ANALYSTS BRIEFING Highlights of 2017 Operations March 22, 2018 Penthouse, PNB Allied Bank Center 6754 Ayala Avenue, Makati City Philippines
DISCLAIMER By accepting this material, you acknowledge, understand and accept the following: 1. This material has been prepared for information and illustrative purposes only, and maybe subject to change without notice, as operating conditions of the Company are never constant; 2. This material may contain statements derived from historical information, projections, forward looking statements or expectations as currently assessed under prevailing conditions which at some point in the operations of the Company may change. Actual results could differ materially from those expressed or implied in this material. Important factors that could make a difference to the Company s operations include, among others, the economic conditions affecting aviation travel, demand/supply and price conditions in the local and global markets which affect the businesses of the Company, changes in Government regulations, tax laws, and other statutes and incidental or extraneous factors beyond control of the Company; and 3. This material is not, and should not be regarded as investment advice or as a recommendation regarding a course of action, including without limitation as to those terms that are used in any applicable law or regulation; 4. This material is provided with the understanding that with respect to the data provided herein, the Company or its representative is not acting in a fiduciary or advisory capacity under any contract with the recipient of the information. Any course of action in connection herewith or arising from this material, as to whether such course of action is appropriate or proper is the responsibility of the recipient of this material, based on the recipient s own judgment and independent assessment of the data contained 5. No part of this document may be reproduced, altered or modified in any manner, in whole or in part, without the written permission of MacroAsia. For more information, please contact: MacroAsia Corporation 12th Floor PNB Allied Bank Center 6754 Ayala Avenue, Makati City, 1226 Philippines Tel No. (+63 2) 840 2001 Investor Relations Gladys Lorraine P. Salamatin Email: gpsalamatin@macroasiacorp.com Kyle Jemmric L. Velasco Email: klvelasco@macroasiacorp.com 2
AGENDA Key Points Growing Under The Spotlight Getting Bigger Standing On Solid Ground Moving Forward To Higher Ground 3
KEY POINTS A. MAC GETS BIGGER! Our core business units continue to drive solid growth. B. MAC RESTS ON SOLID GROUND! A healthy balance sheet keeps well-supported the continuing or new expansion projects C. MAC IS POISED FOR FOCUSED-GROWTH IN A SUNRISE INDUSTRY, EVEN BEYOND BORDERS! We see MAC s growth trajectory to be well-supported by current operating indicators in Q1 2018. Ongoing projects ensure sustainability and growth. 4
GROWING UNDER THE SPOTLIGHT 5
GROWING UNDER THE SPOTLIGHT PSE SECTOR INDEX: SERVICES Name of Listed Company Symbol Last Trade Price (03/9/18) Outstanding Shares Float % Free Float Market Capitalization %Weight 1 PLDT Inc. TEL 1,521.00 216,055,775 50 164,310,417,648.00 27.58 2 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. ICT 108.90 2,035,470,209 51 113,047,979,982.30 18.98 3 BLOOMBERRY RESORTS CORPORATION BLOOM 14.32 11,001,717,025 34 53,565,159,858.48 8.99 4 GLOBE TELECOM, INC. GLO 1,669.00 132,916,585 22 48,804,312,181.00 8.19 5 PUREGOLD PRICE CLUB, INC. PGOLD 53.35 2,765,381,406 33 48,685,922,344.40 8.17 6 ROBINSONS RETAIL HOLDINGS, INC. RRHI 84.60 1,385,000,000 38 44,524,980,000.00 7.47 7 Golden Bria Holdings, Inc. HVN 318.00 644,117,649 16 32,772,706,032.00 5.50 8 CEBU AIR, INC. CEB 99.00 605,953,330 33 19,796,495,301.00 3.32 9 MELCO RESORTS MRP 7.60 5,666,764,407 27 11,628,200,564.00 1.95 10 ABS-CBN CORPORATION ABS 28.80 862,192,581 43 10,677,392,928.00 1.79 11 MACROASIA CORPORATION MAC 26.95 1,227,154,400 26 8,598,670,880.80 1.44 12 Premium Leisure Corp. PLC 1.13 31,627,310,000 21 7,505,160,663.00 1.26 13 LEISURE & RESORTS WORLD CORPORATION LR 7.06 1,199,852,512 64 5,421,413,592.48 0.91 14 STI EDUCATION SYSTEMS HOLDINGS, INC. STI 1.48 9,904,806,924 36 5,277,281,129.64 0.89 15 GMA NETWORK, INC. (COMMON) GMA7 6.30 3,361,047,000 24 5,081,903,064.00 0.85 16 Metro Retail Stores Group, Inc. MRSGI 3.30 3,429,375,000 26 2,942,403,750.00 0.49 17 NOW CORPORATION NOW 9.87 1,517,278,350 19 2,845,352,094.69 0.48 18 SSI Group, Inc. SSI 2.63 3,312,524,430 30 2,613,581,775.27 0.44 19 PHILWEB CORPORATION WEB 6.90 1,435,626,680 26 2,575,514,265.30 0.43 20 IPM HOLDINGS, INC. IPM 8.28 690,000,000 32 1,828,224,000.00 0.31 21 HARBOR STAR SHIPPING SERVICES, INC. TUGS 5.36 907,857,870 32 1,557,157,821.84 0.26 22 WATERFRONT PHILIPPINES, INC. WPI 0.90 2,498,991,753 53 1,192,019,067.00 0.20 23 BOULEVARD HOLDINGS, INC. BHI 0.06 12,000,000,000 56 430,080,000.00 0.07 From February 2017, MAC has invited analysts, fund managers and investors to visit operating facilities for the public to have an awareness of MAC s business. An Investors Relations Office has been formalized for easier access to corporate information. By February 2018, MAC has become part of PSE s Services Sector Index. 6
GROWING UNDER THE SPOTLIGHT MAC has been recognized as among the best by its airline clients from all over the world. Its catering and ground handling units have been receiving awards from airlines. Its MRO JV has been successful in competing on the global base maintenance market. It also helps that LTP is part of the established and wide MRO network of Lufthansa. 7
GETTING BIGGER MAC Group financial results point to sustainable top-line and bottom-line performance. CONSOLIDATED P&L HIGHLIGHTS in PHP millions 3,500 3,000 2,500 2,000 1,500 1,000 500 - +12% 1,723 +22% 1,921 2,335 2,939 +26% 240 +90% +46% 668 456 1,336 THE GROWTH STORY CONTINUES... +100% 122 341 +29% 440 Total Revenues EBITDA Net Income 2014 2015 2016 2017 +180% 1,081 +146% Aircraft Maintenance, Repair and Overhaul (MRO), Food Services (inflight and non-inflight food) and Gateway Services (Groundhandling) consistently deliver growing results. 8
Lufthansa Technik Philippines (LTP) Maintenance, Repair and Overhaul Services (Biggest MAC investment, 49% ownership by MAC) 9
Lufthansa Technik Philippines Revenues (PHP millions) 7,740.8 9,653.4 12,827.5 2,500. 2,000. 1,500. 1,000. 500. Operating income (PHP millions) and margin (%) CAGR = 28.7% CAGR = 70.8% 9% 699.3 11% 1,014.0 16% 2,040.3 18% 16% 14% 12% 10% 8% 6% 4% 2% 2015 2016 2017. 2015 2016 2017 0% LTP s earns in USD and reports in USD. 10
Lufthansa Technik Philippines Net Income (PHP millions) and margin (%) 2,000. 15% 16% 1,800. 1,600. 1,400. 1,200. 1,000. 8% CAGR = 80.2% 11% 1,893.4 14% 12% 10% 8% Year ROE 2015 31% 2016 34% 2017 45% 800. 600. 400. 200.. 582.9 1,014.8 2015 2016 2017 6% 4% 2% 0% Margins continue to increase due to continuing growth in line maintenance and base maintenance activities, while control in operating costs have been sustained through various programs. 11
Lufthansa Technik Philippines In 2017, traffic volume resulted into more flights of line maintenance clients PALEx fleet of six (6) A321 planes were transferred for line maintenance with LTP in Oct 2017 Line Maintenance revenues of USD70m is 46% of core revenues: 4% increase in 2017 PAL fleet increased in mid-december with 2 new B777
Lufthansa Technik Philippines Strong third-party business (65% of BM revenues), especially in the A380 layovers (50 th A380 event since 2012 was marked in 2017 (Qantas A380) Support for PAL s Get That 5-Star Initiative translated into cabin refurbishment work Base Maintenance of USD83m is 54% of core revenues: 10% increase in 2017
MacroAsia Catering Services (MACS) Airline Catering, Institutional Catering and Food Service Management (67%-owned by MAC, 33% by SATS of Singapore)
MacroAsia Catering Services 28% 12% Foreign Airline Market Share (%, based on flight movement) 60% MACS operates in NAIA, in a 2-hectare leased area. MACS is the preferred caterer of foreign airlines. PAL inflight meals are not being provided by MACS (only Mabuhay lounge meals). MACS also runs institutional kitchens outside NAIA (e.g., ADB, BPI). 28 Apr 2017 : Acquisition of Xiamen Air account (A320, daily to Xiamen) MACS MCSC Others 26 May 2017 : Acquisition of Lucky Air account (A320, daily to Kunming (suspended flights since Nov 2017 due to slot issues in NAIA)
MacroAsia Catering Services Average Daily Meals CAGR = 10.8% 11,893 10,580 10,092 3,650 9,002 1,131 2,373 7,929 9,002 8,961 7,929 8,207 8,243 14,926 14,681 4,885 3,858 10,040 +8% 10,823 Core inflight meal business grew by 8% but non-airline meal business slowed down in 2017. Marketing for non-airline meals being produced inside the NAIA kitchen was constrained by facility issues. This has been resolved by repair works in 2017 and production capacity will also be expanded when the MSFI facility is completed by 1H18 2011 2012 2013 2014 2015 2016 2017 In-Flight Institutional Last provision for Okada meals was in Jan 31, 2017. Replacement client was not pursued. BPI 1851 Club was serviced in July 2017
MacroAsia Catering Services Revenues (PHP millions) CAGR = 14.8% 300.0 Operating income and margin (%) CAGR = 55.0% 25% +7% 1,541.0 250.0 19% 20% 1,446.4 200.0 14% 15% 1,168.8 150.0 100.0 8% 276.6 219.6 10% 50.0 91.4 5% 2015 2016 2017 0.0 2015 2016 2017 0% Service fees being charged by MAC & SATS increased in 2017 from 5% of net sales to 7.5% of net sales
MacroAsia Catering Services 300.0 250.0 Net income and margin before Service Fee (millions Php, %) 17% CAGR = 47.4% 16% 18% 16% 14% 200.0 150.0 10% 241.8 +4% 250.3 12% 10% 8% 100.0 50.0 115.3 6% 4% 2% 0.0 2015 2016 2017 0%
MacroAsia Catering Services 200.0 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 CAGR = 53.2% 5% 60.9 Net income and margin (millions Php, %) 12% 174.5 9% 142.9 2015 2016 2017 14% 12% 10% 8% 6% 4% 2% 0% Year ROE 2015 15% 2016 33% 2017 23% Lower 2017 net income is mainly due to the increase in service fees to MAC & SATS (PHP40m increase). Provisions for Input VAT claims was also made (PHP12m). 2016 was a high base due to institutional clients. Slowdown in non-airline marketing was done in Q4 2017 to enable refurbishment and repair work in the 20-yr old inflight kitchen.
MacroAsia Catering Services MACS Volume Developments 16,000 14,000 12,000 10,000 8,000 Volume of meals is expected to grow further after MSFI facility is completed this 2018. Facility challenges were faced in 2017 for the 20- yr old kitchen that has been opened for 24/7 ever since it started in 1998. 6,000 4,000 2,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Meal Volume
MacroAsia Catering Services A Preferred-VVIP Caterer 2017 ASEAN Summit Brunei Cambodia India Laos Russia South Korea
MacroAsia Catering Services 2018 Inflight Meals Growth: Royal Brunei Airlines (BI) 1 st catering provisioning, Feb. 01, 2018 China Eastern (Shanghai) 1 st catering provisioning, Mar. 25, 2018
MacroAsia Catering Services Expanding Production Capacity In 2018 MSFI Facility in Sucat: slated for operations by 2H 2018
MacroAsia Catering Services Expanding Production Capacity In 2018 MSFI Facility in Sucat: slated for operations by 2H 2018
MacroAsia Catering Services Expanding Production Capacity In 2018 MSFI Facility in Sucat: slated for operations by 2H 2018
MacroAsia Service Corporation (MASCORP) Gateway Services, Ground Handling (100% MAC)
MacroAsia Airport Services Corporation Revenues (millions Php) 120. Operating income and margin (millions Php, %) 12% CAGR = 41.3% +52% 1,032.4 100. 80. CAGR = 77.2% 10% +51% 10% 10% 8% 678.8 60. 6% 105.0 6% 516.9 40. 69.5 4% 20. 33.5 2% 2015 2016 2017. 2015 2016 2017 0%
MacroAsia Airport Services Corporation 80. 70. 60. Net income and margin (millions Php, %) CAGR = 94.5% 7% 7% 8% 7% 6% Year ROE 2015 11% 2016 22% 2017 26% 50. 40. 4% +53% 71.2 5% 4% Net income increased mainly due to increase in flights handled in more number of airports served 30. 20. 10. 18.8 46.4 3% 2% 1% Efficiencies in operations have not been achieved, as it requires time for new GH locations to stabilize. 2015 2016 2017 0%
MacroAsia Airport Services Corporation LUZON VISAYAS MINDANAO Basco Tacloban Dipolog Laoag Kalibo Zamboanga Tuguegarao Roxas General Santos Clark Cebu Davao Manila NAIA 1, 2, & 3 Iloilo Surigao From 7 stations in 2016 to 27 stations in 2017 Naga Bacolod Butuan Legazpi Busuanga Puerto Prinsesa Masbate Virac Cotabato Cagayan De Oro Camiguin Siargao *Excluding the PALex Satellite Cargo
MacroAsia Airport Services Corporation Manila Market Share 8% 17% MASCORP Sky Logistics PAL Express MIASCOR Others KEY CURRENT MARKET DEVELOPMENTS: Winding down of Miascor groundhandling operations has resulted into its clients looking for new providers. 55% 3% 17% Cebu Pacific is a MIASCOR Client Following the news of Miascor s closure, Cebu Pacific has formed its subsidiary 1Aviation Groundhandling Services Corporation (new player in aviation services)
MacroAsia Airport Services Corporation Continuing Growth In 2018 Number of airports where MASC will be present will reach 30 New airports include: Sibulan Airport (Dumaguete) Labo Airport (Ozamiz) Tagbilaran Airport (Bohol) New clients (MIASCOR accounts): Manila Jetstar Japan - March 19 Jeju Air - March 19 Kuwait Airways - March 20 Turkish Airways - April 19 Cebu Jeju Air - April 1 MASCORP to operate in new Terminal 2 of Cebu Airport
STANDING ON SOLID GROUND BALANCE SHEET HIGHLIGHTS (in PHP millions) As of End: 2017 2016 Inc (Dec) % Change Cash 1,005.3 559.7 445.6 79.6% Total Assets 6,610.1 4,796.3 1,813.8 37.8% Total Loans 720.3 187.8 532.5 283.6% Total Liabilities 1,988.4 961.0 1,027.4 106.9% Total Equity 4,621.7 3,835.5 786.2 20.5% D-E Ratio 43% 25% Book Value per Share 3.8 3.1 Earnings per Share 0.85 0.32 32
STANDING ON SOLID GROUND Audited (In Php Millions) NET SERVICE REVENUE 2017 2016 Increase/ (Decrease) In-flight and other catering 1,541.5 1,446.4 95.2 7% Ground handling and aviation 1,032.4 678.8 353.7 52% Rental and administrative 197.2 188.8 8.4 4% Charter flights 0.0 11.8-11.8-100% Water 140.4 6.3 134.1 2144% Exploratory drilling fees 27.3 3.0 24.3 811% TOTAL REVENUES 2,938.9 2,335.0 603.9 26% DIRECT COSTS 2,134.2 1,660.5 473.7 29% GROSS PROFIT 804.7 674.4 130.2 19% SHARE IN NET EARNINGS OF ASSOCIATES 968.3 532.4 435.8 82% TOTAL INCOME 1,773.0 1,206.9 566.1 47% OPERATING EXPENSES -619.9-713.2 93.3-13% INTEREST INCOME 6.0 7.0-1.0-14% FINANCING CHARGES -8.3-3.3-5.0 152% OTHER INCOME - net 44.4 75.1-30.7-41% INCOME BEFORE INCOME TAX 1,195.2 572.5 622.7 109% PROVISION FOR INCOME TAX 114.2 132.4 18.2-14% NET INCOME 1,081.0 440.2 640.9 146% Attributable to: Equity holders of the Company 1,038.5 389.0 649.6 167% Non-controlling interests 42.5 51.2-8.7-17% NET INCOME 1,081.0 440.2 440.2 100% % CONSOLIDATED INCOME STATEMENT HIGHLIGHTS (in PHP millions) 2017 2016 EPS 0.85 0.32 EBITDA 1,366.0 667.5 EBITDA Margin 46% 29% Net Margin 37% 19% 33
MOVING FORWARD TO HIGHER GROUND SOME CURRENT COMPANY DEVELOPMENTS a) ENHANCING FOCUSED-GROWTH: Transfer of water subsidiaries from MacroAsia Properties Development Corporation to another holding company under control of MacroAsia Corporation b) REVISITING COMPANY CAPITAL AND EARNINGS RETAINED: Declaration of 30% Stock Dividends (about 368 million shares) 34
MOVING FORWARD TO HIGHER GROUND OUTLOOK AND GUIDANCE: KEEPING THE 20% BOTTOMLINE GROWTH AS 2018 TARGET FOR NOW. 35
MOVING FORWARD TO HIGHER GROUND SOME INDICATORS FOR 2018: From PHP905M capex spending in 2017, the MAC Group is allocating PHP2.6B for capex to expand (excluding investments to be allocated for M&A transactions). Of this PHP2.6B budget, PHP1.9B is for aviation-services related businesses. No capital call is being eyed for these requirements. Several new foreign clients in ground handling and catering are already secured for servicing this 1H2018. More synergies are being eyed between MAC Group and PAL (MRO, Catering, Ground Handling). Line Maintenance Contract has been awarded by PAL on 25 Jan 2018 to LTP for the new A321neo/A350 planes (contract duration of 12 years). More than 50% of MRO base maintenance slots for 2018 are already secured. Last February 7, 2018, LTP and Asiana Airlines signed a five-year agreement for base maintenance from 2018 to 2022, for a total of 14 checks on Asiana s A380s (6 A380s at present). LTP identified two areas of possible hangar locations within its current NAIA location (MacroAsia Special Ecozone). MacroAsia Catering will have its capacity expanded through the MSFI facility and the development of certain areas in its current location. Cebu development project (MacroAsia leased areas) is ongoing. Pilot school (FAA) is targeted to be operational by 2H2018. MSFI (institutional catering is targeted to be operational by 2H2018. Water projects continue to be developed. While the MAC Group continues to grow in other areas in the Philippines., authority was granted for Management to study business expansion outside the Philippines. 36
Q&A