Company Report

PHILIPPINE EQUITY RESEARCH

Aboitiz Equity Ventures: 3Q10 core net income rises 116.7%, 9M10 results

Earnings Analysis above consensus estimate
18 NOVEMBER 2010

SHARE DATA Results ahead of consensus. AEV’s 3Q10 core earnings rose 116.7% y/y to Php5.03Bil. 9M10 net
Rating N/A income rose 208% to 16.4Bil, ahead of full year consensus estimate of Php20.8Bil. Earnings growth
Ticker AEV was driven by income contribution growth across all business segments: Power (+166.3%), banking
Price Target (Php) N/A (+97.3%), food (7.5%) except for transport (-379.2%)
Current Price 35.50
Upside (%) N/A AP 3Q10 earnings slightly ahead of forecasts. Aboitiz Power’s 3Q10 core net income rose 144%
to Php5.1Bil. 9M10 results represent 80.5% and 89% of COL and consensus forecasts, respectively.
Earnings were slightly higher than COL forecast primarily due to the strong performance of the
distribution business. Despite a seasonally weak 3Q10 for the coal and oil plants and lower WESM
prices during the period, EBITDA contribution from the power generation business still met our
expectations due to the surge in earnings of the hydro plants. EBITDA from power distribution was
better than expected. AP’s distribution business enjoyed a strong 3Q10 as sales volume growth
ABSOLUTE PERFORMANCE (%) remained strong and sustained a 9% growth for 9M10.
1M 3M YTD
AEV 14.52 61.36 294.44 Trading gains drive better-than-expected earnings for UBP. Net income rose 70% during the third
PSEi -3.49 16.19 33.30 quarter, largely driven by a 134% increase in trading gains. AEV’s share in UBP’s earnings rose by a
higher 97.3% as it increased its stake in UBP. However, UBP’s net interest income fell 1% to Php1.62Bil
as lower margins more than offset an increase in earning assets. On a year-on-year basis, net interest
margin fell 10 basis points to 3.2% while earning assets rose 7% to Php206Bil.

Transport business net loss widens. The transport group recorded a Php328Mil net loss in the
quarter from Php67Mil net loss during the same period last year. ATSC’s net loss widened due to lower
MARKET DATA (Php)
operating capacity as many of its Super Ferry vessels are on maintenance. Margins also narrowed as
Market Cap 51,251.41 Mil
fuel cost rose 35% higher y/y.
Outstanding Shares 5,694.60 Mil
52 Wk Range (Php) 8.60 - 36.40
Volume expansion boost food business income. Pilmico Foods, AEV’s food subsidiary, posted a 7%
3 Mo Ave Daily T/O 65.24 Mil increase in income contribution to Php374Mil. After posting double digit earnings growth in 1H10,
net profit declined 25% q/q as the rise in commodity prices finally eroded Pilmico’s margins across all
3 business segments (Flour, Feeds, Swine).

Consensus BUY rating. Consensus rating on AEV is a BUY with a FV estimate of Php36.50/sh.

FORECAST SUMMARY (PhpMil)

Year to Dec. 31 2007 2008 2009
Sales 31,205.4 35,862.2 46,230.0
% change y/y N/A 14.9 28.9
EBIT 2,902.3 2,340.4 7,526.8
% change y/y N/A (19.4) 221.6
EBIT Margin (%) 9.3 6.5 16.3
EBITDA 4,726.3 4,071.4 10,202.0
% change y/y N/A (13.9) 150.6
EBITDA Margin (%) 15.1 11.4 22.1
Net Profits 5,378.8 4,092.2 8,653.2
% change y/y N/A (23.9) 111.5
NPM (%) 17.2 11.4 18.7
EPS (Php) 0.9 0.7 4.3
% change y/y N/A (23.9) 7.0

RELATIVE VALUE
P/E(X) 37.6 49.4 8.2
P/BV(X) N/A 1.1 0.9
RESEARCH CONTACT
ROE(%) N/A 8.8 15.8
George Ching
Dividend yield (%) 0.6 1.7 0.7
george.ching@citiseconline.com
*Source: Citiseconline estimates
 18 NOVEMBER 2010

Exhibit 1: AEV3Q10 results summary

in PhpMil 3Q09 3Q10 % Change 9M10
Net income 2435 5,558 128.3 16,839
Net Income (core) 2,321 5,029 116.7 16,430
Source: AEV

Exhibit 2: Net income contribution from subsidiaries

in PhpMil 3Q09 3Q10 % Change 9M10
AP 1,671 4,450 166.3 14,164
City Savings Bank 26 49 88.5 110
Union Bank 473 933 97.3 1,836
ATSC -53 -254 379.2 -374
Pilmico 348 374 7.5 1,241
Source: AEV

TDY/Earnings Analysis/ page 2

 18 NOVEMBER 2010

INVESTMENT RATING DEFINITIONS

BUY HOLD SELL

Over the next six to twelve Over the next six to twelve Over the next six to twelve
months, we expect the share months, we expect the share months, we expect the share
price to increase by 15% or price move within a range of price to decline by more
more. +/- 15%. than 15%.

TOP PICK DEFINITION

A stock that is included in our “Top Pick” list has to meet the following criteria: 1.) It must belong to a sector with neutral to positive outlook; 2.) It must
have double digit earnings growth for the current and the succeeding fiscal year; 3.) Its share price appreciation potential must be above 15% as of the
date it was included in the list; and 4.) It must have an upward intermediate term trend.

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TDY/Earnings Analysis/ page 3