Core businesses seen lifting JG Summit growth

JG Summit Holdings Inc. will likely sustain its growth this year and the next on the back of improvements in its core businesses and narrower losses from its petrochemicals unit, Maybank Investment Banking Group said Thursday.

In a report, the investment bank said it expected the Gokongwei Group’s flagship holding firm to deliver a modest income growth of 2.7 percent this year and robust earnings expansion of 34.9 percent in 2025.

The growth will be driven by the holding firm’s core businesses, namely food product company Universal Robina Corp. (URC), property developer Robinsons Land Corp. (RLC) and budget carrier Cebu Air Inc.

The conglomerate’s core income in the first nine months of 2023 more than doubled to P14.9 billion from P6.5 billion in 2022. Cebu Air saw a 78-percent revenue improvement, and URC and RLC posted profit growth of 6.0 percent and 31 percent, respectively.

Petrochemicals subsidiary JG Summit Olefins Corp. (JGSOC), which reported a nine-month net loss of P8.8 billion in 2023, will continue to trim its losses this year, Maybank said.

“The imposition of safeguard duties on polyethylene imports should improve prospects for JGSOC, but given its lack of pricing power, we expect it to continue to incur gross losses in [fiscal years 2023 and 2024],” it added.

Anticipated losses from the olefins business are expected to “keep the group’s net gearing level high,” Maybank said, adding that the petrochemical unit would only generate positive earnings before interest, taxes, depreciation and amortization by 2026.

Meanwhile, the January 1 merger between Ayala-led Bank of the Philippine Islands (BPI) and Gokongwei-owned Robinsons Bank Corp., with BPI as the surviving entity, is also expected to add value to the group.

“We think this asset swap should be [net asset value] positive over the longer term for JG Summit given positive prospects for BPI, which we expect to translate to better stock price performance,” Maybank said.

A weak local currency and elevated costs of raw materials, among other factors, were seen as downside factors for growth this year.

JG Summit shares fell by 65 centavos, or 1.68 percent, to P38.05 each on Thursday amid a 0.1-percent dip in the benchmark Philippine Stock Exchange index.