Philippine Markets Newsletter

This holding company’s diverse portfolio continues to go above and beyond as it develops double its as-reported return

November 16, 2022

This holding company’s portfolio allowed it to diversify risks and to capitalize on better opportunities amid the pandemic. However, its as-reported metrics do not seem to fully capture the company’s strategy as its profitability continues to have little to no shareholder value.

Also below, Uniform Accounting Embedded Expectations Analysis and the Uniform Accounting Performance and Valuation Tearsheet for the company.

Philippine Markets Newsletter:
Wednesday Uniform Earnings Tearsheets – Philippine-listed Focus
Powered by Valens Research

The pandemic has greatly disrupted the real estate industry.

In particular, the industry faced challenges and opportunities as demand shifted outside the central business districts. Companies like Sta. Lucia Land, Inc. (SLI:PHL) benefited from this incident as its project portfolio was focused on locations outside Metro Manila such as Rizal, Laguna, and Batangas.

Meanwhile, other companies continue to be challenged since 2020 mainly due to the combination of logistics issues, construction delays, and even the exodus of POGOs (Philippine offshore gaming operations).

One of these companies is Manny Villar’s Golden MV Holdings, Inc.(HVN:PHL).

Starting in 1982, the company ventured into the death care business in Golden Haven. However, the demand for luxurious memorial lots was negatively affected in 2020-2021 because of strict quarantine restrictions and limited social gatherings.

So in 2021, 83% of the company’s revenues came from its Residential segment under Bria Homes. This segment pertains to the development and sale of residential house and lots, subdivision lots, and condominium units.

In addition, the company was able to expand its target market by developing affordable house-and-lots throughout the country. Also, Bria Homes recently expanded its operations from Cavite to Camarines Sur as the company hopes to capitalize on demand far from over-developed areas.

Meanwhile, Golden Haven continues to have a dominant position in the death care industry by innovating new offerings such as launching a mobile app that makes client transactions easier and more convenient.

Nevertheless, the suspension of construction activities during the quarantine period and its slow resumption limited the company’s sales in real estate and memorial lots.

For H2 2022, the revenues of the company declined by 6%.

Looking at as-reported metrics, it appears that Golden MV Holdings’ returns continue to decline and produce below cost of capital levels, with return on assets (ROAs) reaching 4% in 2021.

In reality, the company’s financial performance is closer to pre-pandemic levels, with Uniform ROAs performing at 8%.

One major contributing factor that has led to the misstatement of as-reported metrics is the failure to consider current liabilities in the profitability calculation.

Traditional ROA calculations for measuring a firm’s earning power only include current and long-term assets as part of the cost of investment.

However, a company’s ability to receive goods and services in advance of payments—the current operating liabilities—ought to be factored in as well.

Current liabilities (excluding short-term debt) are necessary for operations. Items such as accounts payable, accrued expenses, and others are used to maintain the firm’s current capital position. On the other hand, long-term liabilities are mostly just used to finance the business.

If a company has a ton of cash to service its current liabilities and we only factor in its cash, it would make the company look inefficient. In reality, the company is just being responsible for building liquid assets to meet short-term obligations.

As such, net working capital (current assets – current liabilities) is used for the firm’s ROA calculation. This shows a company’s real cash management ability and thereby, its true earning power.

When current liabilities are subtracted from Golden MV’s assets, along with the many other necessary adjustments made, this leads to a 8% Uniform ROA in 2020.

Golden MV’s earning power is stronger than you think

As-reported metrics distort the market’s perception of the firm’s recent profitability. If you were to just look at as-reported ROA, you would think that Golden MV’s profitability has been recently weaker than real economic metrics highlight.

Through Uniform Accounting, we can see that the company’s true ROAs have been understated over the past decade. For example, as-reported ROA was 4% in 2021, but its Uniform ROA was 2x higher at 8%.

Golden MV’s Uniform asset turns are stronger than you think

For more than two decades, as-reported metrics have understated Golden MV’s asset turns, a key driver of profitability.

Moreover, Uniform turns have already reached 0.8x. In comparison, as-reported turns have yet to eclipse beyond 0.4x. over the same time period, making the company appear to be a less efficient business than real economic metrics highlight.

SUMMARY and Golden MV Holdings, Inc. Tearsheet

As the Uniform Accounting tearsheet for Golden MV Holdings, Inc. (HVN:PHL) highlights, the company trades at a Uniform P/E of 189.2x, above the global corporate average of 17.8x, but around its historical P/E of 189.5x.

High P/Es require high EPS growth to sustain them. In the case of Golden MV, the company has recently shown a 20% Uniform EPS growth.

Sell-side analysts provide stock and valuation recommendations that in general provide very poor guidance or insight. However, sell-side analysts’ near-term earnings forecasts tend to have relevant information.

We take sell-side forecasts for Philippine Financial Reporting Standards (PFRS) earnings and convert them to Uniform earnings forecasts. When we do this, Golden MV’s sell-side analyst-driven forecast is to see Uniform earnings growth of 8% in 2022, and immaterial growth in 2023.

Based on current stock market valuations, we can use earnings growth valuation metrics to back into the required growth rate to justify Golden MV’s PHP 620.00 stock price. These are often referred to as market embedded expectations.

The company is currently being valued as if Uniform earnings were to grow by 60% annually over the next three years. What sell-side analysts expect for Golden MV’s earnings growth is below what the current stock market valuation requires through 2023.

Moreover, the company’s earning power is above the long-run corporate average. However, cash flows and cash on hand are below total obligations—including debt maturities, capex maintenance, and dividends. Together, this signals moderate credit risk.

To conclude, Golden MV’s Uniform earnings growth is below its peer averages, but above its average peer valuations.

About the Philippine Markets Newsletter
“Wednesday Uniform Earnings Tearsheets – Philippine-listed Focus”

Some of the world’s greatest investors learned from the Father of Value Investing or have learned to follow his investment philosophy very closely. That pioneer of value investing is Professor Benjamin Graham. His followers:

Warren Buffett and Charles Munger of Berkshire Hathaway; Shelby C. Davis of Davis Funds; Marty Whitman of Third Avenue Value Fund; Jean-Marie Eveillard of First Eagle; Mitch Julis of Canyon Capital; just to name a few.

Each of these great investors studied security analysis and valuation, applying this methodology to manage their multi-billion dollar portfolios. They did this without relying on as-reported numbers.

Uniform Adjusted Financial Reporting Standards (UAFRS or Uniform Accounting) is an answer to the many inconsistencies present in GAAP and IFRS, as well as in PFRS.

Under IFRS, each company’s financial statements are rebuilt under a consistent set of rules, resulting in an apples-to-apples comparison. Resulting UAFRS-based earnings, assets, debts, cash flows from operations, investing, and financing, and other key elements become the basis for more reliable financial statement analysis.

Every Wednesday, we focus on one Philippine-listed company that’s particularly interesting from a UAFRS vs as-reported standpoint. We highlight one adjustment that illustrates why the as-reported numbers are unreliable.

This way, we gain a better understanding of the factors driving a particular stock’s returns, and whether or not the firm’s true profitability is reflected in its current valuations.

Hope you’ve found this week’s Uniform Earnings Tearsheet on a Philippine company interesting and insightful.

Stay tuned for next week’s Philippine company highlight!


Angelica Lim

Research Director
Philippine Markets Newsletter
Powered by Valens Research

View All

You don’t have access to the Valens Research Premium Application.

To get access to our best content including the highly regarded Conviction Long List and Market Phase Cycle macro newsletter, please contact our Client Relations Team at 630-841-0683 or email

Please fill out the fields below so that our client relations team can contact you

Or contact our Client Relationship Team at 630-841-0683