Skip to main content

AREIT a boon to Ayala Land (ALI), Ayala Corp. (AC)

The AREIT public offering showcases the Ayala Corp. group’s ability to create and realize value. The Ayala Corp. group clearly has a roadmap on creating value. It starts with drawing in and employing the best, brightest, and most competent executives to the conglomerate. Then it adopts best-in-class systems and practices. This results to operational and financial excellence which leads to great returns on investments that results to shareholder value.

Ayala Corp. group’s value creation process stands true even in this time of the COVID-19 pandemic. Its latest exercise is the AREIT public offering. The first Real Estate Investment “Trusts” (REIT) in the Philippines.

The offering will allow Ayala Land, Inc. to raise around 13.6 Billion Pesos out of a roughly 5.4 Billion Pesos of net assets in AREIT. To extract such amount of money out of assets without losing control of such assets is magic. This is just one of the exercise of the Ayala Corp. group’s value creation process.

So what sense does this give to small investors and stock traders?

The exercise is a value creation process of the Ayala Corp. group for Ayala Land, Inc. so that means that the exercise is meant to bolster the finances of Ayala Land, Inc. (ALI) and ultimately the parent Ayala Corp. (AC). The 13.6 Billion Pesos will add liquidity to ALI which as of end of Q1 2020 has 52 Billion Pesos of debt up for repayment in the near term. It has a cash balance on its balance sheet of only 21.7 Billion Pesos.

REITs in advance markets are known for its yield not so much for its capital gains. Since we see AREIT as value creation exercise for ALI then its intention will be the maximum extraction of benefits from AREIT to ALI. The 13.6 Billlion Pesos proceeds is already a windfall for ALI but the value creation process does not stop there. Remember that ALI did not lose control of the underlying assets despite reaping 13.6 Billion Pesos. ALI did not lose control of the cash flow rich assets assigned to AREIT so ALI could take advantage of this by taking out certain costs out of ALI and imputing it to AREIT since AREIT’s assets are cash flow rich. The removal of certain costs from ALI will greatly help the financial position of ALI but will greatly lower the net income of AREIT thus lowering its yield.

AREIT’s fund manager is AREIT Fund Managers, Inc., is a wholly-owned subsidiary of Ayala Land, Inc. while the AREIT’s property manager is AREIT Property Managers, Inc. also a wholly owned subsidiary of Ayala Land, Inc.

We expect lower yield for AREIT so we think small investors should stay out of the AREIT public offering but should instead make a position in ALI and AC because the beneficiary of the AREIT is ALI and ultimately AC. As we said AREIT is a value creation exercise for the Ayala Corporation group so it will ultimately for their benefit.

A link to the AREIT final REIT plan is provided here.

Here are what others are saying about AREIT.

Disclaimer: This is an independent analysis with the objective of informing readers about company fundamentals. Accuretti Systems Inc. presently owns shares of Ayala Corporation.

Labels:

Comments

Post a Comment

Popular posts from this blog

The underlying story of RFM’s 9M 2025: Strong Margins, Weak Cash Flow

As the third quarter of 2025 closed, RFM Corporation stood firm in its role as a staple in the Philippine food industry. The company’s top line barely moved—net revenues edged up by just 1% to ₱5.45 billion , signaling a market that remains steady but competitive. Yet beneath this modest growth lay a story of operational discipline and strategic focus. Margins told the real tale. Despite flat sales, EBITDA surged to ₱830 million , lifting the margin to 15.2% , while net income climbed 3% to ₱480 million . How? RFM tightened its belt where it mattered: selling and marketing expenses dropped, and general administrative costs were kept lean. The result was a healthier operating margin of 11.2% , proving that efficiency—not just volume—can drive profitability. The Consumer segment emerged as the hero. Though its sales slipped slightly, its operating income jumped 24% , powered by better mix and pricing strategies. Meanwhile, the Institutional segment faced margin pressure despite high...
Post a Comment
Read more

EMI 9M 2025 Results: How Emperador Turned Taxes into Cash

 In 2025, Emperador Inc. faced a sobering reality. The global spirits market was cooling. Consumers, wary of inflation and economic uncertainty, began trading down from luxury bottles to more affordable alternatives. Revenues slipped by 4.6%, and net profit edged lower by 3.1%. Even EBITDA, the company’s core measure of operating strength, declined by 7%. It looked like a year of contraction. But behind the numbers, a different story was brewing—one of strategic resilience . Despite the slowdown, Emperador’s operating cash flow rose to ₱4.1 billion , up from ₱3.4 billion the year before. This wasn’t driven by sales or profit—it was driven by smart tax strategy . The company’s finance team leaned into timing. With lower taxable income, they reduced actual tax payments by over ₱1 billion , from ₱1.85 billion to just ₱798 million. This wasn’t tax avoidance—it was cash flow optimization . By aligning tax payments with performance and leveraging allowable deductions, such as depreci...
Post a Comment
Read more

Metrobank's ($MBT) Nine-Month 2025 Story: Growth Amid Emerging Pressures

 Metrobank delivered ₱37.3 billion in net income attributable to equity holders for the first nine months of 2025, up 4.3% year-on-year , translating to EPS of ₱8.29 . Core banking income remained strong with net interest income up 7.1% and other income rising 5.3%. Operating efficiency improved to 49.8% , signaling cost discipline. On the balance sheet, assets grew 3.2% to ₱3.63 trillion , supported by loan expansion and a larger FVOCI securities portfolio. Equity rose 5.7%, aided by earnings and OCI recovery. But beneath the headline growth, cracks are visible: Margin compression: NIM slipped to 3.70% (from 3.90%), while reliance on SSURA funding surged +68.6% , adding rate volatility risk. Credit risk signals: Provisions jumped +147% YoY to ₱8.7B; NPL ratio rose to 1.67% , with PSBank and ORIX Metro showing higher stress. Funding mix & liquidity: Deposits fell –4.5% YTD , liquidity ratio eased to 46.5% , and operating cash flow remained negative. Market risk exp...
Post a Comment
Read more