Philippine Markets Newsletter

This “techglomerate” is proving its pivot towards infra is effective, generating true Uniform returns 3x as-reported metrics

June 21, 2023

This tech-focused conglomerate is pivoting towards infrastructure, joining a “super consortium” to develop the country’s primary airport. 

Despite diversification strategies to seek higher returns, as-reported data show disappointing results. In reality, Uniform accounting metrics indicate promising future growth.

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

Earlier this year, the Manila International Airport Consortium (MIAC), backed by six of the Philippines’ largest conglomerates, submitted an unsolicited proposal to the Transportation department.

The proposal, worth approximately PHP 267 billion, aims to develop and rehabilitate the Ninoy Aquino International Airport over a concession period of 25 years.

One noteworthy member of the MIAC is Aboitiz InfraCapital (AIC), a subsidiary of Aboitiz Equity Ventures, Inc. (AEV:PHL), known in the industry as a “techglomerate.” Interestingly, Aboitiz Equity is now increasingly turning its focus towards its infrastructure business, besides strengthening its technological pursuits.

Aboitiz Equity’s 2022 financial performance showed a slight dip, with a net income of PHP 24.8 billion, reflecting a 9% or PHP 2.5 billion drop from the previous year. This decline is largely due to an increase in non-controlling interest following the sale of shares in its energy division, AboitizPower.

With Aboitiz Equity decreasing its reliance on one segment, it is looking at making a strategic shift towards bolstering its infrastructure business.

As part of this expansion, AIC has actively advanced its presence in the airport sector. Besides its involvement in the MIAC, it has also recently acquired shares in the GMR-Megawide Cebu Airport Corporation. In partnership with Aboitiz Data Innovation, AIC aims to implement smarter, environmentally conscious solutions for the Mactan–Cebu International Airport.

With PHP 30 billion set aside for expansion in this sector moving forward, it is clear that even though Aboitiz Equity is big in tech, the company is looking at infrastructure as its next step for growth.

However, when examining as-reported data, these strategies appear to be underestimated as the ROAs just slightly exceed the cost-of-capital levels.

In reality, the company’s Uniform ROA was actually able to reach above cost-of-capital levels at 9%, triple its as-reported ROA of 3%.

One of the said distortions stems from how Philippine Financial Reporting Standards (PFRS) classifies Aboitiz Equity’s non-operating long-term investments. 

Composed mostly of long-term financial securities and non-controlling ownership interests, these are not considered to be core to the company’s operations since the firm has no management influence on either of these.

As such, removing non-operating long-term investments from the balance sheet and with the other adjustments Valens makes, Aboitiz Equity’s Uniform earning power has actually been more than 2.5x as-reported ROA since 2014.

Specifically, in 2022, the company recorded non-operating long-term investments at PHP 203 billion. Removing non-operating long-term investments from the balance sheet, along with many other necessary adjustments made by Valens, leads to a PHP 333 billion Uniform Net Assets and a 9% Uniform ROA, more than 3x its as-reported ROA.

Aboitiz Equity’s profitability is much more robust than you think

As-reported metrics distort the market’s perception of the firm’s historical profitability. If you were to just look at as-reported ROA, you would think Aboitiz Equity’s profitability has been weaker than real economic metrics have highlighted in the past thirteen years.

Through Uniform Accounting, we can see that the company’s true ROAs have been understated. For example, as-reported ROA was 3% in 2022, but its Uniform ROA was higher at 9%.

SUMMARY and Aboitiz Equity Ventures, Inc. Tearsheet

As our Uniform Accounting tearsheet for Aboitiz Equity Ventures, Inc. (AEV:PHL) highlights, the company trades at a Uniform P/E of 12.7x, below the global corporate average of 18.4x and its historical P/E of 14.1x.

Low P/Es require low EPS growth to sustain them. In the case of Aboitiz Equity, the company has recently shown a 160% Uniform EPS shrinkage.

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, Aboitiz Equity’s sell-side analyst-driven forecast is to see a Uniform earnings decline of 314% and 19% in 2023 and 2024, respectively.

Based on current stock market valuations, we can use earnings growth valuation metrics to back into the required growth rate to justify Aboitiz Equity’s PHP 53.35 stock price. These are often referred to as market embedded expectations.

The company is currently being valued as if Uniform earnings were to shrink by 2% annually over the next three years. What sell-side analysts expect for Aboitiz Equity’s earnings growth is below what the current stock market valuation requires through 2024.

Moreover, the company’s earning power is 2x the long-run corporate averages. However, cash flows and cash on hand are below total obligations—including debt maturities, capex maintenance, and dividends. Together, this signals high dividend risk.

To conclude, Aboitiz Equity’s Uniform earnings growth is well below its peer averages and in line with 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