WEALTH SECURITIES INC Equity Research Market/Strategy

25 July 2014

PSEi Recomposition EMP may replace PX

EMP may replace PX in next index rebalancing. Emperador Inc (EMP) may be replacing Philex Mining Corp (PX) in the PSEi when the index gets rebalanced in September. This is based on our computations that take into account the parameters set in the PSE policy for inclusion in the PSEI. Higher market cap, liquidity qualifies EMP in the PSEi. EMP has been in the top quartile in terms of median daily trade per month in 9 out of the 12 months covered by the ongoing review. Also, EMP’s latest public free float data of 12.45% or more than the 12% hurdle. After satisfying these parameters, EMP – being a non-index stock – needs to be in the top 25 in terms of full market capitalization based on VWAP. EMP will be ranked 20

th as per our computation, making it eligible for PSEi inclusion.

PX does not make the grade on lower market cap ranking. While we believe PX has met the other parameters, it is in danger of getting excluded from the PSEi as it ranked 40

th in terms of VWAP-based full market capitalization. The PSEi rules require that

current index members should be in the top 35 to remain in the index. Higher weights for SMPH, PCOR, JFC; lower for JGS, AGI: Due to changes in their free float levels and based on 24 Jul prices, our computations show that SM Prime (SMPH) Petron Corp (PCOR) and Jollibee Foods Corp (JFC) may see their index weights rise, while JGS and AGI may have lower index weights (see Fig 2).

Analyst : Jason Lee

T: 634.5038 local 8165 E: jason.lee@wealthsec.com

Analyst : Ricardo Puig

T: 634.5038 local 8128 E: rpuig@wealthsec.com

Fig 1. Rank based on full market capitalization

Stock VWAP-based full

market capitalization (Pb)

Rank Stock VWAP-based full

market capitalization (Pb)

Rank Stock VWAP-based full

market capitalization (Pb)

Rank

TEL* 607.82 1 GLO* 218.24 15 EDC* 107.51 29

SM* 602.46 2 ICT* 205.98 16 PNB 94.97 30

SMPH* 446.86 3 LTG* 187.93 17 RLC* 87.95 31

ALI* 407.10 4 SMC* 178.54 18 COSCO 72.89 32

BPI* 353.34 5 JFC* 177.64 19 SECB 68.57 33

AC* 351.81 6 EMP** 171.69 20 RCB 60.36 34

MER* 316.32 7 DMC* 165.31 21 FGEN* 58.79 35

JGS* 308.11 8 GTCAP* 140.17 22 NIKL 54.51 36

AEV* 295.30 9 MPI* 124.95 23 BEL 54.27 37

BDO* 290.54 10 MEG* 124.00 24 MCP 53.26 38

URC* 282.50 11 PCOR* 120.15 25 MWC 52.91 39

AGI* 276.22 12 PGOLD 116.02 26 PX*** 48.99 40

AP* 265.88 13 SCC* 115.49 27 VLL 47.31 41

MBT* 224.34 14 BLOOM* 111.44 28 PF 39.44 42 * Current component of PSEi ** Eligible for inclusion in the PSEi

*** Eligible for exclusion from the PSEi

Source: Wealth Research estimate, Phil Stock Exchange

25 Jul 2014 PSEi recomposition

Wealth Securities, Inc. 2

Fig 2. Potential changes index weighting (based on 24 Jul prices)

Stock

Current index

weight (%)

Estimated new index weight (%)

TEL 11.29% 11.28%

SM 9.47% 9.47%

ALI 7.57% 7.57%

BPI 5.99% 5.98%

URC 5.29% 5.29%

AC 5.12% 5.12%

BDO 4.80% 4.79%

AEV 4.65% 4.65%

JGS 4.61% 4.35%

MBT 4.02% 4.02%

ICT 3.94% 3.94%

SMPH 3.92% 4.06%

AGI 3.85% 3.75%

JFC 2.65% 2.71%

GTCAP 2.08% 2.08%

EDC 1.98% 1.98%

MPI 1.97% 1.97%

DMC 1.93% 1.93%

AP 1.87% 1.87%

GLO 1.72% 1.72%

MEG 1.61% 1.61%

LTG 1.59% 1.59%

MER 1.27% 1.27%

RLC 1.26% 1.26%

BLOOM 1.17% 1.17%

SCC 1.17% 1.17%

SMC 0.98% 0.98%

FGEN 0.85% 0.85%

PX*** 0.71% 0.00%

PCOR 0.68% 0.88%

EMP** 0.00% 0.72% ** Eligible for inclusion in the PSEi *** Eligible for exclusion from the PSEi

Source: Wealth Research estimate, Phil Stock Exchange

Fig 3. % Free Float of Top 43 listed firms (As of 30 Jun 2014)

FINANCIALS INDUSTRIAL

BDO 42.76% AP 19.54%

BPI 47.02% EDC 49.76%

MBT 48.71% EMP 12.45%

PNB 23.37% FGEN 32.50%

RCB 33.36% FPH 47.49%

SECB 73.31% JFC 41.52%

MER 13.17%

SERVICES MWC 58.52%

BLOOM 28.12% PCOR 21.78%

GLO 22.21% PF 14.60%

ICT 51.45% URC 43.52%

MCP 31.17%

PGOLD 33.00% HOLDINGS

TEL 53.85% AC 38.19%

AEV 43.47%

PROPERTY AGI 40.14%

ALI 50.22% COSCO 27.00%

BEL 42.96% DMC 27.68%

MEG 33.46% GTCAP 30.35%

RLC 38.59% JGS 33.76%

SMPH 26.82% LTG 25.64%

VLL 46.34% MPI 44.08%

SM 43.83%

MINING/OIL SMC 14.82%

PX 33.06%

SCC 27.43%

NIKL 23.81%

Source: Wealth Research estimate, Phil Stock Exchange

Wealth Research Analysts Ricardo P. Puig Research Head Strategy, Conglomerates, Property, Telecommunications rpuig@wealthsec.com Tel: (+632) 634-5038 ext 8128 ND Fernandez Banking nd.fernandez@wealthsec.com Tel: (+632) 634-5038 ext 8158 Jason Lee Utilities jason.lee@wealthsec.com Tel: (+632) 634-5038 ext 8165 Russell Ong Consumer russel.ong@wealthsec.com Tel: (+632) 634-5038 ext 8153 Matthew S. Tan Gaming, Services matthew.sytan@wealthsec.com Tel: (+632) 634-5038 ext 8168 Sarah Maria D. Uy Construction, Media sarah.uy@wealthsec.com Tel: (+632) 634-5038 ext 8160

Rating System Wealth Securities Research follows the following rating definition

Buy We expect total return of more than 12% in the next 12 months

Hold We expect total return of -12% to 12% in the next 12 months

Sell We expect total return of less than -12% in the next 12 months

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