The Ayala Corp. Mafioso Incorporated
In the last daily of our Conglomerates series, we walked you through Korea’s Samsung Empire.
But down in Asia’s wild Southeast, conglomerates tend to be bigger, more diversified and more active.
In the land of frontier and emerging markets, institutions are weaker.
To bypass their inherent weakness, companies must own a wide range of functionalities in order to do business effectively.
For that reason, the diversified model is more powerful in Southeast Asia.
And a prime example of a strong Southeast Asian conglomerate is the Philippines’ very own Ayala Corporation (OTCMKTS: AYALY).
Like many successful Southeast Asian conglomerates, Ayala has an extremely diverse portfolio.
It is also committed to national development, and currently uses mergers and acquisitions (M&A) to maintain profit growth and to expand into international markets.
A company that grows with its economy
(The Ayala Corporation is accredited developing the Philippines and for establishing Makati as Manila’s financial district, photo taken in 2017. Photo: Shutterstock)
Its market-cap, at US$12.4 billion, shows its influence. The enormous company accounts for 6 percent of the Philippines Stock Exchange.
Below is a timeline of the Philippines’ economy and the expansion of Ayala. As you can see, Ayala was there every step of the Philippines’ development to lend a helping hand.
The Ayala Group reigns queen of the Philippines by staying highly-diversified
As you can see below, Ayala is highly diversified and recently the conglomerate started reaching outside of the Philippines to satisfy its need for expansion.
Ayala owns businesses in multiple nationally strategic sectors. This includes real estate, water infrastructure, financial services, electronics manufacturing, business process outsourcing, power generation and education.
Holding tightly onto sectors deemed strategic for national growth is extremely beneficial, as the government grants subsidies and tax breaks these “promising” sectors.
Tagging along guarantees long-term growth for Ayala.
But for more immediate gains, Ayala focuses on industries like power and transportation.
Ayala’s secret longevity and profitability weapon
Ayala knows that great success is driven by having an incredibly efficient management approach and team.
So, as a business model, Ayala identifies talent early on. They then groom them inside the company and invest in developing opportunities that train and retain high performers.
And this human capital game plan has paid off. In 2010 and 2015, Finance Asia named Ayala the best-managed company in the country.
But Ayala Corporation hit a rough patch the early 2000s
The company’s revenues were dropping and their growth was stagnating. The country was feeling the same pinch.
So, a plan called “Partnership for Growth (PFG)”, was hatched between the U.S. and the Philippines’ government to save the island titans.
Starting in 2011, PFG sparked developmental growth.
And the plan worked like a charm.
As you can see below, from 2012 to 2016, the Ayala Group rebounded and had a revenue growth rate of 14.5 percent.
Then in 2015, China’s slowdown sent shock waves of downward growth throughout the region.
And yet, Ayala was unfazed. Its growth continued to be steady.
For that reason, Ayala is considered a safe stock. There’s no need to speculate with this equity.
It’s proven to be an optimal choice even during recessions and regional slowdowns. The Philippines’ government is simply always there to catch this company’s fall.
These days, Ayala’s huge volume of assets, worth over US$18 billion in 2016, is actually one of its greatest strengths.
This giant entity maintains its competitive edge by constantly increasing cost efficiency to enhance its gross margin, as you can see below.
Ayala’s next move
According to the IMF, the Philippines will continue to bring home strong growth. In particular, the IMF highlights growth opportunities in electricity, banking and financial services.
As these remain Ayala’s core business, the company will likely reap the benefits of this future growth, big time.
Since 2016, Ayala has broken into high-end industries including energy, automotive, and manufacturing.
And in 2017, Ayala started expanding into financial technology, such as e-commerce, and automobiles in order to capitalize on the world trend.
This is clearly a conglomerate that stays ahead of game. It’s stellar management team makes sure this emerging market stock is worth considering for your portfolio.
In the coming daily, we’ll examine the Chinese-owned conglomerates. Let’s discover why this ethnicity rules the Southeast Asian business scene like hardened mobsters.