May 19, 2014

Ayala Corp posts 22% rise in 1Q14 earnings

Ayala Corp (AC) yesterday announced 1Q14 net income of P5.47b, up 21.6%, largely due to a P1.8 capital gain on the sale of its investments in Stream Global Services Inc and the low base last year due to Globe Telecom’s accelerated depreciation. Excluding of the capital gain and netting out the impact of Globe’s accelerated depreciation, core net income would have been P3.6b or 20% lower YoY than the P4.5b core income that the company reported last year. This also considers the high-base set by BPI’s hefty trading gains. Taking out these three items (capital gain, Globe’s hefty depreciation and BPI’s trading gains), AC computed its earnings growth at 24% YoY.

In terms of equity earnings from its units, BPI still contributed the most at P1.87b notwithstanding the 49% YoY drop due to the huge trading gains last year. Equity in earnings of ALI was up 15% YoY to P1.61b on lower equity stake and despite the 29% YoY earning growth by ALI. Globe contributed P910m (4x the P215m contribution in 1Q13 that was weighed down by hefty depreciation). Equity in net earnings from MWC increased 21% to P654 on inherent growth in both the East Zone and new businesses. This is despite the delayed approval of its tariff hike.

Our take: On the whole, the P5.47b net income came ahead of company full-year earnings guidance of P20b due to the huge capital gains on the sale of Stream. However, the 1Q14 core net earnings came below expectations as it accounted for just 22% of full-year consensus forecast. We believe this is largely due to lower MWC earnings related to the delayed tariff rate hike approval and as BPI’s 1Q14 earnings came in at only 18% of full-year consensus forecast in the absence of hefty trading gains.– WealthSec