Vista Land in line with expectations, reiterate BUY…

Vista Land and Lifescapes, Inc. registered a net profit of 
P1.06 Bln in 1Q12, an increase of 22% from P873 Mln in 
1Q11. This is in line with our earnings forecast of P4.3 Bln for 
2012. Key drivers of growth were solid revenue growth, 
record reservation sales, and improved margins.

Reiterate BUY on VLL with a 12-month target price of Php4.48/share

Emerging markets hedge funds leading the way…

Based on the report that we have received from Eurakahedge, it seems that hedge funds performance were flat in April. It’s actually a confluence of many developments: lingering European debt issues, soft US economic data and slowing Chinese growth. Negative returns in April affected most regional hedge funds as market sentiment became more risk-averse leading to declines across global markets.

Despite these issues, here’s some of the positive highlights for the month:

• North American hedge funds finished the month with positive returns of 0.08%, beating the S&P 500. Managers with positive returns banked on upbeat corporate earnings and the end of April saw a surge caused by speculation of further stimulus from the US Federal Reserve.
• Emerging market hedge funds were up 0.54% in the month, bucking the trend from other regions and the underlying markets. Similarly, a 0.51% return by the Asia Pacific showed that the larger asset managers in the region were able to manage volatility in the underlying markets. The index has also notched up strong returns by the end of April 2012 with gains of 5.47%.
• Hedge funds attracted US$10.4 billion during the month of April. (not bad despite uncertainties!)
• Assets in North American hedge funds have increased by nearly US$40 billion since the start of the year.
• Relative value and fixed income hedge funds are a bright light in the industry – they have now witnessed five consecutive months of positive returns with gains of 5.91% and 4.56% respectively.
• Launch activity remained strong in 2012 with more than 150 funds launched worldwide as at the end of April 2012.
• Assets in distressed debt hedge funds were back above US$60 billion.

From these news, we can conclude that assets under management have increased. This means that risk taking has definitely improved. This also encourages more start up hedge fund launches. There are certain “style” funds that outperform, notably relative value funds.

Good news overall..

Technicals: Phisix chart is showing some weaknesses.

By Jan Michael Tan (jmt@unicapital-inc.com)

Moving to more than a month ahead to May, the daily charts are still showing the same bearish signs as those in March and the weekly charts have started to show some signs of weakness – particularly a possible bearish divergence in the RSI weekly and a reversing (but not yet crossing) MACD weekly.

If the market would correct, these are the levels to watch, according to Fibonacci retracements:
23.6% – 5030 A bounce here would be very bullish
38.2% – 4900 A bounce here is healthy
50% – 4800 Probably a bottom, a break here would be neutral to bearish
61.8% – 4630 A bounce here is still possible but a continuation in trend in slim

The next move would probably be a big drop for correction, or a majorly huge rally to offset the weakness in RSI and MACD.

PHILIPPINE MARKET STRATEGY: 1Q earnings off to a strong start ahead of full year expectations

By: JMC

• We have compiled the initial corporate earnings report for the first quarter. Overall companies have reported better than expected earnings. Out of the 45 companies in our coverage, 21 companies have already reported their first quarter results. So far, 10 companies exceeded consensus estimates, 6 came in line with expectations, while only 5 fell short of forecast. In terms of year-on-year growth, 16 companies recorded higher earnings in 1Q12, while only 6 posted lower income. Given these numbers, we may expect more favorable results as earnings season moves into full swing.

• We note that most of the companies who have shown positive earnings surprises belong to the financial, power, and real-estate industries. Banks’ earnings were mostly driven by hefty trading gains and the expansion of their loan portfolio. Growth of power companies primarily came from the increase of bilateral contracts and higher selling rates, while the upbeat performance of property companies were supported by strong recognition of sales from previously launched projects. The property companies also registered record-high reservation sales, which dispels concerns about property bubble.

• On the other hand, telecom companies GLO and TEL reported lower earnings in 1Q12. The cut-throat competition in the industry prompted the network providers to hike their expenses and subsidies. Nevertheless, their 1Q12 net profits are still in line with the market’s expectations.

• Mining companies are so far the ones who are showing surprise declines in profits. The drop in earnings of mining companies was attributed to lower metal prices, which offset the increase in production.

• Though it is still too early to make conclusions out of the earnings we have seen, we believe that the strong start of earnings season will result into possible re-rating of certain issues.

USI Daily 04.23.2012

Global Markets

Earnings drove stocks higher; crude rose on positive developments in Europe. Stocks rallied Friday, as investors continued to receive encouraging earnings reports. McDonald’s, General Electric, and Microsoft announced figures that beat analysts’ expectations. The Dow rose 65.16 points, or 0.50 percent, to 13,029.26. Meanwhile, U.S. crude futures rose for the first time in three days on Friday, driven by positive economic news from Germany, which eased worries about the euro zone debt crisis. Crude for May delivery expired and settled at $103.05, gaining 78 cents or 0.76 percent.

Philippine Markets

Vista Land raises Php4.5 billion from institutional investors. Vista Land has raised Php4.5 billion from the sale of unsecured domestic corporate notes to institutional investors. The company originally targeted to issue Php3 billion but raised it to Php4.5 billion due to strong demand of these notes. It plans to use the proceeds to partially finance some of its existing and for general corporate purposes. The demand of these notes indicates investor confidence on the company as it has aggressively expanded through the years. It has set aside Php15 billion for its capital spending this year to beef up its property developments on its main flagship projects. Source: Philstar

Meralco sales volume likely up 10% in Q1. Manila Electric Co., said that it is likely to post a 10% increase in sales volume for the first quarter amid improved economic prospects for the year. It also reflects low base figures from the previous year’s and robust real estate and industrial activity. It noted that while the volumes are up, its average distribution rates are lower which may offset the increase in volume. The company is set to announce its first quarter results this week. Source: Bworldonline

Ayala Corp. debt papers receive Prs AAA rating. Philippine Ratings Services Corp. has rated Ayala Corp. proposed Php10 billion bonds Prs Aaa as the current bond issues set to mature in 2017 and 2021. The ratings reflect the company’s sustainable and strong recurring earnings, as well as cash flows from key subsidiaries and associates. These ratings come amid Ayala’s recent business diversification moves in the power and infrastructure sector. Source: Bworldonline

Economic Highlights

BSP wants to issue own bonds. The Bangko Sentral ng Pilipinas has reiterated the importance of being allowed to issue its own bonds bonds to allow it more room to mop up excess liquidity and manage inflation. If the central bank will be allowed to sell its own bonds it would make the bank more effective in controlling inflation. It has pending proposal in Congress to amend its charter. One of the proposed amendments is for the central bank to be allowed to issue its own bonds.

Philippine Market Outlook

• The Philippine market is expected to be trade higher this week but heightened volatility should be expected. The renewed concerns on the European debt crisis and the strength of the US recovery keep investors on edge. Last week, the index rose to a new all-time high at 5,219 mainly driven by improved investor sentiment. It finished 1.16% higher week on week.

• This week the US markets are gearing for a week full of corporate earnings and economic data. Europe will also weigh on the minds of investors. This week, US companies are scheduled to report corporate earnings. Investors will be waiting to see whether earnings will continue to top forecasts. Of the 121 companies in the S&P 500 that have reported, more than 80% have beat expectations, according to Thomson Reuters. During a typical quarter, only about 60% of companies beat estimates.

• Investors will also looking to the press conference call of Federal Reserve Chairman Ben Bernanke. The central bank is expected to maintain key rates but any signs of easing monetary policy could give a reason for a market rally.