Earnings roundup

We should be able to understand better the price movements of our stocks now that we’re seeing the latest financial statements from listed companies as the filing of corporate earnings for the period ending the third quarter has begun.

Among those that already hogged the business headlines last week was Megaworld Corp. (MEG). The company reported a net income of P19.03 billion for the first nine months of the year. This was 192 percent higher than the P6.52 billion it posted in the same period last year.

However, some P11.62 billion or 61.06 percent of the reported net income came from non-recurring profit resulting from the consolidation or acquisition and sale of subsidiaries and associate companies under Megaworld.

The balance of P7.41 billion, representing the company’s regular income for the period, were derived from residential sales in its township projects in Newport City, Uptown Bonifacio, Mckinley Hill and Eastwood City, equivalent to P2.21 billion and from leasing income from its office and retail portfolio, amounting to P5.2 billion. Megaworld pioneered in what is called “live-work-play-learn lifestyle concept” in mixed-use communities or townships.

The rental income for the period of P5.2 billion represented a 20 percent increase from last year’s P4.34 billion.

The consolidation was made up of the acquisition by Megaworld of a 49.2 percent stake in listed and subsidiary company Global Estate Resorts Inc. (Geri) from listed associate company, the holding firm Alliance Global Group Inc. (AGI) of businessman Andrew Tan. The acquisition raised Megaworld’s land bank to around 4,000 hectares, at the same time, increased its stake and control on Geri to 80.4 percent.

AGI posted lower net income for the three quarters of the year, owing to a fall on its revenues. It was only able to realize a net income of P17.2 billion, down 6 percent from last year’s P19.16 billion.

Taking away non-recurring profits, net income was up 5 percent only compared to the same period last year. Due to this, net income attributable to AGI stockholders dipped slightly to P11.4 billion, from P11.5 billion last year.

Jollibee Foods Corp. (JFC) also reported a net income of P1.2 billion, up 15 percent from last year of the same period despite stoppage in the operation of 72 or 3.2 percent of its stores nationwide last August due to its migration to a new supply management system.

Operating income for the period grew 16 percent, to P1.41 billion as revenues increased by 11 percent to P22 billion, with the bulk of the company’s growth still from local business.

The company was able to open during the three quarters of the year a total of 148 stores, 114 of which are domestically located and 34 are overseas. Jollibee planned to open a total of 300 new additional stores. This will increase its branches up to the end of 2014 to a total of 3,064 from 2,764 stores across all brands last year.

Total net income increased by 18 percent to P3.71 billion as compared to last year’s P3.14 billion for the nine-month period.

San Miguel Corp. (SMC) was another. Its net income grew 31 percent to P23.2 billion, on the back of an 11 percent increase of revenues amounting to P599 billion due to a rise in new business of 12 percent and 5 percent growth in the traditional units for the nine-month period.

San Miguel Pure Foods Company Inc. (PF) and Ginebra San Miguel Inc. (GSMI) largely accounted for the increase in new business revenues which grew operating income to P4.3 billion or 18 percent higher, in case of PF, and operating gains of P124 million in the case of GSMI, a significant turnaround from its loss of nearly P1 billion in the same period last year.

PF’s net income growth came from its agro-industrial operations, flour-milling and diary businesses, in which all these happened “despite the adverse effect of Typhoon ‘Glenda’ and the Manila port congestion” problem.

The income growth in both subsidiaries somehow made up for the decline in net profits of Petron Corp. (PCOR), which reported a 27-percent slump in the face of softness in crude oil prices, rendering total net income to only P6.9 billion in the first nine months.

Metropolitan Bank and Trust Co. (MBTC) and Rizal Commercial Banking Corp. (RCB) are two banking institutions that had filed their latest financial statements, too.

MBTC’s net profit jumped 57 percent to P4 billion in the third quarter “on better-than-expected lending business alongside one-time gains from property divestment and sale of non-core assets” to realize a year-on-year net profit of P13.1 billion. Unfortunately, this was 34.8 percent lower than its reported income performance in the same period last year.

RCB posted an unaudited consolidated net income of P3.01 billion for the first three quarters. According to its report, if you strip out trading gains and “last year’s extraordinary net gains of P927 million coming from the sale of nonperforming assets and equity investments, the P3.01 billion net income represented a 114 percent increase in core operating income.

Formerly in the top component of the benchmark index, International Container Terminal Services Inc. (ICTSI) also reported favorable earnings results. Its earnings, however, largely came from the sale of a non-operating subsidiary and the termination of the management contract in Kattupali, India and the restructuring of operations in Yantai, China.

In the nine-month period, “net income was up 5 percent to $142.3 million” (roughly P6.4 billion at a P45:$1 exchange rate).

Alsons Consolidated Resources Inc. (ACR), also a former component of the benchmark index but started to be actively traded again lately, was not so lucky. Its net income for the first nine months fell 24 percent to P606.7 million from P739.2 million last year. Higher interest expenses and foreign exchange losses were blamed for the drop in net income.

Notice that the market prices of most, if not all, of the foregoing stocks had been moving sideways to lower. They continued to stay soft and weak following favorable financial reports. You may now understand why.

Bottom line spin

For example, MEG’s market price did not rally back to its previous highs despite the mega increase in its net income. This is because investors were not satisfied. A substantial portion of MEG’s net income came from non-recurring profits. Worse, recurring profits had been less than they were the year before, a condition which would seem not to be any different from the decline in regular net income suffered by PCOR and ACR.

Most, however, show promise in the next two years or so if we look closely at their programs and the prospective economic scenarios painted within the period.

Credit watcher Moody’s Investors Service affirmed its bullish outlook for the country last week. It said gross domestic product will grow to an average of 6.3 percent this year. This will accelerate in 2015 considering the country’s resilience to external financial shocks. However, government must continue to pursue a proper growth-boosting spending program. Underspending reduced the country’s potential in the first half of the year.

(The writer is a licensed stockbroker of Eagle Equities, Inc. You may reach the Market Rider at [email protected], [email protected] or at www.kapitaltek.com.)