Manila, Philippines

AGI (Alliance Global) Profits Jump: Personal Buy Rating

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Alliance Global Inc (AGI) is a holding company presently engaged in the food and beverage business (The Bar, Generoso Brandy, Emperador and PikNik), real estate (Megaworld, Travellers International, Resorts World, Maxims Hotel), and QSR (McDonald’s via Golden Arches master franchise), plus a few more acquisitions in the names of Global Estate Resorts, Empire East Landholdings and Suntrust Properties.
Given its wide array of subsidiaries, AGI is one of my favorite stocks. Recently, AGI released their 1H11 financials  and I would say that the AFS presented very strong first half results. Having said this, it actually made me bullish once more on the stock, and it makes me wonder why the market is not. In the past few days, the stock has not reacted as much.
As follows is my brief fundamental analysis, a bit of technicals, and a bit of company shopping:

1. Net Profits: First half net profits jumped is at Php9.6B, already more than the full-year profit of Php9.5B last year. Excluding one-off income from acquisition of GERI, net profit is still 31% higher. I’d like to add that GERI is also a very promising acquisition.  

2. Cash Rich: AGI is very cash rich, just like a few years ago when share prices dropped to Php2 levels. As at their Jun30 AFS, they have a whopping Php65B in liquid cash. Given that they have 10B outstanding shares, cash per share is a whopping Php6.30! At prices last Friday (Php10.64) and at Jun30 cash levels, this is like buying the stock price at a Php6.30 discount so you actually risk a mere Php4.34! That’s like Sep09 prices! Or to be more accurate, using share price as at Jun30 (Php11.38), it’s like buying AGI at Php5.08, which is the Jul2010 price!

3. Buy Signal: MACD is at a buy signal already. Or is the market waiting for other indicators? Or have they priced this AFS already at current share price?
4. Positive Prospects: A number of McDonald’s are ongoing renovations. It means they have the money to improve their facilities. Another article mentioned that the top board is considering a pay increase. Again, they have money to spare. Many ongoing projects as well, plus the recent news that they will be building other casinos in the Metro as tie-up with other casino developers.

5. P/E Ratio: P/E ratio is now at 12.88, lower from previous 14. This P/E ratio is actually reasonable enough, not outrageous compared to speculative stocks. PLDT (TEL) P/E ratio is at 21 given that PDLT is very big already! What is the average PSEi P/E ratio?


6. Liabilities: Very minimal liabilities. The biggest chunk is actually the dollar bond issued by MEG. Dunno when this is due. It will be interesting to know as well how the bond is affected by falling dollar prices. Does it make the bond payables more expensive for AGI?

So the past few days, I have been bullish about AGI. I just hope that I am correct. I don’t think the share price right now has already priced the recently released AFS. I just hope that the market is delayed to react. If I’m correct, then I’ve beaten the market in loading up on AGI! Fingers crossed!
Disclaimer: I hold AGI stocks right now, as mentioned above. And this Buy rating is just my opinion, not really to encourage people to buy, but to share my methodology in arriving at such decision. I am not a licensed stock broker, I merely trade on my own, so do not consider this a professional advice.
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 PH Stock Market PSE: AGI

3 Responses

  1. pen_name says:

    Thank you for the comments stocks_newbie and Anonymous.

    I also like AGI stock (apparently) so lucky us if we have the funds to load up for some more. Let's just be careful not to catch falling knives.

    PS. TEL is a veteran in PSE. No wonder it's the most expensive stock.

  2. Anonymous says:

    Everything's bearish because of the global markets.

    AGI might go down some more.
    Opportunity to buy!!!

    I like AGI!!!
    I like TEL (div more than 10% annually based on current prices) – beats TDs and TBs.

  3. stocks_newbie says:

    AGI on a downtrend lately, though the general market is also bearish lately. What do you think?

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