Makati—(PHStocks)—An Issue Credit Rating of PRS Aaa, with a Stable Outlook, was assigned by Philippine Rating Services Corporation (PhilRatings) for Ayala Corp.’s (PSE: AC) proposed PhP10 billion Retail Bonds. The proceeds of the issuance will be used to refinance Ayala’s outstanding PRS-rated bond issuance of PhP10 billion maturing on April 30, 2017.
This will be the second and last issuance of the company in relation to its three-year Fixed Rate Bonds Program (FBP) of up to PhP20 billion. Last July 2016, Ayala initially issued PhP10 billion in Retail Bonds due on July 7, 2023 for its FBP. These were similarly assigned an Issue Credit Rating of PRS Aaa, with a Stable Outlook, by PhilRatings.
The following Issue Credit Ratings of PRS Aaa, with a Stable Outlook, were maintained by PhilRatings for the following other outstanding Retail Bonds of Ayala: a) PhP10 Billion Retail Bonds due on April 30, 2017; b) PhP10 Billion Retail Bonds due on May 12, 2021; and, c) PhP10 Billion Retail Bonds due on May 11, 2027.
PRS Aaa is the highest credit rating assigned by PhilRatings. 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.
On the other hand, an Outlook is an indication as to the possible direction of any rating change within a one year period, and serves as a further refinement to the assigned credit rating for the guidance of investors, regulators, and the general public. A Stable Outlook is defined as: “The rating is likely to be maintained or to remain unchanged in the next 12 months.”
The following key factors were considered in the assignment of the ratings for Ayala’s bonds: a) Ayala’s strong brand equity and leading market position for its core businesses; b) well-defined strategy, backed by a strong management team with a solid track record; c) sustained profitability; and d) healthy cash flows and financial flexibility.
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 Ayala and may change the ratings at any time, should circumstances warrant a change.
Ayala is one of the largest and most diversified conglomerates in the Philippines. Founded in 1834, Ayala has maintained dominant positions in various industries in the country. Ayala’s portfolio includes: Ayala Land, Inc. (ALI), Bank of the Philippine Islands (BPI), Globe Telecom (Globe) and Manila Water Corporation (Manila Water). Ayala also has interests in industrial technologies, power generation, transport infrastructure, international real estate, healthcare, and education. Ayala, in recent years, has taken on an aggressive growth strategy across its businesses to capitalize on a vibrant domestic economy.
Ayala booked PhP32.48 billion in net income in the first nine months of 2016, an 11.2% increase from the PhP29.21 billion recorded in the same period last year. This was backed by the sustained growth of its major operating subsidiaries, such as ALI and BPI. Net income margin remained healthy at 19.6%. It also maintained a significant amount of cash at PhP74.43 billion and a current ratio of 1.25x. Furthermore, Ayala retained a healthy cash flow in relation to its interest servicing requirements with earnings before interest, taxes, depreciation and amortization (EBITDA) interest cover at 4.5x. Ayala continued to be conservatively capitalized with DE ratio at 0.82x and solvency ratio at 1.7x.
Following the attainment of its five-year plan of growing net income to PhP20 billion and return on equity (ROE) to 15%, Ayala is committed to increase its earnings capacity to PhP50 billion and to sustain an ROE of 15% over the next five years. Ayala’s major business units will continue to drive earnings going forward. It is likewise the company’s intention, though, to diversify and expand its portfolio. Such will be achieved by pursuing opportunities in the energy sector, establishing an increasing presence in Southeast Asia, and exploring further new sectors like healthcare and education.
It should also be noted that Ayala exercised its Call Option for and fully paid its PRS-rated PhP10 billion Retail Bonds due on Nov. 23, 2019. The aforementioned bonds were rated PRS Aaa with a Stable Outlook, when its Call Option was exercised by Ayala.