Pasig—(PHStocks)—The outstanding P30 Billion bond issue of JG Summit Holdings, Inc. (PSE: JGS), the holding company of the JG Summit Group, kept its PRS Aaa rating from Philippine Rating Services Corporation (PhilRatings). The rating also has a Stable outlook.
JGSHI is a holding company for a group of companies with substantial business interests in branded consumer foods, agro-industrial and commodity food products; real property development; hotels; banking and financial services; telecommunications; petrochemicals; air transportation; power generation and power distribution. JGSHI is one of the largest and most diversified conglomerates in the Philippines.
Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. PRS Aaa is the highest rating assigned by PhilRatings.
The rating reflects JGSHI’s strong liquidity, its sound capitalization structure, the solid market position of its core businesses, and its well-defined strategy that is supportive of growth. The rating also considers the continued positive outlook for the domestic economy, which is expected to benefit the industries of JGSHI’s core businesses.
PhilRatings’ ratings are based on available information and projections at the time that the rating review was performed. PhilRatings shall continuously monitor developments relating to JGSHI and may change the rating at any time, should circumstances warrant a change.
JGSHI’s liquidity continued to be robust. JGSHI ended the first half of 2016 (1H2016) with a current ratio of 1.0x, and with operations as the main source of cash for the Group. Forecast current ratio will be kept above 1.0x, while cash from operations will remain positive. Capital expenditures (capex) will corner the bulk of projected cash outflow, and will be mostly for the expansion of the Food, Airline, and Property businesses.
In addition to its healthy internal cash generation, the JG Summit Group has good access to external funding sources, including credit facilities from domestic and international banking institutions. Historically, fund-raising exercises by the JG Summit Group in the equity and debt markets have been favorably received, indicating the strong overall corporate image enjoyed by JGSHI and its subsidiaries/associates among investors.
Capital structure remained sound, with debt-to-equity (DE) ratio kept below 1.0x for the last five years (2011-2015). DE ratio is expected to further improve going forward, as debt levels are reduced and earnings are plowed back into operations. The Group expects to end 2016 and 2017 with net loan repayments, while equity growth will come from the re-investment of earnings into the company.
Universal Robina Corporation (PSE: URC) is one of the leading food product companies in the Philippines. In the Philippines, URC is a dominant player with leading market shares in Savory Snacks, Candies and Chocolates. The company is also the largest player in the ready-to-drink (RTD) Tea market and Cup Noodles business. URC attributes its leading market shares in the different categories where it competes to the company’s emphasis on marketing, product innovation and quality, as well as strong brand equity. Also considered a significant competitive strength is the company’s effective nationwide distribution chain and sales network.
Robinsons Land Corporation (PSE: RLC) is one of the Philippines’ leading property developers based on revenues, number of projects and total project size. It is engaged in the development and operation of shopping malls and hotels, and the development of mixed-use properties, office and residential buildings, as well as land and residential housing developments, located in key cities and other urban areas nationwide. RLC’s business model, which has both investment and development components, underpins a strategy that is highly responsive to the changing cycles of the property industry.
RLC believes that it can continue to compete successfully in the domestic property market based on the strength of its brand name, technical expertise, financial standing and the track record of its developments. As of June 30, 2016, RLC had 43 malls, 11 completed office developments, 14 hotel properties and over 100 residential projects in the Philippines.
Cebu Air Inc. (PSE: CEB) operates under the trade name Cebu Pacific Air, and is the leading low-cost carrier (LCC) in the Philippines. CEB was the first airline to adopt the LCC business model in the local aviation industry. CEB also pioneered the following “firsts” in the Philippine aviation industry: e-ticketing, web and mobile check-in, self check-in, seat selection as well as online booking through the airline’s website.
Despite keen competition, CEB remained as the leading domestic airline in the Philippines in 1H2016, based on: number of passenger carried, load factor and competitive performance index. CEB flew 10.0 million passengers in 1H2016, representing a year-on-year (YoY) increase of 8.7%. Seat load factor (SLF) went up to 87.2%, from 81.8% in the same period of 2015. Available seat kilometers (ASK) for second quarter 2016 (2Q2016) grew by 5.7% to 6.7 billion, while revenue passenger kilometers (RPK) posted a much faster increase of 7.7% to 5.6 billion. The airline ended June 2016 with 64 destinations, 98 routes and 2,369 weekly flights.
As of report writing date, JG Summit Petrochemicals Corp. (JGSPC) is the largest manufacturer of polyolefins in the Philippines, with current rated production capacities of 320,000 metric tons per annum (MTA) for polyethylene (PE) and 190,000 MTA for polypropylene (PP). Operational since 1998, JGSPC is the only local manufacturer than can produce both PE and PP within a single integrated complex. In 2015, JGSPC posted the highest annual sales in its history, and also captured a 50.0% market share of the domestic demand for resins.
In 2014, JG Summit Olefins Corp. (JGSOC) started to operate the Philippines’ first naphtha cracking facility, located within the same complex as the downstream polymer plants of JGSPC. The cracker manufactures 320,000 metric tons per annum (MTA) of polymer-grade ethylene and 190,000 MTA of polymer-grade propylene, which are used as feedstock by JGSPC. JGSOC’s products also include pygas and mixed C4 which are raw materials used to manufacture important intermediate chemicals such as benzene, toluene, mixed xylenes and butadiene. In 2015, JGSOC started to co-crack liquefied petroleum gas (LPG) as additional feedstock for the cracker, and also started to export mixed C4.
Robinsons Bank Corp. (Rbank) is a full-service Philippine commercial bank which serves the banking requirements of its retail customers, business partners and the general public through its various products and services. The Bank is the surviving entity from the merger of Robinsons Savings Bank and Robinsons Bank Corporation (formerly known as The Royal Bank of Scotland Philippines, Inc.) As of September 30, 2016, Rbank had a network of 118 branches: 61 were in Metro Manila, while 57 were spread across other areas in Luzon, Visayas and Mindanao. There were 44 branches located inside malls, most of which were in Robinsons malls. Rbank’s distribution network also included 204 automated teller machines (ATMs), of which 122 were on-site and 82 were off-site. Additionally, the bank had four (4) micro-banking offices (MBOs) located in economic processing zones. The Bank’s subsidiary, Legazpi Savings Bank (LSB), had 11 branches and 11 ATMs in the Bicol region.
Going forward, the JG Summit Group is seen to continue its growth and expansion across its businesses. Growth will be supported, not only by the strong domestic economy, but also by healthy demand in the Association of Southeast Asian Nations (ASEAN) market. The Group has identified the growing middle-class in the Philippines and around ASEAN as its target customers. This geographically-expanded market presents more opportunities, but also brings increased competition from both multinational companies and local players. It also brings new ways of doing business, new foreign ideas and business practices. The JG Summit Group will address competition by continuing to innovate, creating value for its customers, and achieving economies of scale.
Execution of strategy is backed by the company’s strong leadership, which has ably managed to sustain the strong competitive profiles of the Group’s businesses, and at the same time implement growth and expansion plans.