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OUTLIER: Investors lukewarm on Alliance Global as pandemic woes persist

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By Lourdes O. Pilar Researcher

INVESTORS remained lukewarm on Alliance Global, Inc. despite the diversified conglomerate’s report of a double-digit income growth last year as the pandemic cast a long shadow to its profitability this year.

A total of P1.54 billion worth of 220.72 million shares exchanged hands from June 22 to 26, data from the Philippine Stock Exchange (PSE) showed. Alliance Global was the fifth most active stock that week.

Shares in AGI finished at P6.72 apiece on Friday, down 3.7% from P6.98 a week ago. Since the start of the year, they have contracted 40.5%.

“Last week, Alliance Global’s stock price underperformed the market and fell by 3.7% compared to the PSEi (PSE index) which dropped by only 2%. We believe investors might continue to prefer stocks least affected by the pandemic,” Philippine National Bank (PNB) Equity Research Analyst Marco R. Mauleon said in an e-mail.

“Moreover, Alliance Global announced that it is accelerating its digital transformation strategy across its businesses as it braces for the ‘new reality,’” he added.

In a separate email interview, Philstocks Financial, Inc. Client Engagement Officer and Research Associate Piper Chaucer E. Tan said investors’ optimism on Alliance Global is starting to dissipate as the number of coronavirus disease 2019 cases continued to increase.

“We expect that the second-quarter earnings will be on a downward bias since the enhanced community quarantine restrictions full effect will reflect on second-quarter earnings figures. The silver lining on Alliance Global is that we expect the company to recover from this pandemic,” Mr. Tan said.

In a disclosure to the local bourse last Thursday, Andrew L. Tan-led Alliance Global’s net profit expanded 14.5% to P27.10 billion last year as its consolidated topline similarly increased 14.8% to P179.99 billion last year from P156.77 billion in 2018.

Its net income attributable to the parent went up 17.3% last year to P17.72 billion from P15.11 in 2018.

Broken down by segment, Alliance Global’s property arm contributed the largest to its parent with P17.9 billion; beverage arm Emperador, Inc., P7 billion; McDonald’s master franchise holder in the country Golden Arches Development Corp., P1.9 billion; and Resorts World Manila operator Travellers International Hotel Group, Inc., P945 million.

As it braces for the “new reality” amid the pandemic, Alliance Global is accelerating its digitalization efforts, such as investments in e-commerce platforms, interactive customer service management, and contactless online transactions, among others, across its various businesses.

For this year, analysts are pencilling in a lower bottom line for the conglomerate due to the pandemic.

“For the remainder of the year, we expect that the earnings of Alliance Global will be lower given that the full extent of lockdown is yet to reflect to its second quarter earnings figures,” Philstock’s Mr. Tan said. “We expect the net income for Alliance Global to be at P22 billion to P23 billion in full-year 2020.”

PNB’s Mr. Mauleon said Alliance Global’s liquor, fast-food restaurant and gaming businesses this year “are exposed to a potential drop in discretionary spending due to the pandemic.”

“As such, we expect Alliance Global’s net income will be lower in 2020. Moreover, the weak consumption of non-essential items may persist even after the crisis,” he said.

Among its subsidiaries, he said: “We believe MEG (Megaworld) will be least hurt due to its strong exposure in the office leasing segment, which may partly offset weakness in residential demand.”

Mr. Mauleon gave Alliance Global a “sum-of-the-parts-based” target price of P6.80 apiece this week.

Philstock’s Mr. Tan placed Alliance Global’s primary support this week at P6.50 and secondary support at P6.00, while the primary resistance at P7.70 and a secondary resistance at P9.25, should it break.

“We expect a slight rally for [this] week due to month-end window dressing most especially on the PSEi-member index stocks,” he added.





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