The Philippine Stock Market - July 21, 2009

Dow Jones Industrial Average (DJIA)Summary
Index Value: 8,848.15
Trade Time: July 20
Change: Up 104.21 (+1.19%)
Prev Close: 8,743.94
Open: 8,746.05
Day's Range: 8,745.90 - 8,854.80

The DJIA is at its highest level since January 7, 2009. Some analysts turn bullish on the 2nd half of the year due to earnings prospects and an expected recovery in emerging markets. Some have projected the S&P to be at the 1060-1100 levels by year-end (it is currently at around 950).

Deficit balloons to P30 bn in June; pushes YTD hole at P153 bn

The Philippine government announced a budget deficit of P30.2 bn in June 2009.
The deficit is a reversal from P769 mn surplus recorded in June last year.
Pump-priming efforts have widened the deficit YTD to P153.4 bn, compared to comparable figure of P18 bn in last year.
YTD deficit has remained below the government's P155.1 bn target for 1H09.
However, it already accounts for 61% of the full year target of P250 bn
While the Finance Secretary has pronounced a deficit to GDP ceiling of 3%, accelerated govt. spending could lead to surpassing targets
Higher deficit in the 2H09 is more likely given the election spending for next year.
Secretary Teves is expecting to plug the deficit by selling P40 bn worth of government assets this September.
These include selling stakes in energy firm PNOC-EC (P10 to P11 bn) and FTI property in Taguig (P10 to P11 bn)

(From SB Equites Research)


The local equites market opens higher because of the triple digit advance in WallStreet overnight. The Philippine Stock Exchange Index (PSEi) however; sheds most of its early gains and settles below the the 2600 level.

PSEi previous close - 2587.91 (July 20)

time----------change-----------PSEi
9:31---------up 10.05--------2597.96
9:32------------15.98--------2603.89

The immediate resistance at the 2600 level is tested.

9:36---------up 17.36
9:38------------18.54
9:42------------21.53--------2609.44 (Day's high)

9:48---------up 16.70
9:50------------14.97
9:55------------13.41
10:13-----------13.10
10:16-----------12.34--------2600.25
10:17-----------11.26--------2599.17

The PSEi goes below the 2600 level once again.

10:22--------up 10.92
10:25------------9.91
10:28------------8.53
10:29------------7.80
10:33------------7.51
10:35------------6.50
10:38------------2.87
10:40------------2.06

The market has completely reversed its direction.

10:43-------down 1.17
10:45------------3.27
10:49------------4.00
10:50------------4.74
10:54------------5.95
10:56------------7.06
10:58------------7.46--------2580.45 (Day's low)

11:06-------down 4.03
11:11------------1.32
11:15---------up 0.01
11:17------------1.35

The market goes in and out of positive territory.

11:19--------up 2.65
11:22-----------3.21
11:25-----------0.90
11:25-----down 0.24
11:28--------up 1.45
11:34-----------3.20
11:37-----down 0.22
11:39--------up 1.43

The market manages to hang on to slight gains until the end of the trading session.

11:41--------up 0.80
11:45-----------5.00
11:46-----------5.51
11:48-----------9.84
11:52----------10.98---------2598.89
11:57-----------5.11
11:59-----------9.05
12:01-----------5.60---------2593.51 (+0.22%)
Market Close.

Value turnover: PhP 3.688 bn
Cross transactions: PhP 1.139 bn

Advancers 58
Decliners 47
Unchanged 43

Sectoral Indices.
M-O +1.80%
Industrial +1.28%
Financial +0.27%
Holdings +0.23%
Property -0.27%
Services -0.62%

The Day's Top Gainers:
EURO: PhP 1.98; +32.00%
TOL: PhP 8.00; +14.29%
NI: PhP 8.90; +12.66%

The Day's Biggest Decliners:
PRIM: PhP 0.70; -17.65%
ATRK: PhP 2.40; -14.29%
MHC: PhP 0.32; -11.11%

At mid-day:
Asian equities markets were mostly higher.
The Philippine Peso was at PhP 48.080 vs US$ 1.00.


CLOSING PRICES OF SELECT STOCKS (as of July 21, 2009):
ABA: PhP 0.97
ALI: PhP 8.90
DGTL: PhP 1.32
EDC: PhP 4.15
EIBA: PHP 0.26
FLI: PhP 0.80
GEO: PhP 0.72
GOB: PhP 0.17
JOH: PhP 1.40
LOTO: PhP 10.25****
MEG: PhP 1.10
MPI: PhP 5.60
MUSX: PhP 0.115
PAX: PhP 2.55
PX: PhP 7.90
SPH: PhP 2.80
SUN: PhP 0.47
TA: PhP 0.99
UW: PhP 0.105
V: PhP 1.06
WEB: PhP 0.055
****Today is the ex-date of a PhP 0.25 cash dividend for LOTO.


CORPORATE NEWS:

SMC to acquire tollway project (Maintain BUY rating; TP of P72/ share)

San Miguel Corp. disclosed it is signing a deal that involves acquisition of significant stake in tollway project
The group reached a non-binding agreement to invest in Private Infrastructure Development Corp.
PIDC is a private consortium that will build the 88-kilometer Tarlac-Pangasinan-La Union tollway project.
Proposed investment deal still subject to government approval
COMMENT: SMC continues to push for steady revenue stream projects to ensure future earnings growth
SMC also in discussions with EXTELCOM owners, Roberto Ongpin and UK-based Ashmore Investment Management
The company confirmed due diligence negotiations with the telco firm that might come next to Liberty purchase.
SMC's major acquisition/ investments so far include: Petron, Meralco, and Liberty Telecom.
We maintain our rating for SMC: BUY with a TP of P72/ share.


Metro Pacific Investment Corp. sells shares for P2.565 and P3.50 per share
(MPI not rated)

Metro Pacific Inv. Corp. (MPI) it agreed to sell 791.1 million shares, equivalent to a 7.75% stake, to Singapore-based LAWL Pte Ltd.
Agreed price to sell to LAWL was for PHP2.03 billion ($42.3 million), or PHP2.565 a share.
COMMENT: Essentially, this agreement sends a negative signal that MPI shares are only worth P2.565 as the recent sale suggests a 53% discount to MPI's latest closing price of P5.50/ share.

On a bigger picture, MPI also disclosed that it issued 3.45 bn common sHares at P3.50 to the following:

Company ------------------# of MPIC ------Subscription ---------% of ---------Eco. ownership
---------------------------------shares------------price-----------Outstanding

Metro Pacific Holdings---- 2.707 bn------P9.477 bn -------14.51%------ 72.95% (dn frm 90%)

PLDT Ben Trust Fund ----742.5 mn ------P2.599 bn -------3.98% -------19.8%

------------------------Total 3.450 bn -------P12.076 bn

COMMENT: This is part of the proposed "relaunch of shares" by MPI thru a public offering or private placement within the next 48 months.
The agreement comes with a guarantee that MPI's price upon re-launch within 90 days will not be below the acqusition price of BTF and MPH
We note the 36% discount in price of MPI shares issued to MPH and BTF relative to current close of P5.50
The discounted value is well compensated for by MPI's acquisition of Meralco shares that comes with capital gains based on MER's closing value..
MPI will acquire 144.385 mn shares of Meralco at "only" P126/ share (a discount from the P180/ sh closing yesterday) from sellers: BTF/New Gallant Fund plus Crogan Limted
The price of P126 was based on 60-day VWAP of Meralco (not surprisingly one fluc away from recent MER low of P127 now acting as a support)
Taking into consideration the capital gain from the MER investment (+P7.07 bn) and the discount given for the new MPI shares (-P7.2 bn), we cite only a negligible difference of negative P171 mn in value deflating MPI (-P0.01/ share). This is based on respective closing prices prior to disclosure.

MERALCO borrowing P2.5 bn ($52 mn)

Meralco looking to borrow $52 mn in 3Q09
Proceeds will be used to refinance maturing debt in January
Option is to raise thu bond offer or thru bank loan
Second quarter sales indications may have declined qoq
However, officials still optimistic that volume sales will post flat growth for the full year
1Q09 sales fell 1.4% to 6,068 GWH due to 10% decline in industrial volume demand
However, 2Q09 profits will likely jump higher as the utility firm reflects the rate increase implemeneted last May

(From SB Equities Research)