1.

Now, our recommendation will be based on the notable trends previously identified as well as
an inclusion of external factors surrounding the company.
2. The company’s liquidity raises two concerns (read) and it is recommended that AP should focus
on stabilizing its liquidity. For example, they should have regular current ratio evaluations so
they can integrate possible adjustments in their different monthly budgets. Also, they should
not exceed the 2.0 ratio limit because these resources could have been reinvested in order to
gain more assets in the future
3. Activity ratios showed (read). In fact, within the same industry, Meralco was able to outperform
AP by 60% in terms of revenue generated per 1 Php of assets. I mean if Meralco can do it, then
why does AP cannot? Hence, Aboitiz needs to increase its efforts in generating revenues and not
just only focusing on capital expenditures
4. Debt – simple
5. Next is the company’s profitability, where they need to address (read). Here, the company
should reevaluate purchasing and generating costs and cut off or reduce unnecessary costs, as
well as being wary of financing activities and evaluate such activities as much as possible for the
cost benefit analysis to minimize financing costs.
6. As part of our analysis outside the required ratios, we all know that the market ratios reflect the
investors’ degree of confidence regarding the particular stock. For a fact, AP’s P/E ratio is 11.52,
definitely lower than Mer’s 19.29. Not only that, as Return on Equity is also 18.07 vs 31.16 in
favor of the Manila Electric Company. So one main step is for Aboitiz to be consistent in its
growth rate by first, achieving higher revenues. Aboitiz needs to appear “the MVP” company in
the eyes of investors.
7. According to Moody’s Investors Service, the power sector remains stable and healthy by
displaying positive returns as well as the supply capacity from Luzon to Mindanao. Supplier
power is relevant since the oversupply situation may keep spot prices subdued, and around 6%
of the attributable capacity of AP is attached to the spot market so they need to bargain with
the suppliers to offset spot prices through lower costs. Furthermore, Meralco and Aboitiz have
long been competing through bidding for different projects around the country. Aboitiz needs to
maintain its market share by being alert for corporate takeovers relating to their industry. They
need to maintain an attitude of “being cautiously aggressive” towards every opportunity, (being
innovative, . . .)
8. Lastly, they need to take every possible opportunity and eliminate the threats. The issuance of
about P16 billion fixed-rate bonds can be a good step for the company since they can use these
funds for future acquisitions, firm investments and other long-term corporate plans. Again, they
should maximize their vertically integrated nature of owning both power generation and power
distribution facilities to expand its power portfolio and capacity.
Current estimate of its earnings growth is at 7.2% (COL) but this earnings growth may increase
even more if the company is able to perform the same in the period 2015-2016. By stepping up
performances, following the above recommendations and assuring the public of accountability
and responsible management, then they can surely achieve their goal of creating a better future
to their customers, host communities, and eventually our nation.