Portfolio investment

An Analysis of the 100,000-peso stocks

Kana Lou Cassandra Besana BS Accountancy V May 11, 2018

MY PORTFOLIO INVESTMENT:
An Overview

Choosing a portfolio investment was something new for me. Though I did have an
experience with investing in stocks, what I’ve learned is not sufficient enough in order for me to
choose the right kind of stocks to be included in my portfolio.

Nevertheless, one major reason that I did consider in selecting the stocks for my portfolio
was to pick those blue chips company since I know that I am more of a risk-averse person. These
companies include the Ayala Land Inc. (ALI), Bank of the Philippine Islands (BPI), Globe
Telecommunications, Inc. (GLO), Petron Corporation (PCOR), and Universal Robina Corporation
(URC). They also present stable financial statements and passive income in the long-run.
Moreover, I preferred these kind of companies because of my primary goal why I started investing
in the stock market – that is, to have long-term returns in the future.

Aside from the established stable earning power that these companies provide to its
investors, they possess major competitive advantage that makes it difficult for other new firms to
unseat their market shares in their respective industry. Qualitative factors such as the company’s
business model, management team and competitive advantage should also be considered since
these might also affect the financial performance of the firm.

To have a closer look on why I chose the previously mentioned companies to be included
in my portfolio investment, I made an analysis of the performance of each company that I selected.

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AYALA LAND, INC. (ALI)

Organized in 1988, Ayala Land Inc. has been considered as one of the country’s top real
estate conglomerate. It is primarily involved in the planning and development of large scale,
integrated estates as well as in the sale of residential lots and buildings, commercial and office
buildings and industrial lots, leasing of commercial and office spaces, and the development,
management and operation of hotels and resorts. Basically, it has six major business segments
namely: Shopping Centers, Residential Developments, Corporate Businesses, Hotels and Resorts,
Construction and Property Management. It also includes investment activities and sale of non-
core assets as part of its other segment and has more than 50 subsidiaries across its various
businesses. Its main competitors are SM Development Corp,. Megaworld, Filinvest Land and DMCI
Homes.

ALI’s mission is that of “Enhancing Land and Enriching Lives, for More People” will be best
realized through efforts of attaining its vision which is to enhance their standing and reputation as
the Philippines’ leading real estate developer, and to be a strong partner in nation building. In
order to further improve its capability and returns, Ayala promoted a four-pillar strategy which
focuses on its growth, margin improvement, capital efficiency and organizational development.
This strategy had a major impact on their core competency of developing integrated, mixed-use
and masterplanned communities and expand our coverage in key growth centers around the
country. In line with this, Ayala has established over 30 growth centers which strengthens its
presence across the country. Furthermore, in 2017, Ayala has generated a total net income of
P25.31 billion which represents a solid growth of 21% on its earnings in the same year. The
resurgence of property sales and strong growth of its leasing business had driven up its Real Estate
revenues resulting to a P142.30 billion in consolidate revenues which is 14% higher than in 2016.

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 The graph above shows the trend of Ayala’s earnings throughout the years. As you can
see, there is a significant decrease in its operating profit from 2016 to 2017 which might have
caused an effect on its dividend rate.

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 This 2018, ALI proposes to launch two industrial parks through Prime Orion Philippines,
Inc. (POPI), its logistics and industrial arm in order to take advantage and capitalize the growing
manufacturing and logistics sector. In addition, it also sets to issue P10 billion worth of 10-year
fixed-rate bonds so that it can partly finance some of its mixed-use developments.

Aside from its financial performance, ALI also emphasizes the importance of a flexible and
empowered organizational structure. Thus in order to combat the challenges in its organization,
it aims to develop areas in management such as risk management, leadership and talent
development, and the enhancement of decision and backroom support systems. Its current
President, CEO and Executive Director is Bernard O. Dy.

In totality, ALI firmly believes on enhancing the sustainability of its company through
conscious effort on its economic, environmental and social dimensions which it has been
promoting for the past years and remained as one of its key competitive advantage.

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bank of the Philippine islands (bpi )

The Bank of the Philippine Islands (BPI) is

recognized as the country’s most technological
bank operating in the Commercial bank sector.
With its long banking history and tradition, BPI
is striving to deliver the highest standards of
convenience banking to its customers through
the ingenuity of technology and creative management. The range of its products and services
would comprise deposits, deposit substitutes, loans, international banking, payments and
settlement services, asset management and trust, investment banking, dealership and brokerage,
insurance services and ancillary services.

In addition, BPI is currently owned by the Ayala Corporation which is considered as one of
the largest conglomerate in the Philippines. Its principal competitors are Citibank, Metropolitan
Bank and Trust Co., Equitable-PCI Bank, Land Bank of the Philippines, Philippine National Bank,
Rizal Commercial Banking Corporation, Development Bank of the Philippines, Allied Banking
Corporation, United Coconut Planters Bank, China Banking Corporation, and Union Bank of the
Philippines.

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 As of 2017, BPI has a total reported sales of 87.58 billion peso which represents a 7.1%
increase from 2016 sales. Its full-year income for was 22.4 billion, 1.7% higher than last year's
P22.1 billion. The increase was attributed to the P4.5 billion, or 6.7% increase in revenues, partly
offset by the increase in operating expenses by P3.6 billion, or 10.3% increase from last year's
P34.9 billion.

Just last year, BPI has been getting a push for the introduction of block chain technology
which will enhance the country’s digital identity technology. It is a distribute ledger allows people
around the world to link their computing power to create permanent records of exchange and
build systems that have trust, accountability, security and transparency at their core. Furthermore,
it is used to record promises, trades, transactions or simply items that a user doesn't want to
disappear.

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Globe Telecom, Inc . (GLO)

Originally incorporated in
1935 as Globe Wireless Limited,
Globe Telecom, Inc. (GLO) primarily
aims to provide digital wireless
communication services, both
domestic and international, in the
Philippines. It is also considered as one of the leading companies in the country
telecommunications industry. In addition, it offers cellular, mobile data and broadband services to
cater the customers’ preference for various multimedia platforms. It basically operates through
its two segments namely: Mobile Communications Services and Wireline Communication Services.

The graph above shows a notable increase from 2014 to 2015’s operating income. This
could be influenced by Globe’s purchase of all the equity in the capital stock of Bayan
Telecommunications, Inc. (BayanTel) which was followed by the conversion of the debt into equity.

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This transaction increased the Company's equity interest in BayanTel to 98.57% from 56.87%. In
addition, GLO also acquired 50% of the equity interest of the telecommunications business of San
Miguel Corporation held through Vega Telecom, Inc. (Vega Telecom).

Furthermore, its earnings per share is expected to decline over the next years
because of the current decline in the stock market.

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petron corporation (PCORP)

Petron Corporation is the country’s largest oil refining and

marketing company supplying nearly 40% of the Philippines’ oil
requirements. The Company operates an integrated crude oil
refinery and petrochemicals complex with a rated capacity of
180,000 barrels per day in Limay, Bataan. At present, PCOR has
ten subsidiaries, some of which include: New Ventures Realty
Corporation, Petrogen Insurance Corporation, Petron Freeport
Corporation, and Petron Marketing Corporation. Petron
produces an extensive range of petroleum products such as
gasoline, diesel, jet fuel, kerosene, LPG, industrial fuel oil, solvents, and asphalts; and
petrochemical feedstocks including benzene, toluene, mixed xylene and propylene.

As seen in the graph, the operating margin of Petron has been fluctuating over the years.
This may be due to the changes in oil prices and other factors that directly and indirectly influence
the oil industry.

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 The company’s financial leverage has been quite low for the past two years and is
expected to be consistent for the coming years which means that the company’s debt
financing is stable.

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universal robina corporation (URC)

Universal Robina Corporation (URC),

the "first Philippine multinational", is one of
the largest branded foods companies in the
Philippines, and has managed to expand to
other Asian markets. Most recently, URC has
expanded its reach to New Zealand and
Australia through the acquisition of Griffin's
Foods, a leading snacks player in New
Zealand.

URC is engaged in a wide range of food-related businesses, including the manufacture and
distribution of branded consumer foods, flour milling and pasta manufacturing, sugar milling and
refining, renewable energy via the bio-ethanol and biomass cogeneration businesses (under Sugar
Group), hog farming, manufacture of animal feeds, glucose, soya products and veterinary
compounds.

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 John Gokongwei Jr. established a vision for
URC to become one of the leading pan Asian
players in snack foods and beverages. This vision
is gradually being realized as URC has managed
to transform itself from a Philippine operation to
a recognized Asian multinational with full scale
operations in eight countries outside the
Philippines, and soon in emerging markets like
Myanmar, Laos and Cambodia. In addition, URC's
products are already being exported to
mainstream markets in the US, Europe, Japan, Korea the Middle East and frontier markets in West
Africa, like Ghana and Nigeria. URC's key to success is to build very strong branding through a
robust product innovation pipeline, consumer-centric marketing and world-class manufacturing
and supply chain management.

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MY PORTFOLIO INVESTMENT:
stock performance ANALYSIS and conclusion

PERCENTAGE
INITIAL STOCK PRICE CURRENT STOCK PRICE
STOCKS INCREASE
(February 8, 2018) (May 8, 2018)
(DECREASE)
ALI P 45.20 P 40.10 (11.28%)
BPI P 115.629 P 97.35 (15.80%)
GLO P 1,830.00 P 1,645.00 (10.11%)
PCOR P 9.49 P 9.27 (2.32%)
URC P 162.00 P 141.00 (12.96%)

As seen from the figures above, there is a cumulative decrease in all of the five stocks since
February 8 until May 8 of this year with BPI having the highest percentage of stock price drop of
15.80%. This great decrease in BPI’s stock price could be attributed to its P50 billion stock rights
offer for its fund loan and expansions. BPI wants to focus on retail-lending, microfinance, and small
and medium enterprises.

URC has the second highest percentage drop of stock price from P162.00 to P141.00 as of
May 8. The consistent downward trend of URC’s stock prices could be highly influenced by the
implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Act imposing an added
tax to sweetened beverages which are one of the main products URC being offered in the market.
This contributed to the decline in their sales and net income, thereby inflicting threats to potential
and existing investors.

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 Generally, there is a downward trend on most of the stocks in the Philippine Stock
Exchange due to the faster inflation in the economic environment and the rising of treasury yield
in the United States. The significant low value of the stock prices in today’s market would be a
great opportunity for long-term investors to acquire shares of stocks and earn long-term profits in
the future. Thus they must take this chance for their advantage and select the appropriate mix of
their investment portfolio.

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 References

Ayala Land Inc (ALI.PS) Financials. (2018). Retrieved from Reuters:

https://www.reuters.com/finance/stocks/financial-highlights/ALI.PS
Ayala Land, Inc. : Financials, earnings estimates and forecasts for Ayala Land, Inc. (2018).
Retrieved from 4-Traders: http://www.4-traders.com/AYALA-LAND-INC-
6491970/financials/
Ayala Land, Inc. company : Shareholders, managers and business summary. (2018). Retrieved
from 4-Traders: http://www.4-traders.com/AYALA-LAND-INC-6491970/company/
Bank of the Philippine Islands (BPI) Company Profile. (2018). Retrieved from
CorporateInformation: https://www.corporateinformation.com/Company-
Snapshot.aspx?cusip=C60881090
Company Profile: Universal Robina. (2018). Retrieved from Universal Robina:
http://www2.urc.com.ph/about-us/company-profile
Globe Telecom Inc (GTMEY.PQ) Financials. (2018). Retrieved from Reuters:
https://www.reuters.com/finance/stocks/financial-highlights/GTMEY.PQ
Globe Telecom, Inc. : Financials, earnings estimates and forecasts for Globe Telecom, Inc. (2018).
Retrieved from 4-Traders: http://www.4-traders.com/GLOBE-TELECOM-INC-
6492511/financials/
Our Profile: Petron. (2011). Retrieved from Petron: https://www.petron.com/about-profile.html
Petron Corporation (PCOR). (2018). Retrieved from PinoyInvestor:
https://www.pinoyinvestor.com/smartinvestor/petron-corporation-pcor-2/

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