Alliance Global Group, Inc. (PSE: AGI)

Business Profile

Alliance Global Group, Inc. (the Company, AGI) derives its revenues from three significant business segments, Food & Beverage, Real Estate, and Quick Service Restaurant.

Food & Beverage segment contributes revenue significantly through the Emperador Distillers, Inc. (EDI), a wholly owned subsidiary. EDI sells brandy, vodka, and tequila.  Brandy was sold under the labels Emperador and Generoso while vodka and tequila under the brand name The BaR. Emperador is the largest selling brandy in the Philippines and was recognized in 2006, 2006, and 2007 by Reader’s Digest as the Most Trusted Brand.

EDI has been the growth driver of AGI posting 17.35 billion or 106% and 2.31 billion or 38% revenue and net income growth respectively from 2010 to 2011. AGI is expecting EDI to contribute 4 billion net income in 2012.[1]

Real Estate segment revenue stream emanates from AGI’s 58% interest in Megaworld Corporation (MEG) and 50% interest in Travellers International Hotel Group, Inc. (Travellers).

MEG pioneered the idea of “live-work-play” development concept. MEG sold 10,451 residential units worth P37.1 billion in 2011 claiming the top spot in term of units, sales value, and total saleable area. As of June 30, 2012, MEG contributed 30% and 42% to AGI’s revenue and net income respectively.[3] MEG expects to earn P7 billion in 2012 which is an increase of 15% from 2011’s P6.1 billion core income.

Travellers has a provisional license issued by the PAGCOR to participate in the Bagong Nayong Pilipino Entertainment City Project. In partnership with Malaysia-based Genting Group, Travellers jointly developed the Resorts World Manila (RWM) which is a leisure and entertainment complex comprising of gaming facilities, restaurants, hotels, and shopping outlets.

RWM recognized P26.3 billion revenue in 2011 from P14.9 billion in 2010 or an increase of 76% year-on-year. The increase in revenue translated to 50% leap in net income or an increase to P4.8 billion net income in 2011 to P3.2 billion in 2010.

Quick Service Restaurant segment is the Company’s 49% interest in Golden Arches Development Corporation (GADC). GADC is engaged in operations and franchising or the McDonald’s brand. Currently there are 329 restaurants nationwide with 185 stores company-owned.


Comments:

AGI’s management is admirable on how they maintain shareholder value. They managed to exhibit high digit net income growth and pays dividend that yields above 2% since 2011.

In the first half of 2012, the Company managed to report an increase of 33% in net income. The increase was not only attributable to the inclusion of Travellers International Hotel Group, Inc. in the presentation of their financial statements but also due to the favorable performance of Emperador Distillers, Inc. and Megaworld Corporation.

On October 5, 2012, the Company converted MEG warrants with an exercise price of P1 for 3.07 billion.[4] This transaction can generate a one-time gain of approximately P4.3 billion assuming MEG remains at above P2.40 since the warrants that are converted were issued to AGI at no cost in 2009.

Sources:

  1. Clarification of news article: “AGI Sees P10-B Core Earnings,” http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-6787_AGI.pdf
  2. Clarrification of news article: “AGI Sees P10-B Core Earnings,” http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-6783_MEG.pdf
  3. Press Release: “AGI Reports Earnings of P8.41 B in 1H 2012 Up 33 percent,” http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-6164_AGI.pdf
  4. Exercise of MEG warrants by AGI and New Town Land Partners, Inc., http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-7256_AGI.pdf

Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell.

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