Ayala Corp., the Philippines’ biggest property developer, plans to build a record number of homes in 2012 and expand into airports and railways, Chief Executive Officer Jaime Augusto Zobel de Ayala said.
“We have committed the highest capital spending ever in our history,” Zobel, 53, also chairman and son of billionaire Jaime Zobel De Ayala, said in a March 9 interview in Manila. “Ayala Corp. a hundred years ago is different from today. We’re open to change.”
Zobel plans to boost capital spending by 38 percent this year to a record 91 billion pesos ($2.1 billion), 75 percent of which is set for property unit Ayala Land Inc. and Globe Telecom Inc. While the company has diversified interests to include banking, its expansion pace has lagged behind rivals such as San Miguel Corp., which moved beyond its roots as a brewer to become the largest power producer in Philippines.
“They have been criticized before for being conservative even on the property side,” said Richard Laneda, an analyst at Manila-based CitisecOnline.com. “The group has turned more aggressive with investments in its core interests while trying to move fast in other ventures like energy and infrastructure.”
Ayala Corp. advanced 0.9 percent to 416.60 pesos as of the mid-day break in Manila trading. Ayala Land rose 2.7 percent to 21.20 pesos, and Globe Telecom was unchanged at 1,200 pesos.
Gin, Rum Traders
Zobel’s family started as traders and gin and rum distillers 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 on Ayala Avenue.
The company took its first step into the power industry last year when it bought 50 percent of a wind farm.
“Ayala’s core businesses are at a mature stage,” said Laneda, who has a “buy” rating on Ayala Corp., according to data compiled by Bloomberg. “It has to go outside of these areas and seek new ventures to provide it with another source of growth,”
Ayala Land plans to start construction of almost 25,000 units in 2012, 20 percent more than last year, Zobel said.
“In real estate, we have more projects going on line than ever in our history,” the CEO said. “We’ve signaled our strong interest in the infrastructure projects of the government.”
Ayala Land won the first road project offered by President Benigno Aquino’s administration to investors in December and wants to invest in airports and rail projects, especially in areas where it can build more homes and malls, Zobel said.
The government plans to offer as many as 18 projects worth more than 200 billion pesos to investors this year as Aquino seeks to create jobs and spur the $200 billion economy after growth slowed to a two-year low in 2011.
Ayala Corp. has flexibility to fund investments in power and transportation, sustain dividends and buy back shares of the company and its units on an “opportunistic basis,” according to a company presentation dated March 9. It had more than $1.6 billion in cash and short-term investments as of September, according to data compiled by Bloomberg.
“With interest rates low and a system awash with cash, it’s a good time for Ayala to be aggressive with expansion,” Laneda said.
Ayala Corp. has said it will build 1,000 megawatts of power capacity over five years. San Miguel has capacity of 3,148 megawatts.
Ayala Land and lending arm Bank of the Philippine Islands, known as BPI, posted record profit in 2011 while Globe’s revenue was at an all-time high.
“In 2012, we should continue that trend,” Zobel said. Ayala Corp.’s net income fell 16 percent last year after 2010 profit was boosted by a one-time gain. Stripping out one-time items, earnings rose 16 percent and that trend should continue, he said.
Globe, 30 percent owned by Ayala and 47 percent held by Singapore Telecommunications Ltd., plans capital spending of as much as $800 million this year as it expands and modernizes its mobile-phone network.
Ayala Land and Globe have announced plans to sell at least 10 billion pesos of bonds this year. BPI has sufficient capital to meet the requirements of the Basel III accord, Zobel said.
Ayala Corp. has gained 34 percent in Manila trading this year, Ayala Land has advanced 40 percent and BPI has climbed 37 percent. All three have outperformed the benchmark stock index. Globe Telecom has risen 6 percent so far in 2012.
“It’s not within Ayala’s philosophy to invest or take over a company with the intention of fixing its problems,” said Jomar Lacson, an analyst at brokerage Campos Lanuza & Co. Inc. “It’s their nature to be conservative.”
The Zobel family traces its roots to Juan Valentin de Ayala, who settled in the Philippines in 1795 from the Basque region of Spain. In 1834, Antonio de Ayala and businessman Domingo Roxas founded Casa Roxas to engage in agricultural trading and later began distilling liquor.
Unlike San Miguel’s Ramon Ang and Philippine Long Distance Telephone Co. Chairman Manuel Pangilinan, Zobel prefers to build existing businesses, limiting mergers and acquisitions to when there are cheap opportunities.
“The Ayala group is moving aggressively through organic growth,” Zobel said. “M&A in a hot market like this; you’re paying a lot and giving that value to somebody else.
‘‘The best time for M&A is when the market is down.’’