Security forces went on full alert in the southern Philippines on Sunday, police said, after military intelligence reported sightings of Islamist militants in the region after the detention of a top al Qaeda-linked leader.
Last week, a team of soldiers and police officers arrested Khair Mundos, an expert bomb-maker and the "spiritual leader" of the Abu Sayyaf faction, which rose to notoriety early last decade by kidnapping foreigners.
Mundos is wanted by the United States, which put a $500,000 bounty up for his arrest.
"Information received with high reliability, revealed a possible terrorist threat to the peace and security of Region 11, particularly in Davao City," Chief Superintendent Reuben Sindac, national police spokesman, said in a statement.
"All police forces in Mindanao have already been alerted to beef up security operations against possible infiltration of suspected members of said reported threat groups."
President Benigno Aquino called the Davao City mayor to relay the possible threat.
Local officials held a meeting on Saturday night with security officials to assess protection at shopping malls, parks and transport terminals.
Roadblocks were set up around Davao City. Patrols were also stepped up in General Santos, Cagayan de Oro, Kidapawan and Koronadal.
"We are preparing for possible retaliatory attacks from Islamist militants to avenge the arrest of Mundos," an army intelligence officer told Reuters, adding the presence of Islamist rebels was reported to them in Davao City a couple days ago.
Abdul Usman Basit, brother-in-law of Khair Mundos, a member of the militant group's special operations unit, was seen in the city. He trained under Malaysian bomb-maker and Jemaah Islamiah leader Zulkifli bin Hir or Marwan, also on the U.S. terrorist list.
Marwan has a $5 million bounty from the U.S. State Department for his arrest while Basit Usman has a $1 million bounty. Both were earlier reported killed in air strikes but survived with some injuries.
"Based on our information, they were planning to detonate car bombs in Davao City" said a senior military intelligence official, adding the improvised bombs were being assembled in the militants' lairs deep in the marshlands of Mindanao.
The army intelligence official said the militants were also targeting Iligan and Cagayan de Oro cities.
The Philippines and the country's largest rebel group Moro Islamic Liberation Front (MILF) signed a peace agreement in March, ending nearly five decades of conflict that has killed more than 120,000 people, displaced 2 million and stunted growth in the resource-rich south of the mainly Catholic state.
However, a small faction of Islamists, called Bangsamoro Islamic Freedom Fighters (BIFF), rejected the pact and continue to fight for a separate and independent Islamic state. Marwan is working closely with this group.