The first half of 2020 (1H 2020) saw the worst of the measures to keep COVID-19 at bay. As a result, business activities were grounded almost to a halt. GT Capital Holdings, Inc. (GTCAP) was not spared.
Automotive operations and real estate sales declined in first half of 2020. Real estate operations of GTCAP are conducted through its 100% owned subsidiary Federal Land and its subsidiaries. Meanwhile, automotive operations are coursed through 51% owned Toyota Motors Philippines, 58.1% owned Toyota Manila Bay Corporation and subsidiaries, and 100% GT Capital Auto Dealership Holdings, Inc.
Equity shares in net income of associates – Metrobank Bank and Trust Company (MBT), Metro Pacific Investments Corporation (MPIC) also declined as challenging business environment caused them to post lower net incomes.
Metrobank net income declined due to increased loan-loss provisioning
GTCAP owns 37.15% of MBT, its most significant investment. During the period, 1H 2020, GTCAP bought 22.11 million common shares of MBT increasing its stake in MBT from 36.65% to 37.15% as of end of 1H 2020. MBT’s net income declined by 30% as compared to the net income of the same period of last year. The 30% decline was a result of the increase in loan-loss provisions.
Aside from MBT, GTCAP also holds around 0.01% shares of its most significant partner, Toyota Motors Corporation, marked at 11 Billion Pesos in the balance sheet as of end of 1H 2020. Its investment in Toyota Motors Corporation saw a decline of around 1.4 Billion Pesos from its value as of end 2019 of 12.4 Billion Pesos.
Pandemic dries cash generation from operations
It may have earned a consolidated net income of 2.74 Billion Pesos for the period 1H 2020 but it burned cash from its operations in that period. As with most other conglomerates, COVID-19 pandemic flattened the generation of cash from operation. With cash from operations drying, GTCAP has to keep handy access to credit facilities as around 30.3 Billion Pesos of debts become due in the coming months. GTCAP has to tap credit facilities to pay debts becoming due in the coming months as it doesn’t generate significant cash from operations.
With strong roots in banking, GTCAP had banking DNA embedded in its system. Management of GTCAP is very prudent. “We continue to closely monitor the development of the Covid-19 pandemic with concern. During this period of uncertainty, GT Capital continues to practice fiscal discipline, resulting in a strong and stable balance sheet, adequate liquidity, and access to credit facilities, in case of need,” declared GTCAP management.
Disclaimer and Disclosure: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent view point. Accuretti Systems Inc. in the course of day to day trading may have own, or is considering buying or disposing, the shares of the companies mentioned in this commentary.