AGI sets P5B stock repurchase program

ALLIANCE Global Group, Inc. (AGI) will be buying back its shares for up to P5 billion in the next two years in a bid to enhance shareholder value amid the company’s aggressive expansion program.

The holding firm of billionaire Andrew L. Tan said in a disclosure on Tuesday that its board of directors has approved the share buyback program, given the positive prospects for AGI.

“Our shares are hugely undervalued. We believe that the share buyback in the long term will create more value for the company,” AGI President Kingson U. Sian during the company’s annual shareholders’ meeting in Eastwood, Quezon City on Tuesday.

The company’s shares were valued at P15.04 apiece on Tuesday, up 28 centavos or 1.9% from the previous trading day. Its market capitalization, meanwhile, stood at around P151 billion.

This year, the company has allocated around P80 billion in capital spending, mainly for the expansion of Megaworld Corp.’s residential, office, and commercial establishments, the development of Resort World Manila’s third phase of expansion, the maintenance capex for Emperador, Inc., and the store rollout of Golden Arches Development Corp.

Megaworld is aiming to hit 2 million square meters in gross leasable space by 2020, from the current 1.1 million sq.m. This will double the property developer’s rental income to P20 billion by 2020, from the P16 billion recorded in 2016. The company is banking on the expansion of Philippine offshore gaming operators ( POGO) in the country, which Mr. Sian said is seen as a subset of business process outsourcing (BPO) firms.

“As far as existing BPO ( business process outsourcing) companies are concerned, they continue to expand, and we’re beneficiary of that expansion. Sixty percent is from expansion, 40% is from new players coming in... POGO came into the picture, that took up the vacuum that was left behind by new players coming in to the Philippines,” Megaworld Senior Vice-President for Business Development and Leasing Jericho P. Go told reporters in a press briefing after the shareholders’ meeting.

Travellers International Hotel Group, Inc., the operator of the country’s first integrated resort and casino Resorts World Manila (RWM), will also be completing the third phase of its expansion program in the first quarter of 2018. International hotel brands Hilton, Sheraton, and Maxims will be added to the new complex in the Bay Area by next year.

Mr. Sian noted the company is fast- tracking the completion of Phase 3 since the company is looking to augment the losses it incurred following the arson attack which left 37 people dead last June. Thirteen RWM employees and 24 guests died due to suffocation after a gunman stormed the casino and set gaming tables on fire before killing himself.

“Syempre may hit dun because of the clientele. That’s why we’re rushing the phase three. That should augment at least what we’ve lost on the second floor,” Mr. Sian said, adding that there’s a chance that Phase 3 may have its soft opening by late December.

The executive said the company lost 100 gaming tables and over 120 electronic gaming machines after the incident. Three months after, Mr. Sian said the company is starting to gain back its foot traffic, with 25,000 to 26,000 visiting the Resorts World Manila complex daily so far this month. Prior to the attack, RWM had an average of 28,000 daily foot traffic.

Meanwhile, Emperador does not expect to exceed its P7.69billion profit in 2016.

Emperador Investor Relations head Kenneth V. Nerecina said recording higher earnings this year would be a challenge given the higher base in 2016. However, he noted the company expects a rebound in earnings in the second half.

“The challenge is beating the second half last year because that’s a high base. Historically the performance of Emperador is always better in the second half. 2016 net income was P7.7 billion, so you can do your own math or analysis... but against the second half of 2016 that might be a different story… Second half last year was P4.4 billion, and first half this year was down. So as I said earlier second half this year will be better than the first half, but beating the second half last year, I guess is the challenge,” he said.

In the first six months of 2017, Emperador saw a 21% drop in net income to P2.4 billion from the same period last year.

For the quick service restaurant segment, AGI said Golden Arches is targeting to open around 40 to 50 new McDonald’s stores this year.

“Definitely 40 to 50, depending on the availability of good location, the other one is the availability of a good partner in the case of a franchise situation. Those are two key ingredients for them, especially when they go outside Metro Manila,” Mr. Sian said.

Mr. Sian noted the long-term goal of reaching 1,000 McDonald’s stores would take “a few more years,” considering the plan is 40 to 50 stores annually.

“But if we can find the right location and a good partner, we can do it faster,” he added.

Golden Arches ended June with a total of 533 stores, against the 494 from the same period a year ago.

For the first half of 2017, AGI reported its net profit attributable to parent fell 8% to P6.7 billion, as revenues were flat at P66.8 billion.