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P H I L I P P I N E E Q U I T Y R E S E A R

DMCI Holdings: Brownfeld enhances uture growth potentialCompany Update

RESEARCH CONTACT

Paul Je rey Lupaul.lu@citiseconline.com

Semirara to put up 600MW plant. DMCI will be an indirect play on the tight power demand supplysituation in Luzon given plans o its 59% owned Semirara Mining to build a 600 MW coal- red plant. The brown eld plant, which is expected to cost US$800 Mil, is scheduled or completion n FY13 andwill increase the power generating capacity o Semirara by 214.7% to 1,070MW.

Although the brown eld project is still undergoing easibility studies, we believe there is a stronglikelihood that the project will push through. There is an expected power shortage in FY11. Theexpected power shortage would ensure the high utilization rate o the plant and attractive sellingprice. Nevertheless, Semirara plans to enter into a strategic partnership with Meralco to reducemerchant risk. It is also in talks with Marubeni, which it plans to tap as a source o low cost unding

or the project.Based on the assumption that the new plant will operated at an average capacity o 85%, andthat average selling price would be Php4.80/KWh, DMCIs 2013 pro ts would grow by Php1.6Bil or11.8%, due to the new plant. (see exhibit 1)

Raising FV estimate to Php33/sh and reiterating BUY. We are increasing our FV estimate by26.4% rom Php26.10/sh to Php33.00/sh. The increase in our FV estimate was largely due to the30.0% increase in our NAV estimate or Semriara. We also rolled over our orecast to end FY11.

We reiterate our BUY rating on DMC given its strong earnings growth potential. The companycontinues to climb the value chain by capitalizing on its core competency o construction andentering into businesses with attractive earnings growth prospects. DMCIs valuation is alsoattractive. At its current price o Php27.80/sh, the stock is trading at only 7.3X FY11 P/E. This iswell below the 14.0X average FY11 P/E o the market and the 13.0X average FY11 P/E o local

conglomerates. Although DMCIs P/E is in line with its historical average o 7.5X, we believe a re-rating is warranted. Earnings are expected to grow by a CAGR o 30.5% until FY13, signi cantlyhigher than its historical average earnings growth o 12.9%. (see exhibit 2)

Company Repor

30 SEPTEMBER 2010

SHARE DATA

Rating BUYTicker DMC

Price Target (Php) 33.00

Current Price 27.50

Upside (%) 20.00

ABSOLUTE PERFORMANCE (%)

1M 3M YTD

DMC 28.81 54.93 183.51

PSEi 14.97 21.57 34.31

FORECAST SUMMARY Year to Dec. 31 2008 2009 2010 2011 2012Sales 21,158 29,711 48,219 49,962 53,234% change y/y 49.3 40.4 62.3 3.6 6.6 EBIT 2,255 3,850 7,718 10,511 11,584% change y/y 15.8 70.7 100.4 36.2 10.2 EBIT Margin (%) 10.7 13.0 16.0 21.0 21.8

EBITDA 3,822 5,343 10,378 13,429 14,651% change y/y -0.8 39.8 94.2 29.4 9.1EBITDA Margin (%) 18.1 18.0 21.5 26.9 27.5 Net Profits 1,688 4,683 7,469 10,041 11,597% change y/y -25.8 177.4 59.5 34.4 15.5 NPM (%) 8.0 15.8 15.5 20.1 21.8 EPS (cents) 0.64 1.76 2.81 3.78 4.37% change y/y -31.9 175.0 59.8 34.4 15.5

RELATIVE VALUEP/E(X) 43.0 15.6 9.8 7.3 6.3P/BV(X) 4.4 3.6 2.7 2.1 1.6ROE(%) 9.1 20.0 24.2 23.9 21.1Dividend yield(%) 0.4 0.7 1.8 1.8 1.8*Source: CitisecOnline estimates

MARKET DATA (Php )

Market Cap 73,026.09 Mil

Outstanding Shares 2,655.49 Mil

52 Wk Range (Php) 8.50 - 30.00

3 Mo Ave Daily T/O 157.71 Mil

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DMC/Company Update/ page 2

Exhibit 1: Calaca Expansion Key AssumptionsFY13

Effective Capacity 600MWEstimated Cost US$800MilOwnership 50%Average Utilization 85%Contracted Price Php4.80/KWhSource: COL estimates

Exhibit 2: Sum Of The Parts ValuationSubsidi ary/ Investme nt Inter est Tota l Val ue Effe ctive Va lue NAV/s hMaynilad 42% 86,940 36,515 13.75Semirara 59% 69,977 41,286 15.55Construction 100% 16,991 16,991 6.40DMCI Homes 100% 12,663 12,663 4.77

18 6, 570 1 07, 45 5Net Debt (4,449) (1.68)Total NAV 103,006 38.79Holding Company Discount (15,560) (5.86)Discounted NAV 87,445 32.93Source: COL estimates

Please see the Important Disclosures Section and Ratings Key at the end of this report.

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DMC/Company Update/ page 3

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INVESTMENT RATING DEFINITIONS

TOP PICK DEFINITIONA stock that is included in our Top Pick list has to meet the ollowing criteria: 1.) It must belong to a sector with neutral to positive outlook; 2.) It musthave double digit earnings growth or the current and the succeeding scal year; 3.) Its share price appreciation potential must be above 15% as o thedate it was included in the list; and 4.) It must have an upward intermediate term trend.

IMPORTANT DISCLAIMERSSecurities recommended, ofered or sold by CitisecOnline are subject to investment risks, including the possible loss o the principal amount invested.Although in ormation has been obtained rom and is based upon sources we believe to be reliable, we do not guarantee its accuracy and it may beincomplete or condensed. All opinions and estimates constitute the judgment o CitisecOnlines Equity Research Department as o the date o the reportand are subject to change without notice. This report is or in ormational purposes only and is not intended as an ofer or solicitation or the purchase orsale o a security. CitisecOnline and/or its employees not involved in the preparation o this report may have investments in securities or derivatives o securities o companies mentioned in this report, and may trade them in ways diferent rom those discussed in this report.

HOLD SELLBUY

Over the next six to twelvemonths, we expect the shareprice move within a range of

+/- 15%.

Over the next six to twelvemonths, we expect the share

price to decline by morethan 15%.

Over the next six to twelvemonths, we expect the shareprice to increase by 15% or

more.