{"id":325201,"date":"2023-10-05T01:12:34","date_gmt":"2023-10-04T17:12:34","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=325201"},"modified":"2023-10-05T01:12:35","modified_gmt":"2023-10-04T17:12:35","slug":"stock-in-focus-ayala-corp-ac-5-oct-2023-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-ayala-corp-ac-5-oct-2023-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: Ayala Corp. (AC) – 5 Oct 2023 by RCBC Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>AC<\/td><\/tr>
Company Name<\/strong><\/td>Ayala Corporation<\/td><\/tr>
Broker<\/strong><\/td>RCBC Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>5 Oct 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 805.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

With the stock declining 9.4% year-to-date, we believe AC now offers attractive value since (1) its core business units (BPI, ALI, GLO, ACEN) remained intact, (2) its value realization program should unlock the fair value of its non-core assets, and at the same time, improve its ROIC profile over the long-term. <\/p>\n\n\n\n

We have a high-conviction BUY rating on AC with a target price of Php805.00, which offers a total return potential of 29.6%. Our Target Price is based on an estimated net asset value (NAV) of Php1,149.53\/share, and a conglomerate discount of 30%, which is +0.5SD from its 5-year average.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

On track to deliver 27% earnings CAGR<\/h3>\n\n\n\n

AC\u2019s core net income grew 55% year-on-year (y\/y) to Php20.5 billion in the 1st half (1H) 2023. BPI\u2019s earnings contribution rose 24% to Php11.6 billion driven by higher net interest income, fee-based income, and lower provisions. ALI’s earnings contribution climbed 57% to Php5.8 billion driven by growth in property development and commercial leasing.<\/p>\n\n\n\n

ACEN’s earnings doubled to Php3.4 billion on the back of higher generation output. Moving forward, AC is on-track to reach pre-COVID earnings this year. We expect AC\u2019s 2023\/2024 core net income to grow 33%\/21% to Php36.4 billion\/Php43.9 billion (equivalent to 27% earnings CAGR in the next 2 years), sustaining the positive earnings momentum of banking and property units.<\/p>\n\n\n\n

Portfolio rationalization to improve ROIC<\/h3>\n\n\n\n

AC is on track with its Php50.0 billion value realization program, which mainly involves divesting underperforming non-core assets and redeploying the proceeds to acquire NAV-accretive businesses that generate better returns, and\/or to strengthen its core businesses. To date, AC has raised more than Php30.0 billion, which was used to (1) buy-back its own shares, and (2) raise its stake in its real estate business ALI.<\/p>\n\n\n\n

Focus on the long-term NAV expansion story<\/h3>\n\n\n\n

Capitalizing on its market-leading position in the banking, property, and telecommunications industry, we believe that AC would be able to expand its net asset value (NAV) over the long-term. <\/p>\n\n\n\n

We expect long-term NAV growth to be driven by the following: (1) ALI utilizing its 12,000-ha landbank within 5 years and creating value-accretive asset infusions to AREIT, (2) BPI aiming to expand its customer base by over ~5x to 50mn in 2026 to expand the bank\u2019s consumer loan book and improve its ROE profile, (3) GLO\u2019s capex rationalization to improve its free cash flows, (4) ACEN\u2019s RE expansion, and (5) reducing net losses from emerging businesses (i.e. AC Health, AC Logistics, and AC Industrials).<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>