Alliance Global: On a Slump


Quick review of the McDonald’s operator in the Philippines

Alliance Global (AGI), a 133.5 billion peso Tan-led holding company, recently reported 1.5% rise in revenue for its 2017 operation compared to prior year and a 0.6% increase in profits.

“2017 has been a rather challenging year for the Group but that never deterred us from pursuing our growth ambitions. As we move forward, we remain focused on investing in our future. We have in fact spent close to P70 billion during the year for our ongoing expansion plans,” says Kingson U. Sian, President of AGI.

AGI has yet to file a complete annual report for its 2017 operations but as of September last year had 122 billion in debt, 77.8 billion in cash, and 157 billion in book value.

AGI’s business includes Megaworld, Travellers, Golden Arches (exclusive McDonald’s franchise), and Emperador. Megaworld produces most of AGI’s profits followed by Emperador.

According to its recent press release, AGI’s McDonald’s business recorded a healthy 33% rise in profits year over year and 12% rise in revenue for 2017.

AGI’s book value has grown at an average of 1.94% in the past ten quarters. The company also took in 30 billion peso in financing activities* in the past three years.

AGI, nonetheless, remains committed to allocating more money in its Megaworld business, 75% to be exact, for its 2018 operations.

COL Financial Group recently raised its fair value for its AGI to 18.34/share and rated its shares a buy. This blog’s estimates, meanwhile, arrived at a per share figure of 23.3/share.

At the time of writing (4/22/2018), AGI traded at 13.14/share.

Investors should consider buying AGI if they could just ignore AGI’s debt intake and weak business growth in recent years.

Disclosure: No shares in AGI.

*earlier blog said debt net repayments; corrected to financing activities.

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