051107: Globe performed better than PLDT--Morgan Stanley

May 11, 2007
Updated 11:30:20 (Mla time)
Rocel Felix
Xinhua Financial News Service

MANILA, Philippines--Morgan Stanley said it prefers Globe Telecom Inc over Philippine Long Distance Telephone Co/(PLDT), which posted stronger first-quarter earnings.

"We retain our attractive view on the Philippine telecom industry and our preference for Globe, which clearly performed better than PLDT," Morgan Stanley said in a note.

It noted Globe's growing revenue, EBITDA and EBIT which went up by 8 percent, 19 percent and 67 percent, respectively. In contrast, PLDT's revenue for the first quarter declined by 4 percent, while EBITDA was up 1 percent and EBIT, up 24 percent.

Globe Telecom Inc said its net profit in the first quarter fell 25 percent year-on-year to P2.6 billion, after booking P1.2 billion in non-recurring costs related to the redemption of $300 million bonds ahead of maturity.

However, core profit reached a new high of P3.7 billion, with consolidated revenue rising 10 percent to 15.6 billion.

Globe closed the first quarter with a mobile phone subscriber base of 16.9 million, with net additions of 1.3 million during the three-month period.

PLDT, the country's biggest telecommunications firm, posted flat profits for the first quarter as higher expenses and income tax provisions offset improved revenues.

PLDT reported net profit of P8.575 billion for the three months to March compared to 8.581 billion in the same period last year.

But its core profit, which strips out the impact of foreign exchange and derivative gains, was 11 percent higher at P8.4 billion, against core earnings of 7.6 billion in the same period last year.

Morgan Stanley raised its earnings and target price for both Globe and PLDT on the back of stronger performance on their wireless businesses, although it noted that PLDT's fixed line business "continues to disappoint."

It said PLDT's fixed line revenue declined 3 percent year-on-year and 11 percent quarter-on-quarter as fixed line margins are under pressure due to relatively fixed costs and the stronger peso.

The new target price for these stocks, which it did not specify, suggested a 13-percent upside for Globe and an 8-percent upside for PLDT.

"There was robust mobile growth as the total net additions of 2.6 million was 50 percent of our full-year target of 5.3 million. The sequential growth for both PLDT and Globe was a surprise as, historically, the first-quarter revenue are typically low after a seasonally strong fourth quarter. The outlook for the second quarter remains robust," Morgan Stanley said.

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