October 22, 2013

Maintain Buy rating for GTCAP

In a company note we released today, we maintained our Buy rating on GTCAP given possible enhancements to earnings and value. The company stands to gain from potential one-off gains from the sale of Global Business Power by its investment banking arm. Meanwhile, any public listing of its power asset and the improving accessibility and expanding development options for its land assets can further enhance GTCAP’s NAV.

Our take: GTCAP stands to book another P1.24b in one-off equitized gains in 2H13 on top of the P2.83b already booked in 1H13 from the sale of FMIC’s 40% stake in Global Business Power (GBP). If everything will be booked this year, GTCAP’s reported net earnings can reach P13.1b (+98% YoY) while we estimate 2013E core earnings at P9b.

Meanwhile, keeping a majority stake in GBP will bode well for GTCAP if the former pursues its IPO plans. Also, its property arm Federal Land is now exploring more options for a 180-hectare property it co-owns with the Ty Family in Laguna.

The property can benefit from the completion of the Cavite-Laguna Expressway and the growing demand for industrial estates given its proximity to an industrial zone. This should enhance the value of the asset as well as ensure long-term profitability of the property company. – Bernard Avinante