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JP 摩根-美股-石油与天然气行业-JG控股:多元化的大型企业集团-4-30页.pdf
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JP 摩根-美股-石油与天然气行业-JG控股:多元化的大型企业集团-4-30页.pdf
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Asia Pacific Equity Research
10 April 2019
JG Summit Holdings
A large diversified conglomerate; petrochemicals
expansion underway - Company Visit Note
Conglomerates & Multi-industry
Daniel Andrew Tan, CFA
AC
(63-2) 554-2413
danielandrew.o.tan@jpmorgan.com
J.P. Morgan Securities Philippines, Inc.
Jeanette Yutan
(63-2) 878-1188
jeanette.g.yutan@jpmorgan.com
J.P. Morgan Securities Philippines, Inc.
Ajay Mirchandani
(65) 6882-2419
ajay.mirchandani@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
See page 26 for analyst certification and important disclosures, including non
-
US analyst disclosures.
J.P. Morgan does and seeks to do
business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.jpmorganmarkets.com
JG Summit is a Gokongwei-owned and controlled holding company, and the 6
th
largest listed company in the Philippines. Its business interests include majority
stakes in listed URC, Robinsons Land and Cebu Pacific, 100% of a Petrochemical
unit, and minority stakes in MER, TEL, and UIC, among others. At their recent
Analyst Days, JGS management highlighted expectations of earnings recovery in
2019 underpinned by URC, RLC, and CEB. They expect expansion to boost
Petrochem earnings capacity by 2020-21. Bloomberg consensus expects JGS to
deliver 22% y/y net income growth in 2019 and 19% in 2020.
Major index constituent. JG Summit is the 6th largest listed company in the
country with US$9.0bn market cap and US$4.6m/day ADV. JGS is also one of
the top 6 names in terms of weights in MSCI Philippines and PSEi (see p.3).
JGS benefited from the March 2019 FTSE index rebalancing where the stock
was added with almost 40 days’ worth of inflows (~US$130m).
Earnings mix shifts as Petrochem grows. Earnings contribution from
Petrochem, MER, and CEB have increased over the last 5Y as erstwhile biggest
earnings driver, URC, slipped to 20%. JGS management guided that petrochem
EBITDA could grow from US$80-150m to US$200-300m by 2021 once the
capacity expansion is completed. Petrochem is largest unlisted earnings
contributor of JGS. JGS is also involved in infra, data analytics, logistics, and
FinTech (see pp.8-9).
Stock performance and valuation. JGS has gained 19% YTD, outperforming
PSEi by 12%. URC has gained 26% YTD. JGS and URC stock prices have
trended in similar directions in 4 of the last 6 years (see pp. 14-15). On the years
that the trends diverged and JGS outperformed URC, JGS Petrochemicals had
strong earnings in 2015 and 2017; MER stock price gained 24% in 2017. JGS is
trading at 16.5x 12m fwd PER, near the 10Y mean of 16.8x, both based on
Bloomberg consensus.
(URC, UW, covered by Jeanette Yutan; MER, N, covered by Ajay Mirchandani)
NOTE: THIS DOCUMENT IS INTENDED AS INFORMATION ONLY AND NOT AS
A RECOMMENDATION FOR ANY STOCK. IT CONTAINS FACTUAL
INFORMATION, OBTAINED BY THE ANALYST DURING MEETINGS WITH
MANAGEMENT. J.P. MORGAN DOES NOT COVER THIS COMPANY AND HAS
NO RATING ON THE STOCK.
Company name (Reuters: JGS.PS, Bloomberg: JGS PM), Historical financial data
2016
2017
2018
Sales
240,503
273,445
291,845
EBIT
52,270
51,733
45,306
Core net income
29,972
29,559
22,562
Core
EPS
4.2
4.1
3.1
EPS (Y/Y)
7%
-
1%
-
24%
Return on equity
12.9%
11.7%
8.3%
PE ratio
15.9
16.1
21.1
Price
-
to
-
book
ratio
1.99
1.78
1.72
DPS
0.25
0.28
0.30
Dividend yield
0.4%
0.4%
0.5%
Source: Bloomberg, Company reports
J
GS PM, Not Covered
PHP 66.45, April 10, 2019
Five-year share price chart
Source: Bloomberg
One-year price performance
1M 3M 12M
Absolute (%) -0.8 4.6 5.1
Relative (%) -3.5 3.5 4.3
Source: Bloomberg
Company data
52-wk range (PHP) 41.90-69.50
Mkt cap. (PHP B) 475.9
Mkt cap. (US$ MM)
9,164
Shares O/S (MM)
7,162
Free float (%)
40.99
Liquidity (US$ MM)
4.5
Exchange rate
52.02
Index | PSEi
8008.53
Year-end
December
Source: Bloomberg.
40
50
60
70
80
90
100
Mar-14
Sep-14
Mar-15
Sep-15
Mar-16
Sep-16
Mar-17
Sep-17
Mar-18
Sep-18
Mar-19
2
Asia Pacific
Equity
Research
10 April 2019
Daniel Andrew Tan, CFA
(63-2) 554-2413
danielandrew.o.tan@jpmorgan.com
Table of Contents
A large diversified conglomerate............................................3
Petrochemicals expansion in the works ................................6
Key parent-level initiatives ......................................................8
Infrastructure ..........................................................................................................8
Data analytics..........................................................................................................9
Supply chain and logistics .......................................................................................9
Fintech....................................................................................................................9
Sufficient annual parent cash flow .......................................10
Potential improvement in URC earnings ..............................10
RLC: Malls and residential recovery.....................................12
CEB: High seat capacity growth in 2019 ..............................13
Valuation and share price analysis.......................................14
Financials................................................................................15
Consolidated financials .........................................................................................15
Parent balance sheet and cash flow ........................................................................16
Petrochemicals: Chemical spreads + capacity expansion are key drivers.................17
Company background............................................................19
Company overview ...............................................................................................19
Management and shareholder structure..................................................................20
JG Summit Petrochemical Corporation ..................................................................21
JG Summit Olefins Corporation.............................................................................22
Universal Robina Corporation ...............................................................................22
Robinsons Land Corporation .................................................................................23
Cebu Pacific Air....................................................................................................23
Robinsons Bank ....................................................................................................23
Core investments...................................................................................................24
JG Summit: Summary historical financial............................25
3
Asia Pacific
Equity Research
10 April 2019
Daniel Andrew Tan, CFA
(63-2) 554-2413
danielandrew.o.tan@jpmorgan.com
A large diversified conglomerate
Large, liquid country proxy
JG Summit is one of the largest names in Philippine equities with market
capitalization of US$9bn (6
th
largest) and daily turnover of US$4.5m/day (7th). It is
the third largest conglomerate behind SM and AC. Notably, the only names that are
larger are Sy (SM, SMPH, BDO) and Ayala (AC, ALI, BPI) family owned
companies.
Accordingly, the stock is one of the largest index constituents in both PSEi (5.0%
weight, 6
th
largest) and MSCI Philippines (5.9% weight, 6
th
largest).
We have previously noted the market’s willingness to pay a premium for large liquid,
names such as SM Investments (SM PM, covered by Jeanette Yutan) and Ayala
Corporation (AC PM, covered by Jeanette Yutan). This is partly due to the increase
of passive funds, in our view. AC has recently traded near its NAV vs. a long-term
average discount of 12%. Please see Ayala Corporation: Limited drivers for further
re-rating; Downgrade to N for more details.
Table 1: JG Summit is one of the largest index names in the country
Name
Ticker
PSEi weight
Rank
Market Cap (USD Mn)
Rank
ADT last 3M (USD Mn)
Rank
SM Investments Corp
SM PM Equity
13.0%
1
22,027
1
4.8
6
SM Prime Holdings Inc
SMPH PM Equity
9.4%
2
21,777
2
6.3
4
Ayala Land Inc
ALI PM Equity
8.9%
3
12,714
3
10.3
1
Ayala Corp
AC PM Equity
6.8%
4
11,024
4
6.3
5
BDO Unibank Inc
BDO PM Equity
6.6%
5
10,955
5
7.1
2
JG Summit Holdings Inc
JGS PM
Equity
5.0%
6
9,002
6
4.5
7
Bank of the Philippine Islands
BPI PM Equity
4.5%
7
6,988
9
3.7
10
Metropolitan Bank & Trust Co
MBT PM Equity
4.0%
8
6,106
13
3.8
9
Aboitiz Equity Ventures Inc
AEV PM Equity
4.0%
9
6,485
12
1.7
22
Jollibee Foods Corp
JFC PM
Equity
3.9%
10
6,669
10
4.2
8
Universal Robina Corp
URC PM Equity
3.9%
11
6,598
11
3.1
12
ICTSI
ICT PM Equity
3.4%
12
5,007
15
6.7
3
PLDT Inc
TEL PM Equity
2.7%
13
4,768
17
3.2
11
Manila Electric Co
MER PM Equity
2.3%
14
8,088
7
1.7
19
Security Bank
Corp
SECB PM Equity
2.1%
15
2,598
26
1.7
21
GT Capital Holdings Inc
GTCAP PM Equity
2.0%
16
3,402
20
2.2
17
Megaworld Corp
MEG PM Equity
1.6%
17
3,551
18
2.3
16
San Miguel Corp
SMC PM Equity
1.6%
18
8,010
8
3.0
13
Metro Pacific Investments Corp
MPI PM
Equity
1.6%
19
2,843
23
2.2
18
Globe Telecom Inc
GLO PM Equity
1.5%
20
4,909
16
1.5
23
Aboitiz Power Corp
AP PM Equity
1.3%
21
5,012
14
0.9
28
Bloomberry Resorts Corp
BLOOM PM Equity
1.3%
22
2,704
25
2.6
14
Alliance Global Group Inc
AGI PM Equity
1.3%
23
3,145
21
2.5
15
Robinsons Land Corp
RLC PM Equity
1.3%
24
2,407
28
1.2
24
LT Group Inc
LTG PM Equity
1.2%
25
3,488
19
1.0
26
Puregold Price Club Inc
PGOLD PM Equity
1.2%
26
2,726
24
1.7
20
DMCI Holdings Inc
DMC PM Equity
1.1%
27
3,016
22
1.0
27
Robinsons Retail Holdings Inc
RRHI PM Equity
1.1%
28
2,420
27
1.2
25
First Gen Corp
FGEN PM Equity
0.7%
29
1,536
30
0.9
29
Semirara Mining & Power Corp
SCC PM Equity
0.6%
30
1,794
29
0.7
30
Source: Bloomberg, J.P. Morgan. Priced as of 09 April 2019.
4
Asia Pacific
Equity
Research
10 April 2019
Daniel Andrew Tan, CFA
(63-2) 554-2413
danielandrew.o.tan@jpmorgan.com
Figure 1: Philippine conglomerates revenues and net income (market cap in US$bn)
Source: Bloomberg. As of 09 April 2019.
Figure 2: Philippine conglomerates daily turnover and free float
Source: Bloomberg. As of 09 April 2019.
Table 2: MSCI Philippines constituents
Float Adj Mkt
Cap (USD bn) Index weight (%) Rank Sector
SM Prime
7.68
13.1
1
Real estate
Ayala Land
6.3
0
10.8
2
Real estate
BDO Unibank
5.02
8.6
3
Financials
Ayala Corporation
4.52
7.7
4
Financials
SM Investments
4.29
7.3
5
Industrials
JG Summit Holdings
3.46
5.9
6
Industrials
Jollibee Foods
2.63
4.5
7
Consumer Discretionary
Universal Robina Corp
2.55
4.4
8
Consumer Staples
Metropolitan Bank
2.42
4.1
9
Financials
ICTSI
2.27
3.9
10
Industrials
Source: MSCI. As of 29 March 2019.
5
Asia Pacific
Equity Research
10 April 2019
Daniel Andrew Tan, CFA
(63-2) 554-2413
danielandrew.o.tan@jpmorgan.com
Diversified: Fairly balanced earnings mix
JGS has a fairly balanced earnings mix with 6 companies contributing between 11-
20% of equity earnings in last 3 years (ex-parent). These are MER, URC, RLC, CEB,
UIC, and JG Summit Petrochemicals.
Five out of these six names are listed in the equity market. Non-listed businesses
(petrochemicals + bank) contributed 14% of group equity earnings in the last 3 years.
The trend in the last five years shows a decline in the contribution of URC and TEL.
On the other hand, contribution from MER, CEB, and petrochemicals have
increased.
Sector earnings breakdown shows largest contribution from property (RLC + UIC) at
25%, followed by power (21%) and food (20%). Notably, JG Summit has significant
exposure to cyclicals, with its transport business mainly driven by oil and FX and its
petrochemicals business driven by chemical spreads.
Table 3: JGS portfolio snapshot
% stake
Listed or
private
2016
-
18 % of
earnings
2016
-
18 % of
dividends Business description
Meralco
29.6%
Listed
20%
39%
Largest electricity distributor in PH
URC
55.3%
Listed
20%
25%
One of the largest branded food producers in PH
RLC
61.0%
Listed
14%
6%
Property developer with large share of leasing
UIC
37.0%
Listed
11%
1%
SG
-
based developer with office focus
Cebu Air
67.6%
Listed
16%
9%
Largest domestic air transport
PLDT
8.0%
Listed
5%
9%
One of the two largest telcos in the country
JG Petrochem
100.0%
Private
13%
7%
Owns first and only naphtha cracker in PH; PE and PP plants
GBPC
30.0%
Private
2%
3%
Power producer in Visayas and Mindanao
Robinsons Bank
60.0%
Private
1%
0%
19th largest bank in the country
Source: Company data. Descriptions from J.P. Morgan
Table 4: JGS equity income breakdown (ex-parent)
2013 2014 2015 2016 2017 2018
2016
-
18
average
Meralco
1%
24%
18%
15%
17%
26%
20%
URC
45%
34%
28%
22%
18%
20%
20%
RLC
20%
15%
13%
11%
11%
20%
14%
UIC
12%
13%
9%
9%
12%
13%
11%
Cebu Air
2%
3%
11%
20%
17%
11%
16%
PLDT dividend income
22%
16%
10%
6%
4%
5%
5%
JG Petrochem
-
4%
-
4%
11%
16%
18%
4%
13%
GBPC
0%
0%
0%
1%
2%
2%
2%
Banks
2%
0%
0%
0%
1%
1%
1%
Source: Company data. Averages calculated by J.P. Morgan.
Table 5: JGS equity income sector breakdown
2013 2014 2015 2016 2017 2018
2016
-
18
average
Food
45%
34%
28%
22%
18%
20%
20%
Power
1%
24%
18%
16%
19%
28%
21%
Property
32%
27%
22%
19%
23%
33%
25%
Petrochemicals
-
4%
-
4%
11%
16%
18%
4%
13%
Transport
2%
3%
11%
20%
17%
11%
16%
Telco
22%
16%
10%
6%
4%
5%
5%
Banking
2%
0%
0%
0%
1%
1%
1%
Source: Company data. Averages calculated by J.P. Morgan.
Figure
3
: Last 3Y average earnings
contribution (ex-parent)
Source: Company data
Meralco,
20%
URC,
20%
RLC,
14%
UIC,
11%
Cebu
Air ,
16%
PLDT , 5%
JG
Petrochem,
13%
GBPC
, 2%
Banks
, 1%
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