Maybank IB is reducing its TP on Philippines conglomerate Ayala Corp by 4% with changes coming from a lower DCF valuation for AC Energy supported by a minor increase in TP for BPI . The SOTP-based TP is now PHP1,010 from PHP1,050. A possible catalyst for the company is the continued net income growth of the four main subsidiaries currently posting significant earnings growth. The house maintains its BUY rating due to AC's cheap valuation supported by its four main companies: BPI, ALI, GLO, and AC Energy.
Changes to AC Energy forecasts
The house is revising its forecasts for AC Energy to incorporate updated project timelines and capacity additions. AC Energy's revenue for FY24/FY25 is reduced by 22%/23%. Net income for FY24 increased by 4% due to lower cost assumptions. Maybank IB has a more conservative approach to our valuation to only include projects with estimated commercial operation dates in the visible pipeline. ACEN's valuation was lowered to PHP5.93 from PHP8.0 (-26%). ACEN makes up 13% of AC's NAV and 9% of its 9M24 earnings.
Traction for ACMobility
Maybank IB said it continues to look at AC's portfolio companies. ACMobility in particular may be the most exciting due to its recent partnership with BYD. The auto company is the official distributor of BYD, Kia, and Volkswagen as well as carrying Honda and Isuzu. It recorded a net loss of PHP176m due to forex impact, increased opex at Kia, and start-up costs for BYD. As of 9M24, unit sales rose 21% YoY to 14,982 units from 12,423, driven by BYD. Kia was also a driver of auto sales with 4,381 units sold (+12% YoY). With BYD's current line-up of 8 vehicles, including 2 hybrids introduced in the past 12 months, it is possible that the brand will be able to capture more market share as BYD becomes more recognisable to Philippine consumers.
Trading at a 32% discount to real time NAV
AC is trading at a 32% discount to its real time NAV, greater than its 5-year average of 25%. Note that GLO and ALI are Top Picks in the telco and property sectors, respectively, and account for 46% of AC's gross NAV.
