,891
2,102
1,990
622
1,488
129
4,293
1,740
1,504
5,367

1,836
1,011
2,333
496
1,001
136
4,549
8,182
1,205
3,910

-2.9%
-51.9%
17.2%
-20.3%
-32.7%
5.4%
6.0%
370.2%
-19.9%
-27.1%

1,528
2,976
1,010
1,206
197
6,719
10,348
1,285
6,853

1,847
2,131
3,242
939
1,138
163
5,822
8,651
1,655
7,868

120.2%
78.4%
49.1%
83.0%
65.3%
67.7%
79.1%
93.8%
78.3%

99.4%
47.4%
72.0%
52.8%
88.0%
83.3%
78.1%
94.6%
72.8%
49.7%

1,812
3,317
1,153
1,943
218
7,809
16,954
1,552
9,593

2,210
3,889
3,823
1,055
1,699
211
6,229
13,291
2,071
9,507

16,431
10,432
11,473
1,052
8,038
3,474
7,688
8,410
5,614
18,600

13,876
12,253
11,400
2,553
7,540
4,738
6,346
15,846
6,462
18,200

-15.5%
17.5%
-0.6%
142.5%
-6.2%
36.4%
-17.5%
88.4%
15.1%
-2.2%

17,054
15,182
3,332
11,263
4,766
9,140
18,725
8,341
29,705

20,183
17,137
16,740
3,533
11,300
3,355
9,868
16,566
8,432
29,073

71.8%
75.1%
76.6%
71.4%
72.9%
84.1%
44.9%
67.3%
61.3%

68.8%
71.5%
68.1%
72.3%
66.7%
141.2%
64.3%
95.7%
76.6%
62.6%

19,595
17,743
3,720
12,935
6,106
12,065
18,502
10,169
32,148

19,816
18,514
4,038
14,174
5,501
12,210
18,260
9,589
33,621

363
1,043
3,174
3,124
2,641
781
524
1,759
8,441

495
1,228
1,293
3,058
3,640
3,007
619
578
2,346
8,553

36.4%
24.0%
-3.7%
16.5%
13.8%
-20.7%
10.3%
33.3%
1.3%

683
1,582
1,639
7,264
5,414
3,971
3,214
11,138

666
1,531
1,786
6,950
5,377
4,109
892
971
3,427
11,578

72.5%
77.6%
78.9%
42.1%
67.2%
75.7%
73.0%
76.8%

74.4%
80.2%
72.4%
44.0%
67.7%
73.2%
69.4%
59.5%
68.4%
73.9%

790
1,898
1,878
8,690
6,345
4,460
4,030
12,829

778
1,786
2,412
7,027
6,326
4,723
1,036
1,100
4,165
13,764

521
(810)
(1,695)
3,577

613
3,248
(4,190)
4,013

17.7%
-501.0%
147.2%
12.2%

1,858
4,990
(2,371)
5,934

1,952
4,371
(3,300)
5,780

33.0%
65.1%
176.7%
67.6%

31.4%
74.3%
127.0%
69.4%

3,645
5,809
757
6,864

3,911
6,392
1,650
8,019

9,526
28,786

11,578
28,561

21.5%
-0.8%

13,028
39,610

13,115
39,068

88.9%
72.1%

88.3%
73.1%

13,960
40,603

13,937
38,764

16,431
5,800
118
13,558

13,411
7,800
163
14,286

-18.4%
34.5%
37.7%
5.4%

15,804
8,365
137
17,570

18,440
7,735
122
19,466

104.0%
69.3%
86.6%
77.2%

72.7%
100.8%
133.4%
73.4%

17,880
11,081
175
20,290

19,711
11,441
181
19,263

8,602
1,586
2,390
6,458
3,738
3,787
12,050

10,789
1,592
2,843
7,187
3,880
4,245
13,500

25.4%
0.4%
18.9%
11.3%
3.8%
12.1%
12.0%

14,012
2,052
4,239
9,593
4,823
6,103
19,182

14,271
2,078
4,340
9,722
4,994
5,730
18,934

77.0%
77.6%
67.1%
74.9%
77.5%
69.6%
70.4%

75.6%
76.6%
65.5%
73.9%
77.7%
74.1%
71.3%

16,227
2,321
4,791
11,062
5,575
6,733
21,590

16,862
2,266
4,878
11,226
6,132
6,591
21,657

*In US$ M il
** Fiscal year ending September
Source: Listed companies, COL estimates, Bloomberg

WEDNESDAY, 26 NOVEMBER 2014

PHILIPPINE MARKET STRATEGY

page 4

PHILIPPINE EQUITY RESEARCH

Appendix 2: Potential Revisions (Up, Down, Unchanged)

9M14 Profits (vs.
Est)

In PhpMil
Banks and Financials
BDO
BANCO DE ORO
BPI
BANK OF PHILIPPINE ISLANDS
CHIB
CHINA BANKING CORP
EW
EAST WEST BANKING CORP
MBT
METROPOLITAN BANK & TRUST
PNB
PHILIPPINE NATIONAL BANK
RCB
RIZAL COMMERCIAL BANKING CORP
SECB
SECURITY BANK CORP
UBP
UNION BANK OF THE PHILIPPINES
Commercial and Industrial
ABS
ABS-CBN BROADCASTING CORP
AT
ATLAS CONSOLIDATED MINING
CEB
CEBU AIR
EEI
EEI CORPORATION
GMA7
GMA NETWORK INC
ICT*
INTL CONTAINER TERM SVCS
MWIDE MEGAWIDE
MWC

MANILA WATER COMPANY

Potential Revisions
Reasons for potential revisions
Revenues Net Income

In line
Below
Below
In line
Below
Below
Below
Above
Below

Unchanged Unchanged
Down
Down
Higher-than-expected operating expenses
Down
Down
Higher-than-expected operating expenses
Unchanged Unchanged
Down
Down
Weaker-than-expected trading gains and fee-based income
Down
Down
Higher-than-expected operating expenses
Up
Up
Better-than-expected trading gains
Down
Down
Weaker-than-expected non-interest income

Above
N/A
In line
Below
Above
Below

Unchanged
Up
Lower-than-expected cost of sales and services
N/A
N/A
Unchanged Unchanged
Unchanged Unchanged
Unchanged
Up
Lower-than-expected production costs
Unchanged
Down

Below

Unchanged Unchanged
Unchanged Unchanged

NIKL

NICKEL ASIA CORP

In line

PX

PHILEX MINING CORPORATION

Above

Down

Down

Below

Down

Down

SCC
SEMIRARA MINING
Conglomerates
AEV
ABOITIZ EQUITY VENTURES INC
AC
AYALA CORPORATION
AGI
ALLIANCE GLOBAL
COSCO COSCO CAPITAL, INC.
DMC
DMCI HOLDINGS INC
FPH
FIRST PHILIPPINE HLDGS
GTCAP GT CAPITAL HOLDINGS INC
JGS
JG SUMMIT HOLDINGS
MPI
METRO PACIFIC INVESTMENTS
SM
SM INVESTMENTS CORP
Consumer
CIC
CONCEPCION INDUSTRIAL CORP.
CNPF
CENTURY PACIFIC FOODS, INC

Net income outperformed only due to one-time gain; operating profits

were weaker-than-expected

Below
Below
Below
Above
Below
Above
In line
Above
Above
Below

Unchanged Unchanged Although 9M lagging, overall performance of subsidiaries is strong

Down
Down
Weak results from Mcdo, RWM, EMP
Unchanged
Up
PGOLD sales growth slightly below expected but margins improving
Down
Down
SCC earnings disappoint
Up
Up
FGEN earnings higher than expected
Up
Up
Strong performance of Toyota and improving outlook
Up
Up
Earnings of subsidiaries better than expected
Up
Up
Earnings of subsidiaries better than expected
Down
Down
Disappointing performance of SM Retail

In line
Above

Above

Unchanged Unchanged
Unchanged
Up
Gross margins better than expected
COAT consolidation and outperformance; strong sales growth of
Up
Up
commodities business
Down
Down
Intense competition
Up
Unchanged Strong sales growth offset by flat margins
Unchanged
Up
Sales growth slightly below expected but margins improving
Non-core items boost net income but operating expenses higher than
Unchanged
Down
expected
Unchanged
Up
Outperformance due to surprisingly strong margins in 3Q

Below
In line
Below
Below

Down
Down
Delays in opening of City of Dreams
Unchanged Unchanged
Down
Down
Delays in opening of City of Dreams
Down
Down
Lower than expected revenue growth

Above
Below

Unchanged
Down

Above

Unchanged Unchanged Earnings beat mainly due to 'other income'

DNL

DNL INDUSTRIES, INC

Above

EMP
JFC
PGOLD
PIP
RFM

EMPERADOR, INC
JOLLIBEE FOODS CORPORATION
PUREGOLD PRICE CLUB INC
PEPSI-COLA PRODUCTS PHILS INC
RFM CORP

Below
In line
Above
Below
In line

RRHI

ROBINSONS RETAIL HOLDINGS, INC.

Below

URC**
UNIVERSAL ROBINA CORPORATION
Gaming
BEL
BELLE CORP.
BLOOM BLOOMBERRY RESORTS CORP
MCP
MELCO CROWN (PHILS) RESORTS
RWM
TRAVELLERS INTERNATIONAL HOTEL
Telecoms
GLO
GLOBE TELECOM INC
TEL
PHILIPPINE LONG DISTANCE TEL
Power
AP
ABOITIZ POWER CORP

Focus should be on arbitration, which would be the major determinant

of earnings going forward

Up
Down

EDC

ENERGY DEV CORP

Above

Up

Up

FGEN*

FIRST GEN CORPORATION*

Above

MER

MANILA ELECTRIC COMPANY

Above

Unchanged Unchanged

Up

Up

Property
ALI
CPG
FLI
MEG
RLC**
VLL
SMPH

AYALA LAND INC

CENTURY PROPERTIES GROUP INC
FILINVEST LAND INC
MEGAWORLD CORP
ROBINSONS LAND
VISTA LAND & LIFESCAPES
SM PRIME HOLDINGS

Above
Inline
Inline
Inline
Inline
Below
Inline

Unchanged
Down
Unchanged
Unchanged
Unchanged
Down
Unchanged

Lower-than-expected depreciation and finance costs

Weakening SMS revenues; above-expected cash operating expenses

Revenues of many plants exceptionally strong, both on volume and

pricing.
EDC earnings higher than expected
Revenues beat mainly due to higher than expected tariff this year, but
with uncertainties going beyond 2015

Up
Higher than expected operating margins
Unchanged Higher than expected gross margins offset weak revenues
Unchanged
Unchanged
Unchanged
Down
Slower revenue growth, higher than expected effective tax rate
Unchanged

*In US$ M il
** Fiscal year ending September

WEDNESDAY, 26 NOVEMBER 2014

PHILIPPINE MARKET STRATEGY

page 5

PHILIPPINE EQUITY RESEARCH

Investment Rating Definitions

BUY

HOLD

SELL

Stocks that have a BUY rating have attractive

fundamentals and valuations, based on
our analysis. We expect the share price
to outperform the market in the next six to
twelve months.

Stocks that have a HOLD rating have either

1.) attractive fundamentals but expensive
valuations; 2.) attractive valuations but
near term earnings outlook might be poor
or vulnerable to numerous risks. Given the
said factors, the share price of the stock may
perform merely inline or underperform the
market in the next six to twelve months.

We dislike both the valuations and

fundamentals of stocks with a SELL rating.
We expect the share price to underperform in
the next six to twelve months.

Important Disclaimers
Securities recommended, offered or sold by COL Financial Group, Inc.are subject to investment risks, including the possible loss of the principal amount
invested. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and it may
be incomplete or condensed. All opinions and estimates constitute the judgment of COLs Equity Research Department as of the date of the report and are
subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a
security. COL Financial ans/or its employees not involved in the preparation of this report may have investments in securities or derivatives of securities of
securities of the companies mentioned in this report, and may trade them in ways different from those discussed in this report.

2401-B East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City, 1605 Philippines
Tel: +632 636-5411

WEDNESDAY, 26 NOVEMBER 2014

Fax: +632 635-4632

PHILIPPINE MARKET STRATEGY

Website: http://www.colfinancial.com

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