APPENDICES

Appendix A: PEST Analysis ................................................................................................... 22

Political Factors ................................................................................................................ 22
Economic Factors ............................................................................................................. 24
Social Factors ................................................................................................................... 26
Technological Factors ...................................................................................................... 28
Appendix B: Porter’s Five Forces Analysis ........................................................................... 29
Bargaining Power of Buyers ............................................................................................. 29
Bargaining Power of Suppliers ......................................................................................... 30
Rivalry among Existing Firms ........................................................................................... 30
Threats of Substitute Products ........................................................................................ 30
Threats of New Entrants .................................................................................................. 31
Appendix C: Balance Sheet .................................................................................................. 32
Appendix D: Income Statement ........................................................................................... 35
Appendix E: Graphs on Time-Series Ratios .......................................................................... 36
Appendix F: Graphs on Cross-Sectional Ratios .................................................................... 39
Appendix G: Intrinsic Value Computation ........................................................................... 49
Appendix H: Technical Analysis ........................................................................................... 50

iv
 REFERENCES

Ayaland Inc. (2018, August 6). Retrieved from Ayala Land Inc: http://www.ayalaland.com.ph

/ayala-land-posts-18-growth-in-first-half-income/

al., S. e. (2017). Fundamentals of Investing 13th Edition. Pearson Education Limited.

Gitman, L. J. (2012). Principles of Managerial Finance 13th Edition. The Prentice Hall.

GuruFocus.com, LLC. (2018). Retrieved from GuruFocus Web site:https://www.gurufocus.

com/term/wacc/OTCPK:AYAAF/WAAC/Ayala%2BLand%2BInc

Investagrams. (2019). Retrieved from Investagrams Web site: https://www.investagrams.

com/ Stock/ALI

Ortiguero, R. R. (2018). State of the Philippine Real Estate. Business World.

SMPH (2018). Annual Reports. Retrieved from: https://smprime.com

Subido, L. K. (2018). Real Estate is Booming in PH but Millenials are Not Buying. A Young

Broker Explains Why. News and Events.

Megworld (2018). Annual Reports. Retrieved from: https://www.megaworldcorp.com/in

vestors/company-disclosures/annual-reports

21
 APPENDICES

Appendix A: PEST Analysis

Political Factors

Government’s “Build Build Build” Project. The administration under Pres. Rodrigo

Duterte sets an aim to reduce poverty incidence from 21.6% in 2015 to 13-15% in 2022.

Therewith, the government decided to envision the term of office of Pres. Duterte as the

“Golden Age of Infrastructure” as manifested in high government spending on infrastructure

which will then lead to a higher gross domestic product (GDP), one of the measures of

economic growth. The government targets to spend P8-9 trillion from 2017 until 2022. The

government believes that adequate roads, bridges, airports, and seaports will increase the

productive capacity of the economy, generate employment, increase family incomes, and

strengthen the investment climate leading to sustained economic development and inclusive

growth. Few examples of the government’s infrastructure projects are the extension of mass

rail transit in the Metro Manila, Bulacan, Cavite, and Rizal, improvement of some airports so

they can accommodate night flight, expansion and maintenance of existing international

airports, construction of new airports, roads, bridges, and among others.

The sources of funding in this ambitious infrastructure program will be the five-year

one trillion peso target collection under the Tax Reform for Acceleration and Inclusion (TRAIN)

Law and domestic and foreign loans. Public-private partnership will also enter into the

picture.

Given these facts, Ayala Land Inc. will be motivated to enter into these projects

through its subsidiary, Makati Development Corporation (MDC). For as long as the

requirements set by the laws, rules, and regulations on procurement involving government

projects, ALI would be able to generate voluminous amount of revenues under the Duterte

22
administration. ALI, together with SM Prime Holdings, Century Properties, and Megaworld

have expressed their interest to be the major developers of infrastructure projects in

Pampanga particularly railways.

Tax Reform Packages. TRAIN Law was also credited by the Department of Finance in

the increase of ALI’s revenue in 2018 by 18% and net income by 17%.

Also, as part of the Duterte administration’s economic agenda for a favorable

investment environment, aside from filling in infrastructure gaps, the government wants to

provide tax incentives to all corporations regardless of size through cuts in the corporate

income tax under the proposed TRABAHO (Tax Reform for Attracting Better and High-Quality

Opportunities (TRABAHO) Law. This aims not only to cut corporate income tax gradually by

2% from the existing 30% until it reaches 20% but also to align Philippine corporate income

tax rates to our neighboring countries Southeast Asia. This will be favorable to ALI because

additional revenues will be set aside for the expansion of its projects instead of paying a

portion thereof to taxes.

The government is also aiming to fully implement trade liberalization laws as well as

to lift some economic provisions in the Constitution, amend procurement law, and streamline

the processing of permits and licenses in the local government level so investors will be

motivated to come in the country. However, cause-oriented groups oppose these moves

because (1) proposed tax reforms on corporate tax incomes are regressive since this will favor

large corporations and (2) this will pave way to more land-grabbing issues and displacement

of informal settlers.

Real estate developers are also hoping that the “Build Build Build” program will be

sustained even if Pres. Duterte will step down in 2022. This is due to the fact that continuity

of government projects becomes an issue once a new president has sworn in offices because

23
of some factors such as differences in party affiliations of the outgoing and incoming

president.

Economic Factors

GDP rates slowing down. The Philippines registered a slow economic growth in the

first quarter of 2019 as manifested in the 5.6% growth rate in the gross domestic product

(GDP). This rate is lower compared to the 6.5% GDP growth rate in the first quarter of 2018.

This can be attributed to the implementation of the TRAIN Law since the first package of tax

reforms contributed to the rising prices in basic commodities as well as expanding the tax

base in socialized and low-cost housing and sale of residential lot and dwelling and these

changes in taxation made Filipinos adjust their consumption habits and defer investments.

The real estate industry has a relatively low contribution to the Q1 2019 GDP growth

rate. The Philippine Statistics Authority reported that the main contributors on growth in the

country are trade and repair of motor vehicles, personal and household goods manufacturing

and financial intermediation were the main drivers of growth. Also, to breakdown the 5.6%

GDP growth rate, 7.0% is from the services sector, 4.4% only from the industry were real

estate developers are classified, and 0.8% from agriculture, fisheries, forestry, fishing, and

hunting.

To further break down, real estate, renting, and other business activities growth rate

slowed down in the current quarter from 4.6% to 4.1%. Real estate registered a lower growth

rate from 11.0% to 7.8%. Growth rate in leasing activities, on the other hand, increased from

2.1% to 2.2% and ownership of dwellings from 3.0% to 3.5%.

Inflation rates. Inflation has also become an issue in 2018 as it went as high as 6.7%

in September 2018 due to external factors outside the Philippines and also the infamous tax

24
reform law implemented in January 1, 2018. As said previously, inflation also affected the

consumption habits of Filipinos. Inflation also paved way to defer investments on real estates.

The government, though, is optimistic that the numbers will go to the country’s favor

once more.

Foreign exchange risk. Also, in an interview in the program “State of the Nation with

Jessica Soho” in March 2018, then-budget secretary and now Bangko Sentral ng Pilipinas

governor Benjamin Diokno said that as the government will finance a portion of its “Build

Build Build” infrastructure program from loans, only 20% thereof will be derived from foreign

debt in order for the country to minimize the risk on foreign exchange rate fluctuations.

Supply and demand. Large volume of supply in the real estate industry is also

anticipated. There is also an upward trajectory with regards to the demands for residential

and commercial properties particularly on office occupancy due to increasing housing and

office occupancy demands for business process outsourcing (BPO) employees as well as the

constant rising urban population not only in Metro Manila but also in regional centers in

Central Luzon, Calabarzon, Western Visayas, Central Visayas, and Davao Region.

` Qualitative factors. Qualitative factors also need to be considered by ALI such as

differences in the economic conditions and standard of living of every highly-urbanized city

in the country. For instance, Bacolod City in Negros Occidental has been a location conducive

for the operations of BPO companies. Cebu, being a great business hub in the Visayas has

been known for diversity in terms of the types of business thriving in the city. Cebu has malls,

retail centers, manufacturing plants, service-oriented companies, BPO industries, and

construction companies. In fact, Cebu has also one of the highest demands for condominium

units in the Visayas. Iloilo City, on the other hand, still cannot offer a favorable business

25
environment for real estate developers because of three reasons: (1) high electricity costs, (2)

lack of water supply, and (3) people’s preference for a house a lot over condominium units.

These factors will be helpful for ALI and other real estate developers to respond to the

unpredictability of the country’s economic conditions as timely as possible. This will also entail

further market researches by real estate developers.

Social Factors

It has been a stigma to ALI and other real estate developers that they are land grabbers

and some cause-oriented groups claim that they take the government support as advantage

to have presence in the proposed central business districts and even in rural communities

which they fear that informal settles or even the townsfolk themselves will be displaced.

Sicogon dispute. For instance, ALI has plans to construct a runway, jetty port, and

resort accommodation within the vicinity of the Sicogon Island in Carles, Iloilo. According to

ALI, they want to contribute in envisioned providing “inclusive growth and economic

development through long-term recovery and livelihood programs and job creation.”

However, the people of Sicogon are not convinced and have consistently expressed their

resistance over the project. For them, ALI’s presence is a threat to their rights to land and

livelihood. This is despite the provisions in the Compromise Framework Agreement (CFA)

which provides the following:

 Ayala and SIDECO would provide 30 hectares of land for residential area to be

donated and develop as housing area;

 Ayala and SIDECO would provide 40 hectares of land to be developed for

conventional farming;

 Ayala and SIDECO would provide P38 million pesos for livelihood support and

capacity building fund;

26
  Ayala and SIDECO would allocate P76 million land development fund; and

 Residents will be prioritized in employment for the work to be generated by

the resort development.

Harassment by ALI and the Sicogon Development Corporation (Sideco) overpowered

the weakened capacity of residents and aggressively pursued its projects in Sicogon with,

worse, the consent from the government. Farmers and fisherfolks fear that their projects will

pave way for the conversion of the lands from agricultural to commercial. Fortunately, they

were able to secure a cease-and-desist order from the Department of Agrarian Reform (DAR)

which ordered to stop all activities in a disputed parcel of land being claimed by farmers

(334.64 hectares out of 1,160-hectare) until the petition for cancellation of land conversion

has come up into resolution.

Pampanga dispute. Also in 2014, the farmers of Pampanga protested in front of the

Department of Agrarian Reform (DAR) central office to implement the Comprehensive

Agrarian Reform Program (CARP) and denounce the harassment and human rights violations

committed by the alleged goons of ALI as the corporation insists to claim and develop the

land in Porac town that they deemed “unproductive” as said by the government. Farmers

decry that the presence of ALI in their lands paved way for the deprivation of their livelihood.

Quezon City Central Business District. In 2012, ALI expressed their interest to develop

the 29-hectare property situated near TriNoma and SM North EDSA in Quezon City. This 10-

year project is by virtue of a 2009 joint venture agreement between ALI and the National

Housing Authority (NHA) which aims to establish offices, retail stores, and hotels. The city

government supported it as it would bring employment and additional local tax revenues to

Quezon City. This resulted in demolition of informal settlements which further led to tension

between the demolition team and the residents.

27
 ALI—UP System Lease Agreement. Also since the earlier 2010s, ALI entered into a

lease agreement with the University of the Philippines System on the property in Katipunan

and Commonwealth areas in Quezon City which is now the location of UP Town Center and

UP-Ayala Technohub. UP System said that rent income and interest payments they will be

receiving will augment the existing funds to be used for the instruction, research, and

extension programs of the university. However, people living in that area and even several UP

Diliman students expressed their opposition over the lease agreement because residents will

be displaced with no relocation available for them and UP System will be disadvantaged in

the lease agreement. Students also decried the possible degradation of UP’s public character

as the Board of Regents allowed the opening of UP for commercial purposes despite being

the country’s premier state university. Organic sectors were not also involved in the crafting

of UP Land Use Plan.

And, in the 2014 qualified opinion of the auditor’s report issued by the Commission

on Audit in January 2016, it was discovered that ALI has still outstanding lease liabilities and

interest payable with the amount of ₱209.2 million although ALI said that they are paying the

lease liabilities together with interest monthly and COA findings might be a results of varying

interpretations in computing for ALI’s liabilities to UP. COA also discovered that there might

be laxity in enforcing the terms and conditions of the lease agreement.

Technological Factors

In 2009, ALI targeted to implement cost reduction measures which according to them

are connected with the corporation’s sustainability efforts and aim to cut down power and

water consumption in the long run. For instance, ALI has installed green technology in their

new facilities.

28
 Also, in their 2009 report, ALI decided to realign some of the functions under the

Finance Group in 2008 to increase the efficiency of its operations. Supply chain management

has been integrated under the Finance Group so that the latter would be able to monitor and,

in some instances, evaluate and control costs and at the same time, improve transactional

efficiencies. With the help of its Technology Management Division, ALI was able to use

information technology to implement full automation of its management information

systems (MIS).

IT was also used to improve its service up-time for all major equipment to ensure that

the provision of basic and repairs services in its amenities and facilities will be conducted at

the least possible costs.

Appendix B: Porter’s Five Forces Analysis

Bargaining Power of Buyers

Consumers or buyers in the real estate industry really take into consideration a lot of

things before they make their purchase. This would be rationalize by the fact that such

properties and items available in this industry are very costly. In addition to their price

sensitivity, buyers often take time to decide on their purchase since they too would consider

the location of the property as well as how far it is from their workplace and the size of the

property which should be appropriate for their family size as well. These just show how

significant it is for them to acquire such property. However, these consumers or buyers have

lesser power for the pricing of properties and are usually inclined to low volume purchase.

Aside from these, millennials tend to not be inclined with property ownership as compared

to older generations in their middle years. Therefore, the bargaining power of buyers in the

real estate industry in the Philippines is assessed to be ‘Weak’. (Subido, 2018)

29
Bargaining Power of Suppliers

The bargaining power of suppliers here in the Philippines is assessed to be ‘Moderate’.

In the real estate industry, projects and developments require huge amount of resources to

be spent on labor and raw materials which includes sand, gravel, concrete, wood and the like.

In the Philippines, there is currently a high number of suppliers of these essential things. In

addition, the prices of such items tend to be fixed and are non-negotiable. On one end, there

seems to be a lack of substitute inputs to be use for projects and developments in this line of

industry.

Rivalry among Existing Firms

To venture in the real estate industry, one must have abundant resources. This line of

industry requires business owners a huge amount of initial capital to finance every project it

plans to have. Thus, it is for a fact that most business owners in the real estate industry have

enough capital and who are also willing to take high risk so as to gain advantage over other

firms. Along with Ayala Land Inc., there are a lot of real estate developers such as, Vista Land,

Filinvest Land, Rockwell Land and many others who have been highly competitive over the

years. Therefore, this level of Rivalry among existing firms in the real estate industry is

assessed to be ‘Strong’. (Ayaland Inc., 2018)

Threats of Substitute Products

One substitute product for properties offered in the real estate industry would be

when possible buyers opt to construct a house in lands that they own. In the Philippines, this

has been the option chosen by most middle-class families instead of renting or purchasing

condominium units. This is also the case in rural areas where families lived in areas near their

farms or near the seas as their sources of living. On one end, real estate industry is really

30
profitable in urbanized areas. Despite this, the threat of substitute products in the real estate

industry is assessed to be ‘Strong’.

Threats of New Entrants

New entrants in the real estate industry are assessed to be relatively ‘Weak’. One

major reason would be that, real estate developments and projects takes years to finish and

such newcomers for this industry seems to be small in terms of branding and competitiveness

if you compare them to major industry giants who have been well established and still

continues to innovate and improve its existing structures. (Ortiguero, 2018)

31
Appendix C: Balance Sheet

Below are some changes in the composition of AYI’s Balance Sheet not mentioned

above:

The Short-term Investment Account of Ayala Land, Inc. (ALI) for the 2014 to 2016 was

only ranging from P100,000 to P300,000. In the year 2017, almost over 2,200% of increase or

an amount of P4,000,000 was added to this account. This was because of the money market

placements of its subsidiaries and affiliates, BGWest, Alveo, AHI, RLC and MDC.

The company’s Financial Assets at FVPL have been seemingly decreasing than

increasing over the years. This is because of the changes in the Investment in Unit Investment

Trust Fund (UITF) which is comprised of a diversified portfolio of primarily short-term fixed

income instruments. It resulted to an 88% decrease in 2015, 169% increase in 2016, 72%

decrease in 2017 and 12% decrease in 2018. Minor reasons of the effect of this trend are also

attributable to the changes in Investment in ARCH Capital Fund.

Just like the Inventory account, the Investment Properties account have also been

relatively increasing over the five year period. An 18% of increase in 2015, 34% in 2016, 85%

in 2017 and 12% in 2018. This 85% increase was due to the fact that an amount P65,000,000

was reclassified to this account. But its general increase over the years was due to additional

land acquisitions and projects costs for malls and office buildings.

Other Assets not mentioned above also have a generally increasing trend over the

course of five years from 2014 to 2018. Total Assets of Ayala Land Inc. have a 14% increase in

2015, 21% in 2016, 7% in 2017 and 16.52% in 2018.

Short-term Debt changes are due to the increase and decrease in the company’s

availed short-term unsecured peso denominated bank loans. In 2014 this account amounted

to P16,000,000 and in 2018 is recently now at P14,000,000. Percentage changes over the

32
years are as follows, 35% decrease in 2015, 131% increase in 2016, 27% decrease in 2017 and

18% decrease in 2018.

Income Tax Payable also have a generally increasing trend, where it greatly depends

on how the company has performed in terms of its net income. This shows that the company

has been greatly profitable in the year 2018 since there was only a 98% increase in 2015, 15%

increase in 2016, 33% decrease in 2017 and it garnered a 165% increase in 2018.

Not much has changed for the other accounts and items in the Liabilities section. Total

Liabilities of Ayala Land Inc. have a 10% increase in 2015, 24% in 2016, 5% in 2017 and 17.5%

in 2018.

Paid-in Capital in 2015 increased by 36% due to the company’s equity top up

placement in January that year. For the succeeding years from 2016 to 2018, such account

uniformly increased by less than a percentage.

For its Retained Earnings, it increased by 17% in both years in 2015 and 2016 and

roughly 20% for both years in 2017 and 2018.

There is an increasing trend for Remeasurement Loss on Defined Benefit Plan for years

2015 to 2017. It increased by 24% in 2015, 17% in 2016 and 55% in 2017. However, there was

a decrease of 37% in the year 2018.

Cumulative Translation Adjustments changes of 13% in the 2018 was due to foreign

exchange adjustment on Regent Wise Investment Unlimited.

Noncontrolling Interest (NCI) have an increasing trend, however it grew at a

fluctuating rate, 7% for 2015, 55% for 2016, 2% for 2017 and 29% for 2018. The 2018 increase

was attributable to MCT Berhad, of which the company has majority control.

Total Equity have also increased over time. Ayala Land Inc.’s Total Equity percentage

increases are as follows; a 23% in 2015, 15% in 2016, 11% in 2017 and 15% in 2018.

33
 AYALA LAND, INC.
Statement of Financial Position - Horizontal Analysis
Year Ended 2014 to 2016

2014 2015 DIFFERENCE % 2015 2016 DIFFERENCE % 2016 2017 DIFFERENCE % 2017 2017 revised DIFFERENCE % 2017 2018 DIFFERENCE %
ASSET
Current Assets -
Ca s h a nd Ca s h Equi va l e nts 28,677,282 19,087,390 - 9,589,892 -33% 19,087,390 20,904,330 1,816,940 10% 20,904,330 20,998,089 93,759 0.45% 20,998,089 20,998,089 - 0.00% 20,998,089 23,996,570 2,998,481 14.28%
Short-te rm Inve s tme nts 301,405 164,621 - 136,784 -45% 164,621 207,671 43,050 26% 207,671 4,739,734 4,532,063 2182.33% 4,739,734 4,739,734 - 0.00% 4,739,734 3,085,373 - 1,654,361 -34.90%
Fi na nci a l As s e ts a t Fa i r Va l ue
through P/L 6,264,569 731,677 - 5,532,892 -88% 731,677 1,964,540 1,232,863 168% 1,964,540 540,606 - 1,423,934 -72.48% 540,606 540,606 - 0.00% 540,606 476,245 - 64,361 -11.91%
Accounts a nd Note s Re ce i va bl e 58,573,665 64,960,745 6,387,080 11% 64,960,745 97,467,753 32,507,008 50% 97,467,753 75,917,344 - 21,550,409 -22.11% 98,311,499 75,917,344 - 22,394,155 -22.78% 75,917,344 78,245,866 2,328,522 3.07%
Contra ct As s e ts - 48,473,011 48,473,011
Inve ntori e s 48,179,191 59,246,962 11,067,771 23% 59,246,962 66,727,945 7,480,983 13% 66,727,945 90,845,608 24,117,663 36.14% 62,192,378 90,845,608 28,653,230 46.07% 90,845,608 104,371,611 13,526,003 14.89%
Othe r Curre nt As s e ts 23,638,333 22,012,200 - 1,626,133 -7% 22,012,200 23,739,874 1,727,674 8% 23,739,874 31,778,649 8,038,775 33.86% 31,778,649 47,810,900 16,032,251 50.45% 47,810,900 44,181,222 - 3,629,678 -7.59%
Total Current Assets 165,634,445 166,203,595 569,150 0% 166,203,595 211,012,113 44,808,518 27% 211,012,113 218,560,955 7,548,842 3.58% 218,560,955 240,852,281 22,291,326 10.20% 240,852,281 302,829,898 61,977,617 25.73%
Noncurrent Asset
Noncurre nt Accounts a nd Note s
Re ce i va bl e 31,374,498 41,256,656 9,882,158 31% 41,256,656 35,133,216 - 6,123,440 -15% 35,133,216 44,522,898 9,389,682 26.73% 44,522,898 44,522,898 - 0.00% 44,522,898 3,367,890 - 41,155,008 -92.44%
Noncurre nt Contra ct As s e ts - - 35,437,047 35,437,047 100.00%
Fi na nci a l As s e ts a t Fa i r Va l ue
through OCI - - 1,495,795 1,495,795 100.00%
Ava i l a bl e -for-s a l e Fi na nci a l As s e ts 784,371 500,359 - 284,012 -36% 500,359 1,385,172 884,813 177% 1,385,172 1,475,241 90,069 6.50% 1,475,241 1,475,241 - 0.00% 1,475,241 - - 1,475,241 -100.00%
La nd Improve me nts 80,444,542 93,302,506 12,857,964 16% 93,302,506 101,456,799 8,154,293 9% 101,456,799 94,276,655 - 7,180,144 -7.08% 94,276,655 - 94,276,655 -100.00%
Inve s tme nt i n As s oci a te s a nd Joi nt
Ve nture s 10,963,182 17,521,517 6,558,335 60% 17,521,517 24,985,317 7,463,800 43% 24,985,317 26,800,823 1,815,506 7.27% 26,800,823 26,800,823 - 0.00% 26,800,823 23,389,752 - 3,411,071 -12.73%
Inve s tme nt Prope rti e s 67,897,942 80,464,775 12,566,833 19% 80,464,775 107,931,032 27,466,257 34% 107,931,032 200,239,815 92,308,783 85.53% 134,616,390 200,239,815 65,623,425 48.75% 200,239,815 225,005,910 24,766,095 12.37%
Prope rty a nd Equi pme nt 18,824,912 24,246,455 5,421,543 29% 24,246,455 26,504,386 2,257,931 9% 26,504,386 28,524,088 2,019,702 7.62% 28,524,088 28,524,088 - 0.00% 28,524,088 35,749,200 7,225,112 25.33%
De fe rre d Ta x As s e ts - ne t 6,457,372 7,911,634 1,454,262 23% 7,911,634 9,878,550 1,966,916 25% 9,878,550 10,648,013 769,463 7.79% 10,648,013 10,648,013 - 0.00% 10,648,013 13,040,993 2,392,980 22.47%
Othe r Noncurre nt As s e ts 6,563,199 10,934,303 4,371,104 67% 10,934,303 18,146,410 7,212,107 66% 18,146,410 14,567,271 - 3,579,139 -19.72% 14,567,271 20,929,175 6,361,904 43.67% 20,929,175 28,503,997 7,574,822 36.19%
Total Noncurrent Assets 223,310,018 276,138,205 52,828,187 24% 276,138,205 325,420,882 49,282,677 18% 325,420,882 355,431,379 30,010,497 9.22% 355,431,379 333,140,053 - 22,291,326 -6.27% 333,140,053 365,990,584 32,850,531 9.86%
TOTAL ASSETS 388,944,463 442,341,800 53,397,337 14% 442,341,800 536,432,995 94,091,195 21% 536,432,995 573,992,334 37,559,339 7.00% 573,992,334 573,992,334 - 0.00% 573,992,334 668,820,482 94,828,148 16.52%
LIABILITIES AND EQUITY
Current Liabilities
Short-te rm De bt 16,302,312 10,486,258 - 5,816,054 -36% 10,486,258 24,244,350 13,758,092 131% 24,244,350 17,644,350 - 6,600,000 -27.22% 17,644,350 17,644,350 - 0.00% 17,644,350 14,386,717 - 3,257,633 -18.46%
Accounts a nd othe r Pa ya bl e s 106,992,321 121,757,202 14,764,881 14% 121,757,202 141,713,114 19,955,912 16% 141,713,114 137,683,859 - 4,029,255 -2.84% 137,683,859 137,683,859 - 0.00% 137,683,859 171,999,422 34,315,563 24.92%
Contra ct Li a bi l i ti e s - - 21,874,681 21,874,681
Income Ta x Pa ya bl e 647,234 1,283,535 636,301 98% 1,283,535 1,470,573 187,038 15% 1,470,573 978,433 - 492,140 -33.47% 978,433 978,433 - 0.00% 978,433 2,588,669 1,610,236 164.57%
Curre nt Porti on of Long Te rm De bt 5,066,903 8,807,652 3,740,749 74% 8,807,652 5,187,111 - 3,620,541 -41% 5,187,111 6,572,775 1,385,664 26.71% 6,572,775 6,572,775 - 0.00% 6,572,775 23,265,173 16,692,398 253.96%
De pos i ts a nd othe r curre nt
l i a bi l i ti e s 5,591,948 3,798,208 - 1,793,740 -32% 3,798,208 15,588,023 11,789,815 310% 15,588,023 21,743,820 6,155,797 39.49% 21,743,820 21,743,820 - 0.00% 21,743,820 6,669,865 - 15,073,955 -69.33%
Total Current Liabilities 134,600,718 146,132,855 11,532,137 9% 146,132,855 188,203,171 42,070,316 29% 188,203,171 184,623,237 - 3,579,934 -1.90% 184,623,237 184,623,237 - 0.00% 184,623,237 240,784,527 56,161,290 30.42%
Noncurrent Liabilities
Long-te rm de bt, ne t of curre nt
porti on 103,296,454 111,702,201 8,405,747 8% 111,702,201 130,369,877 18,667,676 17% 130,369,877 150,168,631 19,798,754 15.19% 150,168,631 150,168,631 - 0.00% 150,168,631 149,446,949 - 721,682 -0.48%
Pe ns i on Li a bi l i ti e s 1,580,228 1,502,247 - 77,981 -5% 1,502,247 1,498,840 - 3,407 0% 1,498,840 1,535,671 36,831 2.46% 1,535,671 1,535,671 - 0.00% 1,535,671 1,550,198 14,527 0.95%
Contra ct Li a bi l i ti e s - ne t of curre nt
porti on 8,630,235 8,630,235
De fe rre d Ta x Li a bi l i ti e s 1,967,129 1,782,061 - 185,068 -9% 1,782,061 4,356,530 2,574,469 144% 4,356,530 3,543,791 - 812,739 -18.66% 3,543,791 3,543,791 - 0.00% 3,543,791 5,894,705 2,350,914 66.34%
De pos i ts a nd othe r noncurre nt
l i a bi l i ti e s 25,504,476 31,397,025 5,892,549 23% 31,397,025 39,321,390 7,924,365 25% 39,321,390 41,857,646 2,536,256 6.45% 41,857,646 41,857,646 - 0.00% 41,857,646 42,292,671 435,025 1.04%
Total Noncurrent Liabilities 132,348,287 146,383,534 14,035,247 11% 146,383,534 175,546,637 29,163,103 20% 175,546,637 197,105,739 21,559,102 12.28% 197,105,739 197,105,739 - 0.00% 197,105,739 207,814,758 10,709,019 5.43%
Total Liabilities 266,949,005 292,596,389 25,647,384 10% 292,596,389 363,749,808 71,153,419 24% 363,749,808 381,728,976 17,979,168 4.94% 381,728,976 381,728,976 - 0.00% 381,728,976 448,599,285 66,870,309 17.52%
Equity
Equi ty a ttri buta bl e to e qui ty hol de rs
of Aya l a La nd, Inc.
Pa i d-i n Ca pi ta l 44,851,468 61,072,448 16,220,980 36% 61,072,448 61,562,170 489,722 1% 61,562,170 61,948,711 386,541 0.63% 61,948,711 61,948,711 - 0.00% 61,948,711 62,350,964 402,253 0.65%
Re ta i ne d Ea rni ngs 66,478,250 77,951,761 11,473,511 17% 77,951,761 91,798,555 13,846,794 18% 91,798,555 109,976,450 18,177,895 19.80% 109,976,450 109,976,450 - 0.00% 109,976,450 132,090,020 22,113,570 20.11%
Stock Opti ons Outs ta ndi ng 185,604 190,747 5,143 3% 190,747 89,697 - 101,050 -53% 89,697 99,064 9,367 10.44% 99,064 99,064 - 0.00% 99,064 65,462 - 33,602 -33.92%
Re me a s ure me nt l os s on Dde fi ne d
Be ne fi t Pl a ns - 572,392 - 432,487 139,905 -24% - 432,487 - 356,918 75,569 -17% - 356,918 - 160,015 196,903 -55.17% - 160,015 - 160,015 - 0.00% - 160,015 - 219,782 - 59,767 37.35%
Fa i r Va l ue Re s e rve of Fi na nci a l
As s e t a t FVOCI 40,350 40,350 - 454,138 - 494,488 -1225.50%
Ne t Unre a l i ze d ga i n on Ava i l a bl e -for-
s a l e fi na nci a l a s s e ts 135,815 - 80,800 - 216,615 -159% - 80,800 43,594 124,394 -154% 43,594 40,350 - 3,244 -7.44% 40,350 - 40,350 -100.00%

Cumul a ti ve tra ns l a ti on Adjus tme nts 1,001,986 1,001,986 1,001,986 1,001,986 - 1,001,986 868,271 - 133,715 -13.34%
Equi ty Re s e rve s - 4,138,909 - 4,970,965 - 832,056 20% - 4,970,965 - 5,432,003 - 461,038 9% - 5,432,003 - 6,152,115 - 720,112 13.26% - 6,152,115 - 6,152,115 - 0.00% - 6,152,115 - 7,400,945 - 1,248,830 20.30%
Total 106,939,836 133,730,704 26,790,868 25% 133,730,704 147,705,095 13,974,391 10% 147,705,095 166,754,611 19,049,516 12.90% 166,754,611 166,754,611 - 0.00% 166,754,611 187,299,852 20,545,241 12.32%
Noncontrolling Interest 15,055,622 16,094,707 1,039,085 7% 16,094,707 24,978,092 8,883,385 55% 24,978,092 25,508,747 530,655 2.12% 25,508,747 25,508,747 - 0.00% 25,508,747 32,921,345 7,412,598 29.06%
Total Equity 121,995,458 149,825,411 27,829,953 23% 149,825,411 172,683,187 22,857,776 15% 172,683,187 192,263,358 19,580,171 11.34% 192,263,358 192,263,358 - 0.00% 192,263,358 220,221,197 27,957,839 14.54%

TOTAL LIABILITIES AND EQUITY 388,944,463 442,341,800 53,397,337 14% 442,341,800 536,432,995 94,091,195 21% 536,432,995 573,992,334 37,559,339 7.00% 573,992,334 573,992,334 - 0.00% 573,992,334 668,820,482 94,828,148 16.52%

34
Appendix D: Income Statement

2017-2016 2016-2015
REVENUE
Real estate 13.08% 16.93%
Interest income from real estate sales 7.96% -3.13%
Equity from earnings (losses) of associates and JVs 56.12% 684.90%
13.07% 16.63%

LESS: COSTS AND EXPENSES

Real estate 14.83% 17.19%
General and administrative expenses 3.46% 6.67%
Others 13.57% 5.44%
13.87% 16.08%

OTHER INCOME (CHARGES)

Interest, investment income -3.97% -12.92%
Interest, other finance charges 8.20% 12.42%
Other income 240.72% -3.32%
-16.14% 18.64%

INCOME BEFORE INCOME TAX 16.31% 17.70%

PROVISION FOR INCOME TAX

Current 18.77% 17.62%
Deferred 16.13% 7.65%
19.36% 20.10%

NET INCOME 15.28% 16.92%

Attributable to shareholders 21.03% 18.59%
Attributable to non-controlling interest -18.82% 7.87%

EARNINGS PER SHARE (BASIC AND DILUTED) 19.58% 19.17%

35
Appendix E: Graphs on Time-Series Ratios

LIQUIDITY RATIOS
2014 2015 2016 2017

1.258
1.184
1.137

1.121

0.772
0.711
0.673

0.638
CURRENT RATIO QUICK RATIO

ACTIVITY RATIOS
2015 2016 2017 2018

4.67
4.36
3.23
1.39

1.37
1.35

1.147
1.103

1.14
0.968
0.968

1.00

1.00

0.92
0.90

0.86
0.233
0.232
0.228
0.219

AR TURNOVER INVENTORY TOTAL ASSET AP TURNOVER FIXED ASSET

TURNOVER TURNOVER TURNOVER

36
 LEVERAGE RATIOS
2015 2016 2017 2018

6.063
5.914
5.698
5.453
3.664

3.596
3.469
3.340
2.106

2.037
1.985
1.953
0.678

0.671
0.665
0.661

DEBT RATIO DEBT-EQUITY RATIO FINANCIAL LEVERAGE TIMES INTEREST

RATIO EARNED

PROFITABILITY RATIOS
2015 2016 2017 2018
18.97%

18.71%
17.71%
17.45%

15.69%
15.26%
14.24%
13.27%
4.40%

4.36%
3.97%

3.89%

NET PROFIT MARGIN RETURN ON ASSETS RETURN ON EQUITY

37
 COMMON STOCK RATIOS
2015 2016 2017 2018

28.71

26.08
22.38

20.51

3.97
3.82

3.22

3.22
P/E RATIO PRICE TO BV RATIO

COMMON STOCK RATIOS

2015 2016 2017 2018
0.35

0.33

0.28

0.25
0.0149

0.0124
0.0120

0.0108

DIVIDEND YIELD DIVIDEND PAYOUT RATIO

38
Appendix F: Graphs on Cross-Sectional Ratios

Current Ratio
4

3.5

2.5

1.5

0.5

0
2015 2016 2017

Ayala Land SMPH Megaworld

Quick Ratio
1.4

1.2

0.8

0.6

0.4

0.2

0
2015 2016 2017

Ayala Land SMPH Megaworld

39
 Accounts Receivable Turnover
3

2.5

1.5

0.5

0
2015 2016 2017

Ayala Land SMPH Megaworld

Working Capital
120

100

80

60

40

20

0
2015 2016 2017

Ayala Land SMPH Megaworld

40
 Accounts Payable Turnover
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2015 2016 2017

Ayala Land SMPH Megaworld

Total Asset Turnover

0.3

0.25

0.2

0.15

0.1

0.05

0
2015 2016 2017

Ayala Land SMPH Megaworld

41
 Fixed Aset Turnover
45
40
35
30
25
20
15
10
5
0
2015 2016 2017

Ayala Land SMPH Megaworld

Inventory Turnover
6

0
2015 2016 2017

Ayala Land SMPH Megaworld

42
 Times Interest Earned
14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00
2015 2016 2017

Times Interest Earned MEG Times Interest Earned SMPH Times Interest Earned ALI

Debt Ratio
0.8000

0.7000

0.6000

0.5000

0.4000

0.3000

0.2000

0.1000

0.0000
2015 2016 2017

Debt Ratio MEG Debt Ratio SMPH Debt Ratio ALI

43
 Operating Profit Margin
50.00%
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2015 2016 2017

Operating Profit Margin MEG Operating Profit Margin SMPH

Operating Profit Margin ALI

Financial Leverage Multiplier

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00
2015 2016 2017

Financial Leverage Ratio MEG Financial Leverage Ratio SMPH

Financial Leverage Ratio ALI

44
 Net Profit Margin
45.00%

40.00%

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2015 2016 2017

Net Profit Margin MEG Net Profit Margin SMPH Net Profit Margin ALI

Earnings Per Share

1.8000

1.6000

1.4000

1.2000

1.0000

0.8000

0.6000

0.4000

0.2000

0.0000
2015 2016 2017

Earnings Per Share MEG Earnings Per Share SMPH Earnings Per Share ALI

45
 Return on Assets
7.00%

6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
2015 2016 2017

Return on Assets MEG Return on Assets SMPH Return on Assets ALI

Return on Equity
18.00%

16.00%

14.00%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2015 2016 2017

Return on Equity MEG Return on Equity SMPH Return on Equity ALI

46
 Price-Earnings Ratio
45.00

40.00

35.00

30.00

25.00

20.00

15.00

10.00

5.00

0.00
2015 2016 2017

Price Earnings Ratio MEG Price Earnings Ratio SMPH Price Earnings Ratio ALI

Dividend Payout Ratio

40.00%

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2015 2016 2017

Dividend Payout Ratio MEG Dividend Payout Ratio SMPH Dividend Payout Ratio ALI

47
 Dividend Yield Ratio
1.60%

1.40%

1.20%

1.00%

0.80%

0.60%

0.40%

0.20%

0.00%
2015 2016 2017

Dividend Yield Ratio MEG Dividend Yield Ratio SMPH Dividend Yield Ratio ALI

48
Appendix G: Intrinsic Value Computation

2018 2017 Difference

Property and Equipment 35,749,200.00 28,524,088.00 7,225,112.00
Current Assets 302,829,898.00 240,852,281.00 61,977,617.00
Accounts Payable 101,055,160.00 76,977,468.00 24,077,692.00
Accruals:
Project Costs 18,072,293.00 15,946,912.00 2,125,381.00
Salaries and Employee Benefits 6,025,804.00 5,485,382.00 540,422.00
Professional Management Fees 4,666,896.00 3,995,579.00 671,317.00
Repairs and Maintenance 2,667,501.00 1,764,627.00 902,874.00
Utilities 2,436,233.00 2,298,695.00 137,538.00
Advertising and Promotions 1,266,336.00 1,075,653.00 190,683.00
Rentals 870,599.00 1,566,953.00 - 696,354.00
Other Accrued Expenses 4,429,418.00 2,055,316.00 2,374,102.00
Total Accruals 40,435,080.00 34,189,117.00 6,245,963.00
Total Accounts Payable and Accruals 141,490,240.00 111,166,585.00 30,323,655.00
Free Cash Flow Value of Firm based on the
Add: OCF 52,877,097.00 Free Cash Flow Valuation
Less: NFAI Model, V
Change in Fixed Assets 7,225,112.00 = FCF / (r - g)
Depreciation 6,318,929.00 = 7,679,094 / (8.94% - 5.30%)
Total - 13,544,041.00 = 210,964,120.88
Less: NCAI
Change in Current Assets 61,977,617.00 Intrinsic Value
Change in (Accounts Payable = V / No. of Common Shares
+ Accruals) 30,323,655.00 Outstanding
Total - 31,653,962.00 = 210,964,094.88 / 14,734,881
TOTAL FREE CASH FLOW 7,679,094.00 = 14.32

Intrinsic Value based on
Dividend Valuation Model, V
= D1 / (r - g)
= 0.053703 / (8.94% - 5.30%)
= P14.75
Where:
D0 - is P0.51
D1 - P0.51 x 1.053
r - taken from gurumaster, (GuruFocus.com, LLC, 2018)
g - derived from the data provided in the FS
of AYI from 2014 to 2018

49
Appendix H: Technical Analysis

50