The nation’s oldest conglomerate will continue to invest in Philippine infrastructure projects and pursue organic growth to win market share, Zobel, 53, a scion of one of the Philippines’ richest families, said in a Bloomberg Television interview.
“We’ve begun to move into the space in Vietnam and Indonesia as first steps,” Zobel said in Hong Kong Feb. 6. “We don’t see why that has to stop with just those two countries.”
Growth in Southeast Asia is outpacing bigger nations in the region, with the exception of China, after policy makers took steps to bolster their economies amid sluggish global expansion. Japan’s drive to revive growth is expected to further boost Southeast Asia, where announced acquisitions surged 39 percent to $140.7 billion in 2012 from $101.1 billion the year before.
“Ayala’s growth in the Philippines is a bit limited already and it needs to achieve returns on a larger scale,” Jomar Lacson, an analyst at Manila-based Campos Lanuza & Co, said by phone. “It could replicate its success in the water business here in emerging markets in the region.”
Unit Manila Water Co. said in July it acquired a 47 percent stake in Kenh Dong Water Supply Joint Stock Co. in Ho Chi Minh City through its Singapore subsidiary, after buying 49 percent of Thu Duc Water BOO Corp., also in Vietnam, in November 2011. Manila Water also agreed in October to acquire Suez Environnement Co.’s 51 percent stake in PT PAM Lyonnaise Jaya, which holds the concession contract for western Jakarta.
Ayala Corp. bought DBS Group Holdings Ltd.’s 10.4 percent stake in Bank of the Philippine Islands for $620 million in October, boosting its holding to 44 percent. In December, the company acquired a stake in a 600-megawatt coal-fired plant in Mariveles, Bataan, north of the capital.
“We’ve always believed in the possibility of mergers and acquisitions as a way of expanding,” Zobel said. “In real estate it means acquiring new land or partnering with others. In the financial sector, Bank of the Philippine Islands is where it is today through five or six different mergers in the past two decades so we’re open to that as well.”
The bank known as BPI held discussions with owners of Philippine National Bank in November and PNB said exclusive talks ended on Dec. 15.
Zobel’s family started as traders and distillers of gin and rum almost 180 years ago. The family expanded its businesses after World War II and helped develop Manila’s main financial district of Makati, which includes the national stock exchange along Ayala Avenue.
While the company has diversified into telecommunications, its expansion pace has lagged behind rivals including San Miguel Corp., which moved beyond its roots as a brewer to become the largest power producer in the Philippines.
“Ayala’s diversification is a struggle between staying conservative and being aggressive in its desire to engage in higher-growth businesses such as infrastructure and power,” Lacson said. “It’s no longer the same conservative animal that we’ve known it to be. Investors have always demanded more growth from the company and they are answering that call.”
Ayala Land Inc., the property arm, said yesterday that 2012 net income rose 27 percent to a record 9.04 billion pesos ($222 million), boosted by home sales. BPI’s profit increased 27 percent last year to 16.3 billion pesos. Globe Telecom Inc., Ayala’s venture with Singapore Telecommunications Ltd., reported a 30 percent decline in 2012 net income to 6.86 billion pesos on higher costs related to network improvements.
BPI and Ayala Land shares closed at record levels yesterday after the benchmark stock index climbed to a record.
Integrated Micro-Electronics Inc., Ayala’s semiconductor unit, has operations in Singapore and six manufacturing facilities in China, where it’s a supplier to the telecommunication industry, Zobel said.
The group will focus on consumers who buy houses, open bank accounts, use mobile phones “and essentially drive many of our different business groups,” Zobel said. Consumer spending makes up about 70 percent of the Philippine economy, he said.
There’s no bubble in the Philippine property sector where there remains a backlog of 4 million homes, Zobel said. Record- low interest rates, inflation that is within the central bank’s target and an exchange rate trading near a five-year high benefit Ayala and other Philippine companies, he said.
The $225 billion economy grew 6.6 percent last year, more than economists estimated, as government spending, consumption and investment rose. Bangko Sentral ng Pilipinas kept borrowing costs at a record-low 3.5 percent last month, while targeting an average inflation of 3 percent to 5 percent until 2014.
The nation, currently rated at the highest junk level, will probably win its first investment grade status this year, central bank Deputy Governor Diwa Guinigundo said yesterday.
The peso climbed to 40.55 per dollar on Jan. 14, the strongest since March 2008. It’s the best performer among emerging-market currencies in the past 12 months.
Ayala's stock has gained 41 percent in the past year, outpacing the 36 percent increase in the benchmark index.
“The overall sheen on the country has been so positive that it has really helped our whole group,” Zobel said. “It’s also an exciting time in the Southeast Asian region and the skill sets we’ve begun to build in our group companies are best practice in many ways for emerging markets.”