Company Report

PHILIPPINE EQUITY RESEARCH

Aboitiz Equity Ventures: AEV 1Q11 core net income fell 28.3%,

Earnings Analysis below consensus estimate
11 MAY 2011

SHARE DATA 1Q11 earnings below consensus forecast. AEV’s 4Q10 core earnings declined 28.3% y/y to
Rating N/A Php4.26Bil. This is below the full year consensus estimate of Php22.6Bil. Earnings contribution from
Ticker AEV all major business segments declined during the quarter. (see exhibits 1 & 2)
Price Target (Php) N/A
Current Price 38.20
AP 1Q11 earnings fell below forecasts. AP’s 1Q11 recurring earnings fell 33.8% to Php4.4Bil. 1Q11
Upside (%) N/A
net income was disappointing as it represents 20.1% of COL and 22% of consensus forecast. The main
culprit for the weak results was the sharp decline in average WESM prices, which dropped 66% to
Php2.73/kwh. The plunge in spot prices also negatively affected the output of AP’s coal and oil plants,
as it became unprofitable to sell power to the spot market during off-peak hours. WESM prices were
mainly affected due to the exceptionally cool temperature this year and the decline in power outages
compared to 1Q10.
ABSOLUTE PERFORMANCE (%)
1M 3M YTD
UBP earnings fell on lower trading gains. UBP’s 1Q11 net income fell 17% year-on-year to
AEV -7.95 14.71 2.96
PSEi 0.38 10.77 1.33
Php708Mil, representing only 13.6% of the full-year consensus estimate. The weaker-than-expected
first quarter income was mainly due to lower trading gains from securities and FX trading and
miscellaneous income. Trading gains declined 13% to Php187Mil while FX gains dropped 48% to
Php77Bil. Miscellaneous income also fell 42% to Php131Mil due to extraordinary items booked
during the previous year. Net interest income rose slightly, driven by higher interest earning assets.

MARKET DATA (Php)

Food business 1Q11 earnings decline on lower margins. Pilmico Foods, AEV’s food subsidiary,
Market Cap 51,251.41 Mil
posted a 24% decline in income to Php282Mil. Despite revenues rising by 22% y/y to Php3.6Bil
Outstanding Shares 5,694.60 Mil
52 Wk Range (Php) 16.25-47.00
during the quarter, earnings declined as the rise in commodity prices eroded Pilmico’s margins across
3 Mo Ave Daily T/O 270.35 Mil
all 3 business segments (Flour, Feeds, Swine).

Consensus BUY rating. Consensus rating on AEV is a BUY with a FV estimate of Php40.00/sh.

FORECAST SUMMARY (PhpMil)

Year to Dec. 31 2007 2008 2009 2010
Sales 31,205.4 35,862.2 46,230.0 74,551
% change y/y N/A 14.9 28.9 61.3
EBIT 2,902.3 2,340.4 7,526.8 28,869
% change y/y N/A (19.4) 221.6 283.5
EBIT Margin (%) 9.3 6.5 16.3 38.7
EBITDA 4,726.3 4,071.4 10,202.0 33,522
% change y/y N/A (13.9) 150.6 228.6
EBITDA Margin (%) 15.1 11.4 22.1 45.0
Net Profits 5,378.8 4,092.2 8,653.2 21,865
% change y/y N/A (23.9) 111.5 152.7
NPM (%) 17.2 11.4 18.7 29.3
EPS (Php) 0.9 0.7 1.4 4.20
% change y/y N/A (23.9) 98.9 193.6

RELATIVE VALUE
P/E(X) 40.4 53.2 26.7 9.1
P/BV(X) N/A 1.1 0.9 0.8
RESEARCH CONTACT ROE(%) N/A 8.8 15.8 34.0
George Ching Dividend yield (%) 0.5 1.6 0.7 4.1
george.ching@citiseconline.com *Source: Citiseconline estimates
 11 MAY 2011

Exhibit 1: AEV 1Q11 results summary

in PhpMil 1Q10 1Q11 % Change
Net income 6247 4,605 -26.3
Net Income (core) 5,938 4,258 -28.3
So ur ce: A E V

Exhibit 2: Net income contribution from subsidiaries

in PhpMil 1Q10 1Q11 % Change
AP 5,676 3,901 -31.3
City Savings Bank 26 102 292.3
Union Bank 353 319 -9.6
ATSC -110 0 -100.0
Pilmico 372 282 -24.2
So ur ce: A E V

AEV/Earnings Analysis/ page 2

 11 MAY 2011

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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AEV/Earnings Analysis/ page 3