AEV Company Review



Magat Dam of Aboitiz Power
Aboitiz Equity Ventures, Inc., or AEV is a holding and management company of the Aboitiz group was incorporated in Sept, 1989. To date, AEV is one of the largest conglomerate in the Philippines. The main businesses of AEV are involved in power sector, financial services, food manufacturing, transport and portfolio investments.

Business Details:
1. Power Generation and Distribution
*Aboitiz Power - 76.4% owned, is the main power business of AEV which runs major power generation plants in the country. In addition, AP has ownership interest in 7 distribution utilities in the country namely; VECO (Cebu), Davao Light, SFELAPCO(Pampanga), Cotabato Light, Subic Enerzone Corp, Mactan Enerzone Corporation (Cebu), and Balamban Enerzone Corporation (Cebu).


2. Financial Services
*Union Bank of the Philippines - 40.91% owned, a universal bank
*City Savings Bank - 99.25% owned, a thrift bank based in Cebu City.

3. Food Manufacturing
*Pilmico Foods Corporation - manufacturer of flour
*Pilmico Animal Nutrition Corporation -  swine production and animal feeds business.

4. Other Investments
*Aboitiz Jebsen Group - ship management, manning and crew management, and bulk transport businesses.
*Cebu Praedia Development Corporation - is the real estate arm of AEV which is engaged in leasing of properties in Makati and Cebu.

Business Performance:
For 2010, AEV and subsidiaries posted a consolidated net income of P21.86 billion, a 163% YoY(year-on-year) increase. This impressive operating performance was driven by the robust net income of its subsidiaries particularly of AP.


However, for 1Q-2011, AEV posted a 26% YoY decrease in its consolidated net income. This is mainly due to the decrease in electricity price in WESM and higher cost of coal.  In terms of income contribution, AP is still accountable for the majority at 85%. Banking and food groups are accountable for the 9% and 6% respectively.

Note: For reference about ratio and stocks analysis, read here.


Profitability:
ROE = 42.81%
Average ROE for 5 years = 24.06%
OCF/Equity = 37.73
Net Profit Margin = 39.27

Growth:
Annual Net Income Growth Rate (5 yrs) = 54.52%

Debt and Risk:
DE Ratio = 129.7%
Current Ratio = 2.36

Dividend:
Dividend Yield (2010) = 1.39%

Recently, AEV distributed divided at P1.58 per share or a dividend yield of 4% based on closing price of P39.10 last May 20, 2011.

Other factors:
It was reported in the news (read here) that AEV will spend P42 billion this year to increase the capacity of its power generation business while P2 billion will be used for its other business. This is a high growth potential for the company.

Valuation:
PE Ratio = 9.87
PB Ratio = 3.36
Intrinsic Value = P83.9/share
Current Price = P39.1/share
Upside = 114.69%


Recommendation:
Long term buy is recommended for AEV due to its high growth potential for its active involvement in developing the Power sector of the Philippines.

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