March 12, 2015

Ayala Corporation posts 46% growth in 2014 reported net income

Ayala Corp yesterday said its 2014 net income rose 46% YoY to P18.6b. However, this was coming off a low base as 2013 was saddled by hefty accelerated depreciation charges of its telecom unit. Also, the 2014 net income was boosted by a P1.8b one-off net divestment gain from the sale of its Stream Global Services Inc outsourcing unit.

Netting the impact of these items, we estimate AC’s core net income at P16.8b or up about 14% YoY. AC’s 2014 earnings performance arose from the strong results of the property, telecom and electronics unit that more than offset the relatively flattish growth of its banking (largely due to the hefty trading gains in 2013) and water utility.

Our take: Our estimate core net income was slightly (2.3%) below the consensus earnings forecast. Going forward the market is looking at earnings to grow 17% to P17.2b although the company said it will attempt to achieve this year the P20b net income base ahead of the 2016 target.

This will be driven by the continued strength of its property and telecom units, a recovery in its banking earnings, and some contribution from its power investments. What could weigh on AC’s prospective earnings, however, is if its water unit is unsuccessful in its bid for a higher rate hike (in light of the regulator’s recommendation of a rate cut) and if it incurs further delays in its power and infrastructure projects. – WealthSec