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FRIDAY, 23 NOVEMBER 2012Company Reports: JFC (HOLD): Reducing estimates on weaker international business, slower than expectedimprovement in margins EDC (HOLD): Raising estimates as Bacman rehabilitation nears completion PNB (BUY): Earnings surge on strong trading gains, ahead of forecasts EW (HOLD): 9M12 earnings grow 12% to Php1.36Bil, on track to meet estimates CHIB (HOLD): Earnings trail estimates on lower margins and higher expenses MWC (HOLD): Downgrade to HOLD due to valuations ABS (N/A): 3Q12 net profits climb 11.7% to Php628Mil AT (HOLD): Net profits decline 30.8% to Php424Mil; lower than consensus estimates GMA7 (N/A): Net profit jumps 9.1% to Php573Mil SMC (N/A): 3Q12 profits rise to Php5.12Bil Property Sector: Residential business mixed while rental business remained strong Power Sector: Power firms deliver mostly in line results NIKL (HOLD): Reducing FV estimate to Php16.40/sh on higher project cost BPI (BUY): BPI and PNB confirm talks of 2.34All3,459.02All 480.57Holding FirmsHoldingFirms 14Mining &Mining& OilOil 5-1.390.80-0.0741.4628.850.050.52 icJG SummitHldgsCoBDOIncBank Unibank,of Phil IslandsAyala CorpAboitizPower CorpAlliance FoodsGlobal IncJollibeeCorpDMCIHldgsHldgsIncSMPrimePrice W/WW/WPrice265.00 8.825.4137.0063.85 8.672.7492.80486.6034.55 8.181.7716.00105.80 6.101.7355.7513.60 PriceCompanyPrice W/WW/WPhilex13.10Philex MiningMiningCorpCorp21.40 -2.96-7.56Lepanto Cons 'B'1.05-2.78Ayala Corporation429.80-5.54Lepanto Cons 'A'0.99-1.98Lepanto Cons 'B'1.33-4.32Robinsons Land Corp18.44-1.39Universal Robina Corp59.45-4.111,135.00Globe Telecom Inc-1.30INDEXINDEXLOSERSLOSERSMEGMegaworld Corporation2.15-3.15Company News: RLC: Bullish on Ortigas Center, unveils Sapphire Bloc (click here) TEL, GLO: NTC orders telcos to refund excess charges on SMS (click here) APM: Lucio Co to invest up to Php60Bil in assets (click here) MER: Meralco earmarks Php11Bil capex for 2013 (click here) MPI: MPI and Citra agrees to talks over common segment of connector road by nyAyalaCorporationBDO UnibankIncPhilAyalaLongCorpDistance CoAyalaLand IncMetrobankSM Prime HldgsMetrobankSM InvestmentsDMCIHldgs, 209,708,708218,860,526195,728,932(click here)HEAD OF RESEARCHApril Lynn Tan, CFAEconomy: BSP registers net loss of Php68.3Bil in 3Q12 (click here) BIR hits October collection target of Php86.1Bil (click here) Sin taxes approved in the Senate (click here)RESEARCH TEAMGeorge ChingRichard Lañeda, CFACharles William AngEdmund LeeKervin Sisayan

PHILIPPINE EQUITY RESEARCHEVENTS day, 23 November 2012COMPANYChemical Industry PhilippinesPhilodrill CorporationManila Jockey Club IncABS-CBN CorporationSan Miguel Pure Foods Co IncTranspacific Broadband Group Int'l IncABS-CBN CorporationPhilippine Realty & Holdings CorpZeus Holdings IncAraneta Properties IncPuregold Price Club IncATN HoldingsPhilippine Racing ClubEEI CorporationDFNN IncEVENTSEx-date Php2.39 Cash DividendEx-date Php0.0003 Cash DividendEx-date Php0.08 Cash DividendAnnual Shareholdings MeetingEx-date Php1.20 Cash DividendAnnual Shareholdings MeetingAnnual Shareholdings MeetingAnnual Shareholdings MeetingAnnual Shareholdings MeetingAnnual Shareholdings MeetingAnnual Shareholdings MeetingAnnual Shareholdings MeetingEx-date Php0.05 Cash DividendEx-date Php0.025 Cash DividendAnnual Shareholdings Meetingpage 2

PHILIPPINE EQUITY RESEARCHJollibee Foods CorporationReducing estimates on weaker international business, slower thanexpected improvement in marginsNet profits climb 18.9% to Php882Mil. Jollibee reported net profits of Php882Mil in 3Q12, 18.9% higherthan the previous year. This brought 9M12 net profits to Php2.47Bil, representing only 65.5% and 69.6%of COL and consensus forecast. Revenues in the period rose by 13.8% to Php17.3Bil, largely driven byhigher sales volume in all regions. Margins improved significantly in the 3Q12 due to a decrease in inputcosts and improvements in cost management in its Philippine operations.Please see COL WEBSITEfor full reportDomestic sales grow faster than expected. Philippine sales rose by 11.4% in 3Q12, faster than ourforecast of 6.0%. This was largely driven by an increase in store rollout, higher same store sales growth,royalty, and franchise fees. Total number of stores grew by 4.9% to 2,040 restaurants with Jollibee andMang Inasal representing bulk of the growth. Same store sales in the period likely exceeded our estimateof 2.0% for FY12.International sales registering slower growth. On the other hand, Jollibee’s international sales grew by23.5% in the 3Q12, slower than the 31.0% and 31.1% posted in the first and second quarter of FY12. 9M12sales grew 28.2%, slightly lower than our forecast of 29.8% for FY12. Although growth remained robust,our major concern is that growth was largely driven by the roll out of new stores. The total number of newstores for JFC’s international business rose by 26.7% to 541 stores as of the end-3Q12. Same-store salesgrowth was flat based on our estimates.Lower than expected improvement in margins. Gross margins in 3Q12 rose to 17.9%, its highestlevel since 4Q10. The said level is also much higher than the 1H12 average of 16.4%. Meanwhile,operating margin increased to 6.2%, up by 1.2 percentage points. This is larger than the 0.5 percentagepoint improvement in gross margin. According to JFC, gross margin improved as prices of raw materialsdeclined. Moreover, JFC benefited from economies of scale due to the rapid growth of sales. JFC alsobenefited from better cost management in its Philippine operations. Overall operating expenses rose byjust 7.6% to Php2.03Bil.Friday, 23 November 2012GEORGE CHINGgeorge.ching@colfinancial.comEDMUND LEEedmund.lee@colfinancial.compage 3

PHILIPPINE EQUITY RESEARCHEDC, FGEN, FPHRaising estimates as Bacman rehabilitation nears completionThe rehabilitation of the Bacman is nearly complete. With the trial run for the plants scheduled forDecember, there is a strong likelihood that the 110MW Bacman unit 1 and 2 can begin commercialoperations in January 2013. Due to the earlier than expected start of commercial operations and theincrease in capacity factor of Bacman, we increased our FY13E earnings forecast for EDC by 11.9%to Php10.1Bil. This led to a 6.8% increase in our FV estimate to Php7.4/sh. Our new FV estimatefor FGEN increased by 4.2% to Php24.90/sh, while our new FV estimate for FPH increased by 3.7%to Php114.7/sh.Please see COL WEBSITEfor full reportRaising forecasts on earlier than expected completion of Bacman rehabilitation and highercapacity factor assumption. The rehabilitation of the Bacman is nearly complete. The generatorrotors of Bacman unit 1 and 2 that were sent to U.K. for repair have already arrived, while the repairof the turbines is expected to be completed by November. With the trial run for the plants scheduledfor December, there is a strong likelihood that the 110MW Bacman unit 1 and 2 can begin commercialoperations in January 2013. This is earlier than our previous forecast that the plants would only begincommercial operations by 2Q13.We are also increasing our assumption on the long term capacity factor for the Bacman plants.Management indicated that the rehabilitation of the rotors practically restored the condition of theBacman unit 1 and 2 plants back to its original condition. As such, we are raising our capacity factorforecast from 75% to 80%. Due to the earlier than expected start of commercial operations and theincrease in capacity factor of Bacman, we increased our FY13E earnings forecast for EDC by 11.9%to Php10.1Bil. This led to a 6.8% increase in our FV estimate to Php7.4/sh.Given that FGEN owns 49% of EDC, our FY13E earnings estimate for FGEN increased by 10.1%to US 127Mil following EDC’s earnings upgrade. Meanwhile, our earnings estimate for FPH, whichindirectly owns 32.4% of EDC, increased by 6.0%. Our new FV estimate for FGEN increased by4.2% to Php24.90/sh, while our new FV estimate for FPH increased by 3.7% to Php114.7/sh.Friday, 23 November 2012GEORGE CHINGgeorge.ching@colfinancial.compage 4

PHILIPPINE EQUITY RESEARCHPhilippine National BankEarnings surge on strong trading gains, ahead of forecastsProfits rise on strong trading gains, above estimates. PNB reported Php1.7Bil in profits in 3Q12, up67% from the restated net income in 3Q11. This brought PNB’s 9M12 total earnings to Php3.45Bil, 77%higher year-on-year and representing 91% and 75% of COL and consensus full-year forecast respectively.Earnings were ahead of our estimates as trading gains surged during the quarter. Meanwhile, net interestincome fell on lower margins. The 9M12 figure translates to an annualized ROE of 14.0%. (see exhibit 1)Please see COL WEBSITEfor full reportTrading gains drive income. PNB’s non-interest income rose 94% to Php3.23Bil as strong trading gainsmore than made up for the slight decline in fee-based income. Trading gains was at Php1.48Bil during thequarter, almost 8 times as high as the Php185Mil gain in 3Q11. This offset the 2.5% decline in fee-basedincome to Php461Mil. According to the bank, trading gains surged as PNB sold a portion of its availablefor-sale (AFS) investments, prices of which have significantly increased with the decline in interest rates.Recall that PNB also booked Php1.76Bil in trading income during the first quarter as it also unloaded someits AFS securities. For 9M12, non-interest income is up 66% year-on-year to Php8.65Bil, already hitting ourfull-year target of Php8.8Bil.Net interest income declines on lower margins. Meanwhile, PNB’s net interest income fell 7% toPhp1.74Bil in 3Q12, bringing its 9M12 total to Php5.43Bil, at par with last year’s level. The decline was dueto lower net interest margin, which fell by 10 basis points to 2.6% in 3Q12 based on our calculations. PNB’sflat asset base failed to offset the narrower margins. As of end September, PNB’s interest earning assetbase increased by only 3% year-on-year, with its loan portfolio remaining flat at Php130Bil. The 9M12 totalrepresents 74% of our 2012 forecast.Write-down of unamortized SPV losses to improve profitability. PNB’s ROE of 14.0% for 9M12benefited from the full write-down of the remaining unamortized SPV losses as permitted by the centralbank last July. Recall that PNB’s net income has been dragged down by amortizations of deferred chargesamounting to Php475Mil in 1H12 and Php860Mil in 2011. While this reduced its equity base by Php4.4Bil(the remaining unamortized amount), the write-off should result in an improved profitability going forward.Following the write-off, PNB’s tier 1 and total capital adequacy ratio as of end September dropped to 11%(based on our estimates) and 18% respectively.Reiterating BUY rating with FV estimate of Php87. We reiterate our BUY rating on PNB with an FVestimate of Php87.00/sh based on 1.4X 2013E P/BV. We like PNB as a turnaround play given its effortsto improve profitability coupled with revenue and cost synergies that are expected to result following itsupcoming merger with Allied Bank. In addition, valuation are attractive. At its current price of Php71.95/sh,PNB is trading at only 1.2X 2013E P/BV, well below the industry average of 1.8X.Friday, 23 November 2012APRIL LYNN TAN, CFAapril.tan@colfinancial.comCHARLES WILLIAM ANGcharles.ang@colfinancial.compage 5