SMC’s Ramon Ang may rekindle HLCM interest as it starts building massive airport

San Miguel Corporation’s planned New Manila International Airport in Bulacan is now a few signatures closer to receiving tax breaks and an official franchise from the government.

Now that San Miguel Corporation (SMC) is commencing the construction of the gigantic airport , Ramon Ang may now also be busy looking for targets along the supply chain of the project. The San Miguel boss would not like any hiccups in the project in the form of supply or material constraints.  The massive airport project will draw significant amount of construction materials that it might compete with construction supplies from other major projects.  To secure the critical materials for the project, Ramon Ang would be glad to acquire suppliers critical to the project.

Funding for acquisitions may not be a problem, San Miguel Corporation as a group has a consolidated cash balance of 344.4 Billion Pesos as of June 30, 2020 that is more than double its loans becoming due in the near-term of 165.4 Billion Pesos. Despite the pandemic, SMC is still generating significant cash from operations.  In the first half of 2020, SMC was able to generate cash from operations of 13.5 Billion Pesos.

In addition to its internally generated cash, SMC is aggressively taking advantage of the prevailing low interest rate regime by issuing perpetual preferred shares and perpetual capital securities at relatively low rates.

It can be recalled that San Miguel Corporation and LafargeHolcim Ltd. have agreed for the sale of 85.73% of Holcim Philippines, Inc. But the Philippine Competition Commission sought to block the deal for anti-trust reasons leading San Miguel to cancel the deal.

HLCM’s Bulacan cement plant might be of a particularly interest to San Miguel as it could be the most proximate cement plant to the massive airport.

With Holcim Philippines, Inc. (HLCM) presently valued at just 35.16 Billion Pesos, Ramon Ang may now be pursuing HLCM again. They may now be back into the negotiating table.

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.

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