JG控股：多元化的大型企業(yè)集團

1、JG Summit HoldingsA large diversified conglomerate; petrochemicals expansion underway - Company Visit NoteJG Summit is a Gokongwei-owned and controlled holding company, and the 6th largest listed company in the Philippines. Its business interests include majority stakes in listed URC, Robinsons Land

2、 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

3、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 Phili

4、ppines 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

5、 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 FinT

6、ech (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 Petro

7、chemicals 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 INFORMAT

8、ION ONLY AND NOT AS A RECOMMENDATIONFOR ANY STOCK. IT CONTAINS FACTUALINFORMATION, OBTAINED BY THE ANALYST DURING MEETINGS WITHMANAGEMENT. J.P. MORGAN DOES NOT COVER THIS COMPANY AND HAS NO RATING ON THE STOCK.201620172018Sales240,503273,445291,845EBIT52,27051,73345,306Core net income29,97229,55922,

9、562Core EPS4.24.13.1EPS (Y/Y)7%-1%-24%Return on equity12.9%11.7%8.3%PE ratio15.916.121.1Price-to-book ratio1.991.781.72DPS0.250.280.30Dividend yield0.4%0.4%0.5%Source: Bloomberg, Company reportsCompany name (Reuters: JGS.PS, Bloomberg: JGS PM), Historical financial dataAsia Pacific Equity Research10

10、 April 2019Conglomerates & Multi-industry Daniel Andrew Tan, CFA AC(63-2) 554-2413 HYPERLINK mailto:danielandrew.o.tan danielandrew.o.tanJ.P. Morgan Securities Philippines, Inc.Jeanette Yutan(63-2) 878-1188 HYPERLINK mailto:jeanette.g.yutan jeanette.g.yutanJ.P. Morgan Securities Philippines, Inc.Aja

11、y Mirchandani(65) 6882-2419 HYPERLINK mailto:ajay.mirchandani ajay.mirchandaniJ.P. Morgan Securities Singapore Private LimitedJGS PM, Not CoveredPHP 66.45, April 10, 2019Five-year share price chart10090 8070 60 5040Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18Mar-19Source: Bl

12、oombergOne-year price performance 1M3M12M Absolute (%)-0.84.65.1Relative (%)-3.53.54.3Source: BloombergCompany data52-wk range (PHP)41.90-69.50Mkt cap. (PHP B)475.9Mkt cap. (US$ MM)9,164Shares O/S (MM)7,162Free float (%)40.99Liquidity (US$ MM)4.5Exchange rate52.02Index | PSEi8008.53 Year-endDecember

13、Source: Bloomberg.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

14、could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. HYPERLINK / Table of Contents HYPERLINK l _bookmark0 A large diversified conglomerate3 HYPERLINK l _bookmark1 Petrochemicals expansion in the works6 HYPERLI

15、NK l _bookmark2 Key parent-level initiatives8 HYPERLINK l _bookmark3 Infrastructure8 HYPERLINK l _bookmark4 Data analytics9 HYPERLINK l _bookmark5 Supply chain and logistics9 HYPERLINK l _bookmark6 Fintech9 HYPERLINK l _bookmark7 Sufficient annual parent cash flow10 HYPERLINK l _bookmark8 Potential

16、improvement in URC earnings10 HYPERLINK l _bookmark9 RLC: Malls and residential recovery12 HYPERLINK l _bookmark10 CEB: High seat capacity growth in 201913 HYPERLINK l _bookmark11 Valuation and share price analysis14 HYPERLINK l _bookmark12 Financials15 HYPERLINK l _bookmark13 Consolidated financial

17、s15 HYPERLINK l _bookmark14 Parent balance sheet and cash flow16 HYPERLINK l _bookmark15 Petrochemicals: Chemical spreads + capacity expansion are key drivers17 HYPERLINK l _bookmark16 Company background19 HYPERLINK l _bookmark17 Company overview19 HYPERLINK l _bookmark18 Management and shareholder

18、structure20 HYPERLINK l _bookmark19 JG Summit Petrochemical Corporation21 HYPERLINK l _bookmark20 JG Summit Olefins Corporation22 HYPERLINK l _bookmark21 Universal Robina Corporation22 HYPERLINK l _bookmark22 Robinsons Land Corporation23 HYPERLINK l _bookmark23 Cebu Pacific Air23 HYPERLINK l _bookma

19、rk24 Robinsons Bank23 HYPERLINK l _bookmark25 Core investments24 HYPERLINK l _bookmark26 JG Summit: Summary historical financial25A large diversified conglomerateLarge, liquid country proxyJG Summit is one of the largest names in Philippine equities with market capitalization of US$9bn (6th largest)

20、 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

21、th largest) and MSCI Philippines (5.9% weight, 6th largest).We have previously noted the markets 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

22、 of passive funds, in our view. AC has recently traded near its NAV vs. a long-term average discount of 12%. Please see HYPERLINK /research/content/GPS-2501566-0.pdf Ayala Corporation: Limited drivers for further HYPERLINK /research/content/GPS-2501566-0.pdf re-rating; Downgrade to N for more detail

23、s.Table 1: JG Summit is one of the largest index names in the countryNameTickerPSEi weightRankMarket Cap (USD Mn)RankADT last 3M (USD Mn)RankSM Investments CorpSM PM Equity13.0%122,02714.86SM Prime Holdings IncSMPH PM Equity9.4%221,77726.34Ayala Land IncALI PM Equity8.9%312,714310.31Ayala CorpAC PM

24、Equity6.8%411,02446.35BDO Unibank IncBDO PM Equity6.6%510,95557.12JG Summit Holdings IncJGS PM Equity5.0%69,00264.57Bank of the Philippine IslandsBPI PM Equity4.5%76,98893.710Metropolitan Bank & Trust CoMBT PM Equity4.0%86,106133.89Aboitiz Equity Ventures IncAEV PM Equity4.0%96,485121.722Jollibee Fo

25、ods CorpJFC PM Equity3.9%106,669104.28Universal Robina CorpURC PM Equity3.9%116,598113.112ICTSIICT PM Equity3.4%125,007156.73PLDT IncTEL PM Equity2.7%134,768173.211Manila Electric CoMER PM Equity2.3%148,08871.719Security Bank CorpSECB PM Equity2.1%152,598261.721GT Capital Holdings IncGTCAP PM Equity

26、2.0%163,402202.217Megaworld CorpMEG PM Equity1.6%173,551182.316San Miguel CorpSMC PM Equity1.6%188,01083.013Metro Pacific Investments CorpMPI PM Equity1.6%192,843232.218Globe Telecom IncGLO PM Equity1.5%204,909161.523Aboitiz Power CorpAP PM Equity1.3%215,012140.928Bloomberry Resorts CorpBLOOM PM Equ

27、ity1.3%222,704252.614Alliance Global Group IncAGI PM Equity1.3%233,145212.515Robinsons Land CorpRLC PM Equity1.3%242,407281.224LT Group IncLTG PM Equity1.2%253,488191.026Puregold Price Club IncPGOLD PM Equity1.2%262,726241.720DMCI Holdings IncDMC PM Equity1.1%273,016221.027Robinsons Retail Holdings

28、IncRRHI PM Equity1.1%282,420271.225First Gen CorpFGEN PM Equity0.7%291,536300.929Semirara Mining & Power CorpSCC PM Equity0.6%301,794290.730Source: Bloomberg, J.P. Morgan. Priced as of 09 April 2019.Figure 1: Philippine conglomerates revenues and net income (market cap in US$bn)Source: Bloomberg. As

29、 of 09 April 2019.Figure 2: Philippine conglomerates daily turnover and free floatSource: Bloomberg. As of 09 April 2019.Table 2: MSCI Philippines constituentsFloat Adj MktCap (USD bn)Index weight (%)RankSectorSM Prime7.6813.11Real estateAyala Land6.3010.82Real estateBDO Unibank5.028.63FinancialsAya

30、la Corporation4.527.74FinancialsSM Investments4.297.35IndustrialsJG Summit Holdings3.465.96IndustrialsJollibee Foods2.634.57Consumer DiscretionaryUniversal Robina Corp2.554.48Consumer StaplesMetropolitan Bank2.424.19FinancialsICTSI2.273.910IndustrialsSource: MSCI. As of 29 March 2019.Diversified: Fa

31、irly balanced earnings mixJGS 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 busin

32、esses (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 con

33、tribution 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% stakeListe

34、d orprivate2016-18 % ofearnings2016-18 % ofdividendsBusiness descriptionMeralco29.6%Listed20%39%Largest electricity distributor in PHURC55.3%Listed20%25%One of the largest branded food producers in PHRLC61.0%Listed14%6%Property developer with large share of leasingUIC37.0%Listed11%1%SG-based develop

35、er with office focusCebu Air67.6%Listed16%9%Largest domestic air transportPLDT8.0%Listed5%9%One of the two largest telcos in the countryJG Petrochem100.0%Private13%7%Owns first and only naphtha cracker in PH; PE and PP plantsGBPC30.0%Private2%3%Power producer in Visayas and MindanaoRobinsons Bank60.

36、0%Private1%0%19th largest bank in the countrySource: Company data. Descriptions from J.P. MorganFigure 3: Last 3Y average earnings contribution (ex-parent)GBPC, 2%Table 4: JGS equity income breakdown (ex-parent)JGPetrochem, 13%PLDT , 5%Banks, 1%2013201420152016201720182016-18averageMeralco1%24%18%15

37、%17%26%20%URC45%34%28%22%18%20%20%RLC20%15%13%11%11%20%14%UIC12%13%9%9%12%13%11%Cebu Air2%3%11%20%17%11%16%PLDT dividend income22%16%10%6%4%5%5%JG Petrochem-4%-4%11%16%18%4%13%GBPC0%0%0%1%2%2%2%Banks2%0%0%0%1%1%1%Meralco, 20%Cebu Air , 16%UIC, 11%Source: Company dataRLC, 14%URC, 20%Source: Company d

38、ata. Averages calculated by J.P. Morgan.Table 5: JGS equity income sector breakdown2013201420152016201720182016-18averageFood45%34%28%22%18%20%20%Power1%24%18%16%19%28%21%Property32%27%22%19%23%33%25%Petrochemicals-4%-4%11%16%18%4%13%Transport2%3%11%20%17%11%16%Telco22%16%10%6%4%5%5%Banking2%0%0%0%1

39、%1%1%Source: Company data. Averages calculated by J.P. Morgan.Table 6: Key subsidiaries details2016-18contributionTickerRatingCovering analystMER20%MER PMNAjay MirchandaniURC20%URC PMUWJeanette YutanRLC14%RLC PMOWJeanette YutanCEB16%CEB PMOWJeanette YutanUIC11%UIC SPNCNCJGS Petrochemicals13%NCNCNCSo

40、urce: Company data, J.P. Morgan calculations, BloombergEquity income with parent (Table 7) includes adjustments for interest expense, foreign currency gains/losses, and mark-to-market gains/losses, etc. at the parent level. The company booked a large loss in 2016 due to impairment of its stake in PL

41、DT.Table 7: JGS equity income breakdown (with parent and adjustments)2013201420152016201720182016-18averageMeralco2%26%22%46%19%34%33%URC60%37%34%66%20%26%37%RLC27%16%16%32%12%26%23%UIC16%14%11%26%13%17%19%Cebu Air3%3%13%60%18%14%31%PLDT Dividend income29%18%12%17%4%6%9%JG Petrochem-6%-4%14%47%20%5%

42、24%GBPC0%0%0%3%2%3%3%Banks3%0%0%1%1%1%1%Parent and others-35%-9%-22%-197%-11%-33%-80%Source: Company data. Averages calculated by J.P. Morgan.Petrochemicals expansion in the worksJG Summit Petrochemicals turned black in 2015 and gradually increased its earnings contribution to the parent company, av

43、eraging 13% from 2016-2018. This came after the company completed the integration of the naphtha cracker and expansion of capacity.The company is spending US$1.1bn to expand capacity which will underpin its 2020 target of EBITDA of US$200-300m from the current US$80-150m run rate. Payback on the exp

44、ansion is expected to range from 5-9 years. JG Summit Petrochemicals management noted that the company has made an initial investment of US$800m until 2014.The petrochemicals business had production issues in 2018, which led to lower utilization. This, along with the rise in naphtha costs, led to a

45、60% y/y decline in EBITDA to Php3.2bn. The companys initial EBITDA target for 2019 is in low Php4bn range, which implies slight improvement from 2018, due to planned 2-month shutdown in 4Q19 in view of the on-going expansion.JGS CEO Lance Gokongwei said that it is premature to spin off the business

46、into a separate listed company.Expansion plansThe companys petrochemical expansion involves increasing capacity of current plants and adding new plants: bimodal PE plant, butadeine extraction unit, and aromatics extraction unit. The company is targeting to complete the expansion by 2020.Table 8: JGS

47、 Petrochemical plant current capacityProductCurrent capacity (kTA)Expanded capacity (kTA)Ethylene320480Propylene190240Mixed C4100-140159Pygas150-200295 Bimodal PE plantBimodal PE250 Butadeine extraction unitButadeine70Raffinate89 Aromatics extraction unitBenzene126Toluene76Mixed xylenes46C8+/C9+18 N

48、on-aromatics29Source: Company data.Table 9: Expansion project detailsProjectLicensorEPCNaphtha cracker expansionLummusPOSCO (South Korea)Butadeine extraction unitLummus/BASFCTCI (Taiwan)Aromatics extraction unitGTCCTCI (Taiwan)Bimodal PE plantChevron PhillipsTencimont (Italy)PP expansionGraceJGC (Ja

49、pan)Source: Company data.Financing of expansionThe company is planning to spend US$1.1bn from 2018-20E based on the schedule below. This will be internally funded by debt at the petrochemicals level.Table 10: JGS Petrochemicals planned capex for expansion In USD MnProgrammed investment2018E3502019E4

50、00 2020E350 Total1,100Source: Company data.Key parent-level initiativesFigure 4: NAIA is by far the busiest airport in the country9.94.2 2.5 2.0 1.8 1.8 1.6 1.5 1.242.0MNL CEB DVO KLO ILO CGY PPS BCD CRKTACSource: CAAPFigure 5: Clark Airport is the fastest growing (2014-17 CAGR)20%13%9%7%7%6%5%6%3%2

51、%MNL CEB DVO KLO ILO CGY PPS BCD CRKTACSource: CAAPJG Summit is developing businesses in infrastructure, data analytics, and logistics. This is on top of its focus to grow its non-listed petrochemicals and banking businesses. Management also noted that the JG Summit has been professionalizing its bu

52、sinesses, with hiring of industry experts such as Irwin Lee as CEO of URC (30 years at Procter & Gamble).InfrastructureNAIA rehabilitation. JG Summit is part of the NAIA Consortium, which has secured the original proponent status (OPS) to rehabilitate and expand the countrys main airport, the Ninoy

53、Aquino International Airport (NAIA). The group submitted a Php102bn for a 15-year concession. The four terminals of the airport are currently serving 42m passengers annually vs. the 31m capacity.The NAIA Consortium is in discussions with DoTr regarding some provisions in the offer that have been dee

54、med to be government guarantees (Source: Inquirer). Once approved, the proposal will be endorsed to NEDA before the mandated Swiss Challenge. The consortium is targeting to begin upgrades on the airport beginning September this year.Other members of the consortium include Ayala Corporation (AC PM),

55、Aboitiz Equity Ventures (AEV PM), Alliance Global Group (AGI PM), Asia Emerging Dragon, Filinvest Development Corporation, and Metro Pacific Investments (MPI PM). Its technical partner is Singapores Changi Airports International.Clark Airport O&M. JG Summit is also part of the North Luzon Airport Co

56、nsortium (NLAC), which has won the 25Y contract for operations and maintenance of Clark International Airport. The concession agreement includes completing Terminal 2 (8m new capacity). Clark has been the fastest growing with 45% passenger CAGR from 2015-18. Passenger count grew to 2.7m in 2018 from

57、 1.5m in 2017.Management noted that the agreement involves Php10bn payment to government in tranches, investment of Php6-7bn for Terminal 2, with the group receiving 18.25% revenue share. Management also noted that this investment will not move the needle at JGS level, with low double-digit ROE targ

58、et over 25 years. The Php6bn is planned to be funded by debt.JG Summit has 33% stake in the consortium; other members are Filinvest Development Corporation, Singapore Changi Airport, and Philippine Airport Ground Support Solutions, Inc.Table 11: Busiest Airports in the Philippines*Passenger Traffic

59、(mn pax)GDP per% of% ofIATA201420173Y CAGRCatchment AreaRegion/sCapita US$GDPpopulationNinoy Aquino International AirportMNL34.042.07%Greater Manila AreaNCR, 3,4-A, 4-B4,35163%41%MactanCebu International AirportCEB6.99.913%Central Visayas72,2747%8%Francisco Bangoy (Davao) Intl AirportDVO3.54.27%Sout

60、hern Mindanao112,6955%5%Kalibo International AirportKLO2.32.53%Western Visayas61,8034%7%Iloilo International AirportILO1.72.06%Western Visayas61,8034%7%Laguindingan AirportCGY1.61.85%Northern Mindanao102,4214%5%Puerto Princesa International AirportPPS1.41.89%Palawan4-B1,4521%3%Bacolod-Silay AirportB