Alliance Global expects all business units to contribute to growth in 2015

The holding firm of billionaire Andrew Tan expects faster growth next year anchored on expansion across its business units.

"The growth momentum is there. We expect growth for next year obviously," Alliance Global Group Inc (AGI) president Kingson Sian said on the sidelines of Emperador Inc's special stockholders meeting on Monday.

AGI's net income attributable to equity holders was flat at P11.4 billion in the first nine months of the year due to reduced ownership in Emperador and Travellers International Hotel Group Inc.

Property arm Megaworld Corp will "continue to expand on all fronts," launching more projects fuelled by the country's high-growth trajectory and the recovery in the United States, Sian said.

Megaworld maintained an upbeat outlook on the sector even after the Bangko Sentral ng Pilipinas imposed stricter control on lending to real estate.

"Most of our buyers, majority is still funded out of equity. [It may affect] those that need more financing. Based on our financing plan, by the time we turn over [our projects], buyers would have paid 40-50 percent so pasok ka na sa value," Sian said.

Liquor maker Emperador will introduce new products and capitalize on synergies with Scotch whisky maker Whyte & Mackay for its expansion into new markets.

"With the acquisition, we need to be able to leverage off each other's network. Whyte & Mackay is expanding into new markets, same with Emperador, and also introducing new products to the market," Sian said.

A joint venture with Genting of Malaysia, Travellers International will continue expanding Resorts World Manila with the Marriott Grand Ballroom expected to be completed next year. The new wing of the Marriott Hotel will be unveiled in 2016, followed by the completion of the third phase expansion in 2017 and the opening of Bayshore City Resorts World in 2018.

Golden Arches Development Corp, the master franchisee of McDonald's in the Philippines, is on track to open its 500th store next year. McDonald's already has 430 stores in the Philippines.

During the special meeting, Emperador shareholders approved the issuance to Arran Investment Private Limited of up to P22 billion worth of common shares and equity linked securities convertible to common shares. Arran Investment is an affiliate of GIC, Singapore's sovereign wealth fund.

- Interaksyon

MEGAWORLD CORPROATION (MEG): Offers to acquire AGI’s stake in GERI

MEG to acquire GERI stake from AGI. MEG has agreed to purchase the 49.20% stake of Alliance Global Inc. (AGI) in Global-Estate Resorts (GERI) for a total purchase price of Php10.43 Bil or Php1.93 per share. After the acquisition, MEG will own 74.96% of GERI and will initiate a mandatory tender offer for the remaining GERI shares held by minority shareholders at Php1.93 per share.

Financing not a problem. MEG will pay for the transaction in cash as it has Php31.75 Bil in cash and cash equivalents as of end FY13. MEG may temporarily have to borrow around Php7 Bil but this should not be a problem for the company. MEG has expressed plans to sell its 8.99% stake in RWM which is valued at Php13.82 Bil based on the current market price of RWM. The sale of this would put MEG back in net cash position.

Consolidation complete.The acquisition will complete the consolidation of all real estate businesses of AGI under MEG, enabling MEG to capitalize on growth opportunities of the property market. We have no changes in our fair value estimate for MEG at this point but we believe this will be NAV accretive to MEG as the company is in a better position to unlock the value of GERI’s landbank through future developments.

Reiterate BUY on MEG. We reiterate our BUY rating on MEG with a fair value estimate of Php5.48.

- Col Financial

Emperador board approves maiden debt sale to help finance doubling of profit in 2-3 years

Emperador Inc aims to double earnings in the next two to three years as it plans to tap the market to finance expansion.

"The expansion is in line with Emperador’s strategy of diversifying and strengthening its liquor product portfolio as well as its premiumization strategy in the liquor industry," the liquor arm of Andrew Tan-owned Alliance Global Group Inc.

Emperador's profit climbed 17.4 percent to P5.8 billion last year from P5 billion in 2012, bucking the impact of higher excise taxes to remain as the world’s largest selling brandy brand.

To strengthen its capital base and fund its expansion, the company’s board of directors cleared the appointment of global investment banks to advise the firm as it undertakes its maiden debt offering.

Emperador plans to raise an amount equivalent to as much as 70 percent of its stockholders' equity even after it closed last year with P24 billion in cash.

Based on its stockholders' equity of P30.89 billion at end-2013, the leading brandy maker may raise as much as P21.62 billion from its first debt issuance.

Last year, the company embarked on a five-year plan to double sales volume and corner a third of the world market in five years. It is in talks to acquire Diageo’s Whyte and Mackay spirits business but an agreement has yet to be reached.

So far, Emperador has invested P5.8 billion in the most technologically advanced vineyards, distilleries and bodegas in Spain.

This year, the liquor maker is spending P4 billion to boost its production capacity in the Philippines. Besides flagship Emperador, the company also manufactures the Generoso and Emperador Light brandies as well as a line of flavored alcoholic beverages called The Bar.

Emperador sold 33 million cases last year to remain the world's largest selling brandy brand and the largest liquor company in the Philippines. Emperador Brandy comprises seven out of 10 liquor bottles sold in Manila, the company said.

- Interaksyon

Alliance Global Inc: Gaming business drags FY13 net income lower

FY13 Core income drops on weak gaming. AGI reported a net income of Php17.22 Bil for FY13. However, if we exclude one-time gains which amount to around Php5.74 Bil, core net incomewas only Php11.48 Bil, underperforming our estimates. The main reason for the disappointingcore income of AGI was the dismal performance of RWM whose net income dropped 59% due to a very low hold rate in 2H13.

AGI booked Php5.56 Bil in one-time gains. Much of AGI’s reported income growth was due to non-recurring profits. AGI booked a Php2.9 Bil gain from the sale of a 12% stake in Emeperador. It also booked a Php2.34 Bil foreign currency gain. It also recognized a Php763.8 Mil gain from MEG’s acquisition of a real estate company. After netting out EMP’s Php212.2 Mil fair value loss on financial instruments and minority interests, we estimate that total one-off gains amounted to Php5.56 Bil.

RWM reports loss in 4Q13.RWM reported a loss of Php835 Mil in 4Q13 from an income of Php3.17 Bil a year earlier. Lower revenues and higher expenses during the quarter led to the loss. For the full year 2013, net income dropped 59.3% to Php2.74 Bil. For the full year, EBITDA margin dropped to 21.8% from 31.2% in FY12. This was a result of increased expenses from operations, but we believe a large part was also due to the lower win rate of the VIP segment. VIP revenues were up just 10.3% but drop volume grew 27.3%. In the VIP segment, higher volume drop results to higher commissions paid to junket operators. Thus, a lower win rate had a big impact on its operating margins.

Forecasts and FV estimates under review. In light of the listing of two of AGI’s subsidiaries RWM and EMP, we are reviewing our FV estimate for AGI. We will come out with our new FV estimate on AGI soon as we have already initiated coverage on both RMW and EMP.

- COL Financial