University of San Carlos

School of Business and Economics

Department of Accountancy

A Financial Due Diligence on:

“Ayala Corporation”
_______________________
In Partial Fulfillment
of the Requirements for the course
AC 521: Business Technical Writing
________________________

Submitted to:
Atty. Joram Deogracias, CPA
Teacher

Submitted by:
Astillero, Marian Ingrid
Lozada, Prince Niño
Umpad, Nicole Frances Andrea
Eumague, Maria Kem
Rio, Claire
Students
 Table of Contents
Executive Summary.......................................................................................................................... 2

Company Background ...................................................................................................................... 3

Vision ........................................................................................................................................... 3

Mission ........................................................................................................................................ 3

Corporate Governance ................................................................................................................ 3

Quantitative Analysis ....................................................................................................................... 4

Earnings Per Share ....................................................................................................................... 4

Trend Analysis.............................................................................................................................. 4

Qualitative Analysis.......................................................................................................................... 5

SWOT Analysis ............................................................................................................................. 5

Strengths .................................................................................................................................. 5

Weaknesses ............................................................................................................................. 5

Opportunities ........................................................................................................................... 6

Threats ..................................................................................................................................... 6

PEST Analysis ............................................................................................................................... 7

Political Environment ............................................................................................................... 7

Economic Environment ............................................................................................................ 8

Social Environment .................................................................................................................. 8

Technological Environment ..................................................................................................... 9

Key Performance Indicators ...................................................................................................... 10

Conclusion ...................................................................................................................................... 12

Appendix ........................................................................................................................................ 13

1|Page
Executive Summary
Ayala Corporation is one of the oldest conglomerates in the country. It has been one of the
foundations of progress in the Philippine economy. Ayala is famous for its high end malls and premium
residential real estates or condominiums. It is a prestigious company that always forms a demand and is
less battered in bear markets as compared to unknown companies. It has established its name well
throughout the years. It's one of the best performing companies in the country. It performs well
financially, as indicated by the financial statements provided. In addition, Ayala is also managed by one of
the best executives and managers in the country. In fact, Ayala has bagged the award for Best Managed
Company in Asia.

The primary objective of this study is to help stockholder/s in assessing how worthy it is to invest
in a corporation like Ayala. Further analysis of the company management and operations are done to
provide information that may help in evaluating the company performance. With the information
gathered, it is realized that Ayala stocks are actually worth buying and holding on to.

2|Page
Company Background
Ayala Corporation is a diversified conglomerate in the Philippines with business interests
in real estate and hotels, financial services and insurance, telecommunications, water
infrastructure, electronics manufacturing, industrial technologies, automotive, power generation,
transport infrastructure, international real estate and technology ventures. One of its flagship
holding is Bank of the Philippine Islands which is one of the country’s largest banks. It also has a
social commitment arm. Ayala Foundation, has programs that focus on education, youth
leadership, sustainable livelihood, and the promotion of arts and culture. With its core values;
Integrity, Innovation and strategy, Empowering Leadership, Pride and Execution, and
Commitment to National Development, Ayala Corporation aligns their strategies with social goals
to contribute a positive change to the communities and the nation.

Vision
We will be the most relevant, innovative and enduring Philippine-based business group,
enabling shared value and prosperity for the many stakeholders we serve.

Mission
Anchored on values of integrity, long-term vision, empowering leadership, and with a strong
commitment to national development, Ayala fulfills its mission to ensure long-term profitability and
value creation. Ayala creates synergies as it builds mutually-beneficial partnerships and alliances
with those who share philosophies and values.

Corporate Governance
Through the large scale of operation that Ayala Corporation operates, its decision-making
process must be inclusive and responsive to the needs of the shareholders and address a wider
base of interests.

Ayala adheres to the principles of good governance including transparency, integrity,

accountability, and fairness. The basic elements of Ayala’s corporate governance system include
a combination of internal and external mechanisms.

3|Page
Quantitative Analysis
Earnings Per Share

Trend Analysis

4|Page
Qualitative Analysis

SWOT Analysis
Strengths

Ayala Land has its financial strength from its resources and the stability of its parent company

Strong financial growth and profitability

Has its organizational strength because they just hire qualified employees

Strong and experienced portfolio of its business units

Has its business stability quality, quality products and service strength

Excellent corporate governance framework

Strategies aligned towards sustainable development

Country’s largest conglomerate for the time

Aside from owning some of the large malls in the country, it also owns large residential areas,
prestigious hotels and resorts, which means an expanded scope of business

Weaknesses

The buying opportunities in the share price of Ayala Corporation because of its high selling price

The weak export of its products

Very little global presence

The slowing growth in China and weak job creation in United States

5|Page
Opportunities

Entry into e-commerce sector

More idle land in the country means more openings for Ayala Corporation to expand its business

As the population increases, housing and residential needs also increase

For growing countries like the Philippines, the need of the masses gets higher—which means
higher demands from the people (growing needs of growing economy)

Threats

SM prime is Ayala’s biggest competitor

SM prime is building more condominiums and more malls that have larger areas than Ayala’s

Possible contingencies in portfolio management

Risks arising due to political and regulatory reforms

Funding

Adverse impact of capital market factors

Synergy risk

6|Page
 PEST Analysis

Political Environment

After effects of Trump’s policies:

After having put behind the times of dictatorship, and now living under the federal
government, Philippines has seen good years of political stability in the past few years. Philippines has
been successful in providing a positive political atmosphere under the leadership of President Rodrigo
Duterte. However, post the election of Donald Trump as the US president there is fear that Trump’s trade
and immigration policies could weaken the economy of Philippines. The merchandise trade has
experienced minimal effect as the Philippines’ export to US is very less. But Philippines’ service export has
had to bear brunt of Trump’s protectionist policies. The BPO companies which were mostly serving the
US firms, have seen a gradual decline in their revenue with many US clients preferring to not extend their
contract with Philippine companies. The scenario for manufacturing sector is still good and is expected to
remain healthy due to Pres. Duterte policies on promoting the sector. Ayala Corporation has not been
affected too much after Trump’s election which could be attributed to their readiness to take on all
possible contingencies.

7|Page
 Economic Environment

Resilience to global economic slowdown in 2016:

Slower economic recovery in 2016 weakened the net exports; however, increasing
domestic demand pushed the GDP growth rate of the Philippines to 6.8%. The consumption growth
remained strong due to monetary policies which kept the interest rates slow and supported healthy
expansion in consumer lending. Ayala Corporation also reaped the benefits of consumption growth with
the strong revenue growth and is expected to continue the same.

Growth prospects are subjected to certain downside risks:

Looking from external front, increasing global interest rates could weaken the Philippine
currency peso and this could adversely affect capital inflows to the Philippines resulting in surge of
domestic inflation. Global crude oil prices are expected to rise in 2018, which could also increase
inflationary pressures. Hence, there are chances that Ayala Corp. may have to cope up to the decrease in
demand due to higher inflation rates, so proper mitigation strategy and implementation on this front
becomes a necessity for the company.

Social Environment

Growing demand for products and services to maintain social status in emerging markets:

With the growth of economy, also comes the growth in the living standards of the people
of the country. People of the Philippines will have more purchasing power with increase in their income;
with the rise in income, also rises the need to maintain and showcase the status to the society. Almost all
of Ayala’s business ventures will come in handy to fulfill this need. For example: real estate, automotive
sector, banking, utilities—all these would help in fulfilling the demands of Filipino citizens.

8|Page
 Technological Environment

Digitalization of services through technology:

E-commerce and digital payment platforms are changing the way people purchase goods.
These give businesses a space to innovate services for new markets and grow at a faster pace. As the
digital economy expands, traditional logistics infrastructure and systems is also undergoing a similar digital
transformation to meet the needs of these growing market place. Ayala Corporation has partnered with
Brilliant 1257 GmbH & Company Vierte Verwaltungs Kg to form a technology-driven end-to-end fulfillment
solutions company. The joint venture company formed—Entrego Fulfillment Solutions Inc., draws from
its strong competence and track record in e-commerce fulfillment solutions. It also intends to build on its
expertise in e-commerce logistics and fulfillment solutions and offers an integrated suite fulfillment
services.

Transforming the telecommunication sector:

Ayala Corporation has interest in real estate, banking, information technology, utilities,
automotive and telecommunications. The corporation’s timely interventions and use of its balance sheets
were instrumental in the development of its business. Ayala Corporation was able to turn Globe Telecom
into one of the most successful companies in the country by attracting strong strategic partners in
Singapore Telecom and Deutsche Telekom and also by putting a strong management team in place.

9|Page
Key Performance Indicators

10 | P a g e
 The table sets forth the comparative key performance indicators of the Company and its material
subsidiaries.

In general, the above key performance indicators were within targeted levels. For the balance
sheet items (current ratio and debt to equity ratios), the company aims to maintain for its current ratio
not to be lower than 0.5:1 and for its debt to equity ratio not to exceed 3:1. The company and its
subsidiaries’ ratios are considered better than these levels as a result of prudent debt management
policies.

There were no events that will trigger direct or contingent financial obligation that is material to
Ayala Corporation, including any default or acceleration of an obligation. Likewise, there were no material
off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other
relationships of the company with unconsolidated entities or other persons created during the reporting
period.

For the past five years, the company has been consistently receiving commendation from the
MWSS Board of Trustees for outperforming the target set by the regulators in terms of KPI and other
service obligations.

11 | P a g e
Conclusion
Overall, Ayala Corporation is a well-performing company especially in the financial aspect. From
the data provided by Investing.com, its revenues has increased by 18% and its net income applicable to
common stockholders by 3%. Revenues reflect an increase in demand for the Company's products and
services due to favorable market conditions. The company's stock price has gone up to almost a thousand
pesos but still, there is a high demand for Ayala stocks. Ayala is still in an uptrend. Technical analysis
confirms that there is still a good long-term demand on the stock, and it continues to be in an upward
direction for the long term. It also has a very strong balance sheet. Ayala Corp boasts of a very strong,
liquid, and dynamic balance sheet, with tons of cash to maximize more growth opportunities in the future.
This tells a lot about the company's guaranteed financial stability in the long run. As the company
continues to perform well financially, it also assures higher returns to its stockholders. The company is
also undeniably well-managed. By having a few of the best executives and managers in the country run
the company, Ayala Corporation continues to remain in the top performing companies in the Philippines.
It could be concluded that an investment in Ayala stocks would be very promising and worth spending
every penny for.

12 | P a g e
 Appendix
1. Trend Analysis: https://www.pesobility.com/stock/AC

2. Disclosures: http://www.ayala.com.ph/disclosures

3. Ayala stocks: https://m.investing.com/equities/ayala-corp-financial-summary

13 | P a g e