Big business is crying all the way to the bank as growth risks rise
The country’s top conglomerates are crying all the way to the bank, reporting record profits even while the economy is being buffeted by geopolitical headwinds, trade warmongering, and you-know-who continues to suffer from foot-in-mouth disease.
The first-semester financial results are trickling in, incidentally coinciding with the halfway mark of the Duterte administration, and the results are, well, you be the judge.
Take the country’s economic royals, the Zobels of Ayala Corp. The country’s oldest conglomerate reported that its net income for the first six months of 2019 expanded “two-fold” to P37.8 billion.
Its power subsidiary, AC Energy, saw its profit jump 11 times – yes, 11 effing times – to P23.2 billion from P2.1 billion in the same period last year.
“We are pleased with the rapid growth of AC Energy, its growing contribution to our overall profitability, and the regular value realization exercises to deliver investment returns to Ayala,” said Ayala president Fernando Zobel de Ayala.
Compared to AC Energy’s money-spinning machine, Ayala’s traditional cash generators Globe Telecom (21 percent profit rise) and Bank of Philippine Islands (25 percent profit jump) now look like laggards.
BPI’s P13.7 billion net income, incidentally, already factored in the P3.5 billion the country’s oldest bank had to book as loss provision for the Hanjin bankruptcy.
The comparison even becomes more pointed when compared to BDO of the late taipan and frenemy Henry Sy. The Sy bank reported that its first-half net income ka-chinged by nearly 54 percent to P20.14 billion, even without those higher ATM charges kicking in.
Port developer Enrique Razon Jr., who has the most global footprint of the country’s big boys, reported that profit for his ICTSI conglomerate jumped 42 percent to $128.5 million even as the global economy was being roiled by the China-US trade war.
Meanwhile, the most-manufacturing based conglomerate, JG Summit, reported that its net income rose 79 percent to P17.6 billion.
Its budget carrier Cebu Pacific profit jumped to P7.3 billion, “more than 2x of last year’s profits,” a proof that Filipinos would put up with cramped seats just to save a few bucks. The good tidings apparently is broad-based. Luxury retail chain SSI Group of the Tantocos reported that its net income rose 22 percent for the first half of 2019, “buoyed by same store sales growth and gross profit margins and controlled increases in operating expenses.”
On the lower end of the spectrum, 7-Eleven operator Philippine Seven reported that net income for the first half jumped an even better 47 percent to P1.2 billion, pre-IFRS (international financial reporting standards) impact on leases.
Meanwhile, the youngest self-made taipan, Injap Sia, continues to ride the wave of the real estate boom, with his DoubleDragon Properties’ first-half profit jumping by nearly 75 percent to P2.2 billion.
Sia seems unafraid that the POGO boom can overnight – knock on wood – turn into a bust.
“The POGO exposure (of DoubleDragon) is only about 12 percent of 2019 total leasable space,” Sia told Arra Francia of Businessworld, adding that DoubleDragon requires mainly Chinese gaming tenants to pay 12 months rental security deposits up front, on top of post-dated checks covering the entire lease term.
“The only downside if the POGO tenants are replaced by BPO and corporate tenants is that, in that case the company expects to no longer get the very high 29 percent yield on cost, but may revert to the normal yield of 14 percent, which is anyway still more than double the company’s cost of fund which now stands at 6.2 percent,” Sia said.
That is probably why the brown taipan, Manuel Villar Jr., accentuated the non-POGO reliance of his Vista Land property empire, pointing out that offshore gaming tenants only account for two percent of its leasing portfolio.
Vista Land reported an 11 percent growth in net income for the first semester of 2019 to P5.8 billion, which means the former senate president could easily count on 10 billion reasons, nearly twice who voted for him in 2010, to be happy this Christmas. Good news: Delta to keep flying to Manila
Delta Airlines has clarified that it will continue to fly to Manila via Seoul even after it shuts down its ManilaTokyo service in late March.
Delta issued the clarification amid earlier news reports, including in this space, that the US carrier was discontinuing its Manila-Narita and Singapore-Narita flights by next year amid a reallocation of Delta slots to Tokyo Haneda airport.
“Effective March 2020, the carrier will suspend its NRTMNL service and launch a new daily ICN-MNL service operated by Delta,” Delta said in a statement. “Serving Manila through Seoul will offer our customers superior connectivity via our industry-leading trans-Pacific hub in Seoul with our JV partner Korean Air.”
According to the grapevine, Delta will offer an early morning flight to Seoul, similar to the current ManilaTokyo schedule, in addition to the daily Korean Air flight to Seoul that leaves Manila past noon.
From Seoul, US-bound Delta passengers can then transfer to any of the four trans-Pacific flights to Seattle, Detroit, Minneapolis, and Atlanta, also on Delta-operated flights.
“Delta started breaking apart the Narita-based hub (that it inherited from Northwest) in 2016 because it lacked a partner carrier in Japan and saw rising demand for flights between the US and other places in Asia,” the Star Tribune of Minneapolis reported last week.
Delta gradually reshaped its trans-Pacific routes with more non-stops from US cities to South Korea and China, ending service to Bangkok and Hong Kong, while channeling Southeast Asian-bound passengers to connect in Seoul with partner Korean Air.
E-mail: moneygoround.manila@yahoo.com