PLDT's buy rating maintained--Citigroup

INQ7 MONEY - BREAKING NEWS

August 09, 2006
Updated 11:22:56 (Mla time)
Cecille Yap
Xinhua Financial News Service

CITIGROUP said it has kept its buy rating on Philippine Long Distance Telephone Co (PLDT), looking past the year-on-year decline in the firm's second-quarter net profit to focus on its potential for further growth.

"We continue to view PLDT as an attractive capital management play in the next 12 months, and [in the] longer term as a growth play," Citibank analysts Karen Ang and Anan Ramachandran said in a note to clients.

The telecoms firm reported that its second-quarter net profit fell to 6.73 billion pesos from 7.30 billion the year earlier due to increased depreciation costs and foreign exchange losses, although core earnings rose.

First-half net income fell to 15.31 billion pesos from 16.52 billion in the same period last year.

Core profit -- which strips out the impact of foreign exchange gains or losses and derivative transactions --- rose to 7.64 billion pesos in the second quarter from 7.19 billion a year earlier. In the first half, it grew 11 percent year-on-year to 15.21 billion pesos.

PLDT is counting on its data and call center businesses to give its earnings a lift since revenue growth from its mobile phone business has started to taper off, officials said at a results briefing Tuesday.

Citigroup analysts said earnings contributions from PLDT's data and BPO businesses can no longer be ignored. They accounted for a combined 13 percent of PLDT's revenues in the second quarter, up from 10 percent a year ago and 7 percent in the same period in 2004. The contribution from these new businesses should further improve with the recent acquisition of BPO firm SPI Technologies, which PLDT said would raise call center revenues to 100 million dollars annually.

Citigroup expects PLDT to post core net profit this year of 32.6 billion pesos, slightly higher than PLDT management's guidance of 32 billion pesos. Core net profit last year stood at around 29 billion pesos.

At 10:50 am, PLDT was down 70 pesos or 3.37 percent at 2,010 pesos.

(1 dollar = 51.43 pesos)

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