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The Bellwether Volume 3 No. 2 - February 28, 2015

Dear all,

Releasing the 2nd issue of The Bellwether Volume 3, as published by FMIC's Research Department. This is a monthly publication on market action and outlook.


The following are the highlights of the issue:

Corporate Earnings: Property and Consumer Sectors Uplift Initial Results


We believe that a double-digit earnings growth for 2015 remains attainable. We estimate that a 13-16% earnings growth will be due to strong consumer purchasing power, firm macroeconomic fundamentals, and increased spending ahead of the 2016 elections.


Curve Steepened amid Short Duration Strategy

While domestic fundamentals support yields at low levels, traders will remain defensive amid volatility at the global front and time table of Fed rate hike. Unless there will be dovish statements this coming Fed meeting (Mar. 19), the bearish US treasury market will continue to price in firm US economic recovery (2015E GDP growth @ 3.1-3.2%) and this will offset possible appetite for safer assets due to risks coming from the Euro area. With only a few months left towards the said timeline, local traders will be cautious in taking position despite local fundamentals pointing to lower yields. The BSP revised its 2015 inflation forecast from 3% (Dec meeting) to 2.3%.


Ayala Land, Inc. (ALI):

2020-40 Plan: PHP40bn Earnings by 2020
ALI aims for PHP40bn in earnings by 2020. This would require earnings to grow 20% annually from PHP11.7bn in 2013. ALI has a strong head start as 2014 earnings grew 26% to PHP14.8bn behind strong topline performance and improved costs.


Manila Water Company, Inc. (MWC):

Earnings flat amid delay in arbitration
MWC said that the deliberation is not yet completed and the panel still needs to hold one more meeting. Should it win the arbitration process (+Php3/cu.m. based on the alternative business plan), we project MWC's topline and net income to rise by Php1.35bn and Php470mn (full-year impact), respectively. If it loses (-Php7.24/cu.m.), projected impact to revenue and income are Php3.25bn and Php1.12bn (full-year impact), respectively.


Integrated Microelectronics, Inc. (IMI): Income surged from lackluster years

The overall semiconductor industry is seen to be flat for the next years as the previous years' growth was caused by lower base from 2009. Automotive and Communications are seen to grow higher than the total semiconductor market according to World Semiconductor Trade Statistics, sectors that IMI will be focusing on moving forward. This will drive IMI's USD1bn revenue target for 2015.