MANILA, Philippines - Conglomerate Ayala Corp. (AC) expects its unlisted operating units to contribute more significantly to its income stream in the medium term as it lines up a Southeast Asian expansion for its core businesses.
Higher profits from the still privately-held companies will be driven by the infrastructure and power businesses, company executives said.
“We believe our growth plans in the power and transport infrastructure businesses will give us new and significant growth platforms in the coming years,†said AC president and chief operating officer Fernando Zobel de Ayala.
“Our goal over the next five years is to push [the contribution of unlisted units] to around 20 percent, bulk of which will come from infrastructure and power,†added John Eric Francia, managing director and head of corporate strategy of AC.
“At any given point in time, ideally, we should have a portion of our value creation through unlisted firms,†Francia said.
So far, unlisted firms Ayala Automotive Holdings Corp., LiveIt Investments Ltd., AC Infrastructure Holdings Corp. and AC Energy Holdings Inc. account for 10 percent of AC’s business.
AC Energy targets 1,000 megawatts of generating capacity through a mix of conventional and renewable energy power projects like coal power plants and wind farms, respectively.
For infrastructure, AC has committed to be active in government’s Public-Private Partnership (PPP) projects.
“We look at projects with strategic impact on our other businesses,†Francia said, adding that the toll roads business will have synergy with real estate unit Ayala Land Inc.
Specifically, AC will join the bidding for the P60-billion Light Rail Transit Line 1 expansion, the Cavite-Laguna Expressway, the 14-kilometer Manila-Cavite Expressway, the P17.5-billion operation and expansion of the Mactan-Cebu International Airport and the P1.72-billion Contactless Automatic Fare Collection System.
In July, AC raised P6.45 billion from an overnight sale of 15 million treasury shares, forming part of the $1-billion allotted by the conglomerate for its power and infrastructure projects until 2016.
Meanwhile, AC has lined up expansion plans abroad for its core business units of water utility, property and banking.
“We have expanded our core business aggressively, enhanced the profitability of our international businesses and we invested in new business initiatives from which we can derive future sources of earnings and value creation,†said AC chairman and CEO Jaime Augusto Zobel de Ayala.
The conglomerate has sent teams from different operating units to study prospects in Myanmar, which is a new investment favorite among emerging economies in Southeast Asia.
“We are looking at opportunities in real estate in Myanmar and banking as well,†Zobel said.
“We are very excited with what’s happening in ASEAN. The countries that revolve around ASEAN has become increasingly intertwined,†he added.
Late last year, the conglomerate acquired an initial 49-percent stake in a Vietnamese firm that will undertake infrastructure projects in the emerging market.
AC signed an agreement with Ho Chi Minh City Infrastructure Investment Joint Stock Co. (CII) and some other Vietnamese investors to form a joint venture, VinaPhil Technical Infrastructure Investment JSC, which will have an initial capitalization of around $43 million.
Also in 2012, AC acquired a 10-percent stake in CII, which is listed on the Ho Chi Minh Stock Exchange, concurrent with Manila Water Co. Inc.’s acquisition of a 47.35-percent interest in Kenh Dong Water Supply JSC.
In October, Manila Water bought a 51-percent stake of Indonesia’s Suez Environment in PT PAM Lyonnaise Jaya, which is operating the water supply concession contract in Western Jakarta.
Locally, AC expects to benefit from robust economic growth that drives consumer spending.
“We have a strong growth component to our economy I think it would continue to 2013,†Zobel said.