In a market fixated on macro gloom, it’s easy to miss when a diversified heavyweight quietly stitches together a better earnings base. That is exactly where JG Summit Holdings (JGS) finds itself today: trading near ₱21 despite reporting improving operating metrics and sturdier balance‑sheet ratios. At this price, investors are paying roughly ₱0.41 for every peso of book value—a P/B near ~0.4× against a book value per share of ₱50.91—and ~7× trailing earnings on TTM EPS ~₱2.94. Those are deep‑value multiples more typical of companies with deteriorating prospects, not of a conglomerate whose core engines—airline, property, food, and associates—are starting to pull in the same direction.
Peeling back the layers of JGS’s SEC 17‑Q (9M 2025) helps explain the mismatch. Operating income (EBIT) rose 14.7% to ₱42.0 B, EBITDA climbed 13.8% to ₱69.0 B, and the group’s operating margin improved to 15% from 13% the previous year—signals that pricing, volume, and cost discipline are landing where they should: on cash‑flow coverage of interest and capex. More telling for equity holders, core net income doubled to ₱4.6 B in 3Q25, bringing 9M core to ₱19.3 B; strip out last year’s mega one‑off and recurring core earnings are up 24% YoY. In a weak tape, recurring profitability matters because it turns “cheap” into “too cheap,” especially for holding firms that are perpetually valued with discounts.
The airline story gets most of the headlines—and rightly so. Cebu Pacific (CEB) posted ₱87.6 B revenues (+17.5%) and ₱9.5 B net income for the first nine months, riding stronger passenger demand, higher cargo and ancillary revenues, and the mitigating effect of five free‑of‑charge engines that added ₱6.0 B to other income amid industry‑wide engine supply issues. Crucially, CEB’s transition to larger, more fuel‑efficient NEO aircraft is not just an environmental or fleet optics play; it is a throughput‑and‑unit‑cost story that can carry margin momentum through seasonal lulls, a dynamic the 17‑Q makes plain. For a group trading at ~7× earnings, a visible airline turnaround is precisely the kind of pillar that justifies a P/E re‑rate once macro stops fighting you.
Equally important—but less flashy—is real estate and hotels. Robinsons Land (RLC) delivered ₱34.6 B revenues, with malls up 11%, offices up 5% (occupancy 88%), and hotels up 10%—the sort of recurring NOI breadth investors prize during growth scares. The real kicker is RLC Residences: realized revenues +76% and EBIT +207%, a reflection of the residential cycle turning in earnest. People forget this segment’s duality: recurring income stabilizes, while residential recognitions drive incremental operating leverage. Together, they answer the perennial holding‑company critique—“too much lumpiness”—with cash‑flow geometry that supports debt service and the day‑to‑day grind of funding capex.
Meanwhile, URC—the food arm—did what it often does in difficult input cycles: grew the top line (₱124.6 B, +4.8%) while taking the punch in gross margin (−71 bps) from higher coffee costs and one‑offs tied to packaging rationalization. That may sound unremarkable, but it is the kind of “steady hand” contribution that keeps consolidated earnings defensible while other engines rev. Snacks and ready‑to‑drink beverages led domestic volume, with Malaysia and Indonesia resilient. When you’re assessing P/E and P/B against a holding‑company backdrop, it matters that one core unit can shoulder some input inflation without knocking the group off course.
Then there is MERALCO, the associate that provides ballast when one leg wobbles. Equity earnings of ₱9.5 B in 9M more than offset the petrochemical segment’s ₱8.1 B loss, with MERALCO’s carrying value near ₱87.9 B anchoring the asset base. In other words, while JGSOC remains in indefinite shutdown, producing obvious P&L pain, MERALCO keeps the keel straight. Investors should ask whether the market fully reflects that stabilizer in current multiples; recent pricing suggests not.
Critics will rightly point to financing costs and FX losses: absorbing JGSOC debt lifted net financing costs to ₱14.5 B (+11.6% YoY), and the group booked ₱680 M in FX losses as the peso softened against USD and JPY. Those headwinds are real, and they dilute the otherwise clean operating story. Yet they are also rate/FX‑cycle artifacts, not structural flaws—especially with interest coverage at 4.34×, gearing at 0.58, and net debt‑to‑equity at 0.48. Liquidity appears adequate (current ratio of 1.23), and the capital program is being funded as leverage ratios improve. This is exactly the balance‑sheet posture you want before the market decides to pay more than ₱0.41 per peso of equity.
If the market tape were friendlier, perhaps the re‑rating would have arrived already. But the PSEi has labored under growth concerns and a weaker peso, clocking multi‑year lows into November and early December. That backdrop keeps discounts wide even for names with improving micro. In this sense, JGS’s valuation looks less like a verdict on operating quality and more like collateral damage from index‑level risk‑off. Still, markets don’t stay pinned forever, and holding firms with clearer cash‑flow paths typically lead the early stages of any sentiment thaw.
What unlocks the gap? Three near‑term catalysts stand out. First, a credible JGSOC roadmap—such as restart economics, asset monetization, or timeline certainty—removes the single biggest overhang and lowers the debt drag on the parent. Second, CEB needs to keep printing: unit‑cost discipline, hedged fuel coverage, and continued NEO ingress can sustain quarterly profits through seasonality and convince skeptics that 2025 wasn’t a one‑off. Third, RLC should keep doing the unglamorous work: occupancy in malls/offices, steady tenant sales, and smooth recognition of pre‑sold inventory. None of these requires heroics; they require execution—something the 17‑Q suggests is already happening. With those pieces in place, moving from ~₱21 toward the street’s ₱30–₱31 center line looks reasonable, even if broader sentiment remains mixed.
The bottom line is simple: JGS is priced like trouble, but the results show progress. In 9M 2025, the conglomerate improved margins, scaled core, and de‑risked leverage while diversified engines worked in tandem to offset the petrochemical drag. When investors pay ~0.4× book and ~7× earnings for that profile, they’re not buying perfection—they’re buying optionality: the chance that execution plus one or two catalysts force the market to close the gap. In our book, that’s the kind of fundamentally cheap worth a hard look.
We’ve been blogging for free. If you enjoy our content, consider supporting us!
Comments
Post a Comment