March 03, 2014

JGS capex set at P40b this year

BusinessWorld today quoted a company official as saying capex will go down to P40b this year from more than P50b last year with the completion of JGS’ naphtha cracker facility and its investments in the Manila Electric Co. The naphtha cracker plant cost US$800m and it is slated to commence operations this year.

The bulk of the capex will be to finance its share of funding for the expansion plans of Robinsons Land Corp, Cebu Air Inc and JG Petrochemicals Corp.

Our Take: Assuming optimal operations, the petrochemical facility should be another earnings driver for the group in addition to potential income from its investments in MER. Funding pressure on JGS cashflows should be tempered by the ability of its units to tap the debt market to finance their own expansion plans.

For instance, RLC is looking to issue P15b worth of bonds to refinance a maturing debt obligation. URC’s cash flows is also underpinned by improving margins. – WealthSec