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  • Cebu Air’s Underlying Momentum Is Real — and It Shows

    Cebu Air’s Underlying Momentum Is Real — and It Shows

    Start with the basics. For the nine months to September 30, 2025, CEB logged ₱87.6 billion in revenue, up 18% year‑on‑year. Passenger sales rose 17% to ₱59.7 billion on broad‑based demand recovery; cargo accelerated 30% to ₱5.2 billion; and ancillary revenues—those high‑margin add‑ons like baggage, seat selection, and bundles—climbed 17% to ₱22.8 billion. The top‑line story isn’t just about reopening—it’s about retention and monetization.

    More telling than growth is quality. Operating costs did rise (+16% to ₱79.8 billion), as you’d expect with more flights and a bigger fleet. But the key heavy lines behaved: flying operations were essentially flat (+1%), thanks to lower fuel prices offsetting higher consumption and crew counts; depreciation (+21%) and aircraft/traffic servicing (+41%) reflect capacity normalization rather than inefficiency; and short‑term lease costs fell sharply (−80%), signposting better asset planning. Net result: operating income of ₱7.8 billion, up 37%. 

    The best lens for “underlying momentum” is CEB’s pre‑tax core net income, which filters out outsized, non‑recurring items. On that basis, CEB delivered ₱2.9 billion, double last year’s ₱1.45 billion. Pair that with an EBITDA of ₱22.2 billion and a 25.3% EBITDA margin (up from 23.6%), and you see a business extracting more cash profit per peso of revenue even as it rebuilds capacity. Efficiency metrics corroborate the trend: Cost per ASK ticked down to ₱3.05 from ₱3.10, with the seat load factor steady at 84.8%—proof that routes and pricing are holding. 

    Of course, the reported net income of ₱9.47 billion (+181%) needs context. Two items gave the year a big glow: ₱5.99 billion booked as other income for five free‑of‑charge Pratt & Whitney GTF engines—a fair‑value recognition tied to industry‑wide AOG mitigation—and ₱226 million from remeasurement on the step‑acquisition of 1Aviation (ground handling), which moved from joint venture to subsidiary. These don’t recur, and the market should normalize them. But they also matter: the engines improve near‑term fleet availability, while consolidating 1Aviation strengthens service control and integration. (Source: CEB Form 17‑Q, 9M 2025)

    If there’s a headwind, it’s below the line. Financing costs rose 17% to ₱5.6 billion as deliveries and lease liabilities scaled, and foreign‑exchange losses hit ₱1.25 billion on peso depreciation versus USD and JPY—the currency mix in aviation is stubborn. Yet even here, the interest coverage ratio improved to 1.57x (from 1.32x), reflecting stronger earnings capacity to carry debt and leases. 

    Balance‑sheet optics have turned decisively better. Equity grew to ₱16.1 billion (from ₱10.0 billion), and book value per common share jumped to ₱21.00 (from ₱7.18), driven by profits despite an active buyback and a ₱2.82 billion dividend to preferred shareholders. On liquidity, the current ratio is a low 0.53x, and current liabilities still exceed current assets by ~₱30 billion—that’s the nature of airline working capital. But cash generation is the counterweight: ₱15.41 billion net cash from operations year‑to‑date, ₱4.78 billion net inflows on investing (proceeds and PDP/security‑deposit refunds, net of capex), and deliberate ₱24.46 billion outflows in financing (debt/lease repayments, treasury purchases, dividends). The company is using cash to de‑risk.

    Operationally, the platform is deeper and more resilient. CEB now flies 98 aircraft with an average age of ~6.1 years, across 82 domestic and 42 international routes with roughly 2,700 weekly flights. The AirSWIFT acquisition broadens leisure connectivity (El Nido and other tourist nodes), while 1Aviation consolidation tightens ground operations across thirty‑plus airports. Those moves aren’t mere trophies; they reinforce the commercial engine—better schedule reliability, more ancillary throughput, and improved customer experience that sustains yield. 

    There are risks worth watching. Fuel and FX remain volatile, and hedging is prudently modest; heavy maintenance accruals (₱5.68 billion HMV YTD) and return condition provisions (₱0.83 billion) underline a busy engineering calendar as utilization rises; lease liabilities are substantial (₱116.84 billion), keeping discipline front‑and‑center. Still, the levers are visible: route profitability, ancillary monetization, tighter ground operations, normalized lease mix, and efficiency at scale. 

    Bottom line: If you’re trying to decide whether CEB’s 2025 bounce is cosmetic or structural, the core tells the story. Pre‑tax core earnings doubled, margins expanded, CASK declined, and cash flows are funding de‑risking, not just growth. The headline numbers benefited from exceptional items, yes—but the business beneath them is sturdier than it was a year ago. For investors, valuation should key off normalized earnings and EV/EBITDA, but the direction of travel is favorable: an airline that’s earning more per flight and per customer, with a wider network, better integration, and improving balance‑sheet optics.

    In a sector where momentum can be fleeting, Cebu Air’s looks real—and increasingly repeatable.

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  • Rent Is the Engine, Refinancing Is the Weather: Reading SM Prime’s 9M 2025

    Rent Is the Engine, Refinancing Is the Weather: Reading SM Prime’s 9M 2025

    In a year when higher funding costs and mixed consumer signals have turned developers cautious, SM Prime Holdings (SMPH) just delivered a set of numbers that feel both familiar and instructive: steady rent‑led growth, softness in residential, and a heavier–but manageable—refinancing calendar.

    On the headline figures, consolidated revenues rose 4% to ₱103.40B for the first nine months of 2025, carried by rent (up 7% to ₱60.99B), while real estate sales eased 2% to ₱31.20B. Costs and expenses fell 1%, pushing operating income up 9% to ₱51.90B and net income (attributable) up 10% to ₱37.24B. EPS clocked in at ₱1.291, with a cash dividend of ₱0.480 already paid in May.

    The Core Story: Malls Still Do the Heavy Lifting

    SMPH’s malls continue to anchor earnings strength. In the nine months, Malls posted ₱60.92B in revenue and ₱31.51B in pre‑tax profit; Residential contributed ₱32.58B and ₱10.41B, respectively; Hotels & Conventions added ₱6.01B and ₱1.01B; Commercial & Integrated Developments generated ₱3.89B and ₱3.01B. Operating leverage is visible: the company squeezed more profit out of largely flat third‑quarter revenues thanks to disciplined costs.

    This operating resilience rests on footprint and execution. SMPH opened SM City Laoag in May and SM City La Union in October, bringing the Philippine mall count to 89 (plus 8 in China). The pipeline of redevelopments also supports rent and occupancy, while hotels, offices, and conventions continue to offer steady—if smaller—contributions.

    Where the Fuel Mix Shows Some Octane Lag

    The Residential engine sputtered a bit: real estate sales slipped 2% year‑on‑year and segment profit ticked lower. Receivables and contract assets rose (₱107.25B), with unbilled revenue tied to construction milestones also higher—fine if build schedules and collections remain tight, more delicate if they don’t. Meanwhile, non‑cash OCI headwinds—FVOCI losses in the equity book and a weaker cash‑flow hedge reserve—trimmed total comprehensive income to ₱35.67B (from ₱37.21B), even as net income advanced.

    These are not structural breaks; they are friction points that investors should watch: project take‑up and construction cadence, pricing power, and the sensitivity of SMPH’s OCI to market marks.

    Balance Sheet: Bigger Tank, Higher Octane Price

    On the funding side, interest‑bearing debt climbed to ₱419.82B (+8% YTD), while current maturities rose to ₱112.08B. SMPH notes these are “due for refinancing,” a normal course for a developer of this scale. Coverage remains sound: interest coverage at 7.06×, debt/EBITDA at 4.84×, and net debt‑to‑equity at 46:54. Liquidity is adequate, with a current ratio of 2.28× and acid‑test 1.29× (excluding items flagged for refinancing).

    Hedging helps: after swaps, roughly 57% of long‑term borrowings are effectively fixed‑rate. Still, derivative assets came down with maturities and fair‑value changes—less cushion than last year, but consistent with a company rolling hedges as the book evolves.

    The Bottomline

    SMPH’s playbook still works: rent growth and operating discipline carry the income statement; capex and landbanking expand the footprint; hedges and market access keep the funding bridge sturdy. The residential wobble and OCI marks are the ballast on comprehensive profits, not the anchor. The refinancing calendar is heavier, but coverage and liquidity suggest it’s navigable—especially for a name that just placed ₱25B in retail bonds and continues to roll projects and tenants into an already dominant network.

    As with any property stock in a higher‑for‑longer world, the cost of money is the weather: if it worsens abruptly, sentiment and valuation can swing faster than the EPS math. But in the base case, SMPH’s rent engine remains powerful enough to keep the vehicle moving—just perhaps with a touch more fuel discipline and a keener eye on the road ahead.

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  • Why ABS is likely to move under FPH—funded by First Gen

    Why ABS is likely to move under FPH—funded by First Gen

    From the Trading Desk. 

    The Lopez Group faces a moment that calls for clear, steady action. TV5’s notice to end its content deal with ABS‑CBN—which ABS says it’s working to resolve—puts pressure on ABS’s cash flows and its relationships with partners. Letting that pressure linger risks bigger problems. 

    The most straightforward fix is to bring ABS under First Philippine Holdings (FPH) through a share swap—and then use First Gen (FGEN) cash to help ABS regain its footing. Here’s why this path makes sense, quickly and simply:

    1) Put ABS under the strongest umbrella

    Inside the Lopez Group, ABS sits under Lopez Holdings, while FPH is the parent for major businesses like First Gen (power) and Rockwell Land (property). Moving ABS under FPH aligns responsibility and resources in one place and avoids messy intercompany band‑aids. It’s a clean, familiar step for listed companies in the Philippines.

    2) Use the cash that already exists

    In November 2025, First Gen closed a ₱50 billion deal with Prime Infrastructure, selling 60% of its Batangas gas plants and the LNG terminal while keeping 40% (Tokyo Gas holds 20% in the LNG hub). That transaction brought in real cash. A special dividend from FGEN to FPH immediately equips FPH with funds to settle partner obligations, stabilize operations, and give ABS breathing room after the share swap. 

    There’s a bonus: in the Philippines, cash dividends between local companies aren’t taxed at the recipient company, making FGEN → FPH a fast, efficient way to move support where it’s needed. 

    3) This doesn’t weaken Lopez control of FPH—if anything, it can increase it

    Some might worry that issuing new FPH shares for a 100% ABS swap would dilute Lopez control. In practice, it won’t:

    • Before the swap, Lopez Holdings (LPZ) owns about 55.6% of FPH (per FPH’s Public Ownership Report). 
    • After a full ABS‑for‑FPH share swap (priced on recent trading averages), LPZ’s stake in FPH would likely tick up—roughly into the low‑to‑mid 60% range—because LPZ would receive the new FPH shares issued as consideration. In other words: more FPH shares end up with Lopez Holdings, so control does not fall; it can rise. (This is based on recent market data for ABS and FPH and simple share‑count math; inputs such as ABS’s outstanding shares and recent prices come from PSE EDGE.) 

    And since FPH already has a healthy public float, that small increase in Lopez ownership does not threaten the exchange’s minimum public‑ownership rules. 

    4) Doing nothing costs more

    Waiting invites headlines, frays trust with partners, and makes a later fix more expensive. A share swap + FGEN special dividend is decisive, transparent, and fast. It shows banks, advertisers, and viewers that ABS’s finances are under firm stewardship—with the scale and discipline of FPH behind it.

    Bottom line:
    The likely move is ABS under FPH via share swap, funded by an FGEN special dividend—and Lopez control of FPH won’t be diluted by doing this. It’s the simplest way to restore confidence and give ABS the time it needs to get fully back on its feet.

    Because the FGEN cash is already real, many investors will naturally front‑run the possibility of a special dividend flowing to FPH—and, by extension, to all FGEN shareholders. In that sense, the market may treat FGEN like a buy‑for‑dividend‑optionality story right now, pending board moves. (Again, this is sentiment—not a recommendation.) 

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  • FLI’s Two‑Track Story: Gains on the Ground, Rates in the Rear‑View

    FLI’s Two‑Track Story: Gains on the Ground, Rates in the Rear‑View

    Filinvest Land, Inc. (FLI) has quietly stitched together a steady nine‑month performance that looks better beneath the surface than its modest headline growth might suggest. Yet the same report, which shows improving revenue, cash generation, and liquidity, also flags the familiar headwinds of higher financing costs and execution risk that could trip up momentum if conditions turn. Here’s the balanced read investors should care about—what’s getting better, and what could potentially derail the story. 

    What’s getting better

    1) Dual‑engine revenue: development + leasing both up.
    FLI’s consolidated revenue rose 7.9% to ₱18.99 billion for the nine months ended September 30, 2025, with real estate sales up 8.2% to ₱12.86 billion and rental & related services up 7.3% to ₱6.13 billion. The sales mix remains anchored in medium‑income housing (71%), while affordable/low segments (17%) widened their share—useful ballast when the market tilts toward value. Leasing gains came from higher occupancy and contractual escalations; even the co‑living pilot (The Crib Clark) added incremental pesos.

    2) Earnings drift higher with resilient margins.
    Net income improved 5.0% to ₱3.64 billion; EPS ticked up to ₱0.14 (from ₱0.13). Under the hood, computed gross margins held sturdy—about 52% in real estate and 51% in leasing—despite cost inflation and a heavier depreciation footprint from asset additions. That margin resilience is the critical “quality” signal in a build‑and‑lease model.

    3) Operating cash flow and cash reserves strengthened.
    Operating cash flow climbed 5.1% to ₱7.09 billion, while cash & equivalents nearly doubled (+89.6%) to ₱7.55 billion. A lighter investing outflow—thanks to tempered net capex and larger dividends received from associates—helped the cash balance. In a rate‑heavy world, more cash on hand means more options.

    4) Liquidity ratios improve—more near‑term cushion.
    The current ratio rose to 3.07× (from 2.78× at year‑end 2024) and the quick ratio to 0.81× (from 0.71×). When maturities cluster, and contractors queue up for payments, these buffers matter—a lot.

    5) Collections and working capital discipline show up in the numbers.
    Other receivables fell by 7.3%, reflecting better tenant collections and liquidation of advances; expected credit losses remain modest. Contract assets declined 9.7%, which management ties to a higher percentage completion across projects—an indicator that work‑in‑progress is converting toward billable/saleable stages.

    6) Associates contribute more—and in cash.
    Equity in net earnings of associates jumped 48% to ₱371.7 million, and dividends received rose to ₱289.4 million (from ₱106.0 million)—a welcome auxiliary stream that diversifies cash sources beyond unit transfers and rental billings.

    7) Recurring platform scaled via the REIT.
    The Festival Mall – Main Mall property‑for‑share swap lifted FLI’s stake in Filinvest REIT Corp. (FILRT) to roughly 63%. The transaction (SEC valuation approved on May 27, 2025) underscores FLI’s capital‑recycling playbook: seed the REIT with stabilized assets, free up growth capital, and lean into recurring income through the platform.

    8) Pipeline depth: investment properties up; new retail underway.
    Investment properties (NBV) rose to ₱87.02 billion; fair value indications stand near ₱215.34 billion (Level‑3 appraisal). Retail projects in Cubao and Mimosa are under construction—future anchors that can compound footfall and lease yields if delivered on time and on budget.

    9) Shareholder cash is still visible.
    A ₱0.05 common dividend (paid in May 2025) equated to a ~6.1% trailing yield on the ₱0.82 closing price as of September 30, 2025; the company’s reported P/E sat at 4.34×—low enough to make the carry look compelling, provided coverage metrics stay healthy.

    What could derail the story?

    1) Financing costs: the gravity that never sleeps.
    Interest & finance charges rose 18.8% to ₱3.14 billion. Coverage ratios edged down (EBITDA/interest 1.91×; EBIT/interest 2.38×). With ₱6.72 billion in bonds and ₱11.23 billion in loans maturing within 12 months (total ~₱17.95 billion), repricing risk is non‑trivial: tighter liquidity or wider spreads could bite into earnings and dividend headroom. FLI’s debt‑to‑equity ≈ 0.88× is comfortably within covenants (max 2.0–2.5×), but the direction of travel matters as much as the level. 

    2) Sales velocity and inventory turns.
    Real estate inventories rose to ₱73.33 billion (+4.8%). If buyer affordability weakens or cancellations tick up, inventory clears slower, cash conversion stalls, and carrying costs pile on. Receivable ageing shows meaningful “past‑due but not impaired” buckets—collections need to stay tight to keep momentum real, not just reported. 

    3) Leasing margin compression risk.
    Leasing revenue grew, but cost of rental services grew faster (+10.2%), propelled by depreciation on new builds and operating costs. If occupancy dips or escalations soften while opex keeps climbing, today’s ~51% gross margin in leasing can erode quickly. The retail pipeline is promising, but pre‑leasing discipline and tenant mix will determine how accretive those projects really are. 

    4) Execution complexity across a wide map.
    From Filinvest City to Cebu SRP, Clark Mimosa, and New Clark City, FLI manages multi‑site construction and leasing with varied regulatory pathways and counterparties (including BTO and long‑term leases). Delays, cost overruns, or contractor bottlenecks can ripple through the P&L and push out cash timelines. 

    5) Macro & policy overhangs.
    Higher rates, build‑cost inflation, or shifts in housing policy (including socialized housing thresholds) would amplify the pressures above. As a REIT sponsor, FLI also carries ongoing reinvestment and reporting obligations—non‑compliance isn’t the base case, but it’s a governance tripwire worth monitoring. 

    The bottom line

    FLI’s 2025 nine‑month tape shows a business doing the right things: growing both development and leasing, protecting margins, and strengthening liquidity—while smartly using the REIT to recycle capital. But the rate cycle is the villain in this play: financing costs are up, coverage ratios are thinner, and near‑term maturities mean execution and treasury strategy must stay sharp. If sell‑through holds and leasing stays firm, the math still works; if either wobbles while rates stay stubborn, the dividend and expansion pace could be tested. 

    What to watch next quarter

    • Coverage ratios: Aim for EBITDA/interest >2.0×; a sustained slip below that line raises caution.
    • OCF vs. cash commitments: Keep operating cash flow ≥ (capex + dividends) to avoid creeping dependence on debt.
    • Sell‑through & cancellations: Affordable/MRB projects should keep cycle times short; any elongation is a red flag.
    • Pre‑leasing & occupancy: Verify that new retail/office assets land anchor tenants early—and at rents that defend margins.
    • Covenant headroom: D/E, current ratio, DSCR—trend matters as much as absolute levels. 

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  • What it will take for DITO to break even

    What it will take for DITO to break even

    By any reasonable yardstick, DITO is still far from break‑even. But the path is not unknowable—it’s arithmetic, capital discipline, and execution. The company’s 3Q25 filing lays out the challenge in stark numbers: nine‑month net loss of ₱24.93B, EBIT (operating loss) of ₱9.73B, and EBITDA of ₱1.565B—up 112% year‑on‑year, yet nowhere near enough to absorb heavy depreciation (₱11.47B), interest (₱12.82B) and FX losses (₱2.23B). On that math, DITO would need roughly ₱26–27B of EBITDA over nine months—or ~₱35–36B annualized—to hit net break‑even today. 

    Scale the cash engine—fast, and with margin integrity.
    No telco breaks even on hope; it breaks even on EBITDA. With nine‑month revenues at ₱14.9B and an EBITDA margin of ~10.5%, the cash engine is underpowered. The first lever is scale and margin: push data monetization (already 86% of service revenue) while rebuilding ARPU (mobile blended down to ₱100, FWA up modestly to ₱306). Even at a healthier 25–30% EBITDA margin—more typical for mature operators—the company would still need ₱90–120B in annual revenue to generate ₱22–36B of EBITDA, the minimum needed to neutralize fixed charges. That implies aggressive growth in consumer data, enterprise connectivity, and wholesale (carrier) lines, plus disciplined promo management to prevent volume from cannibalizing yield. 

    Make finance costs smaller—or fewer.
    The second lever is the price of money. Nine‑month interest expense of ₱12.82B—largely tied to US$3.241B and CNY2.561B drawn on project‑finance facilities—remains the single biggest drag after depreciation. Two paths help: (1) Refinance and repricing where possible (SOFR and LPR resets, margin negotiation) and (2) deleverage through primary equity and asset monetization. DITO has a Subscription Framework with Summit Telco to subscribe up to 9B primary shares; execution speed and terms will matter more than headlines. Parallel moves—tower sale‑leasebacks, partial fiber IRU monetization, and selective disposal of non‑core assets—can chip away at principal and lower interest, even if lease expense rises. The net objective is a multi‑billion‑peso annual reduction in interest payments to narrow the break‑even gap.

    Tame the currency roller-coaster

    DITO’s FX sensitivity is enormous: a ~9.7% move in USD/₱ shifts loss before tax by ±₱19.4B; a ~9.2% move in CNY/₱ shifts it by ±₱7.0B. FX losses already ran ₱2.23B in 9M25. That volatility is too significant to leave unmanaged. The company needs a formal, disclosed hedging policy—currency swaps or forwards aligned to semi‑annual interest and principal amortization calendars, plus natural hedges from USD/CNY-denominated costs and (where viable) revenues. Hedging won’t create profit, but it will stop FX from destroying operating gains. 

    Keep capex lean; keep sites lit.
    Post‑audit, capex dropped 76% YoY to ₱2.475B in 9M25. That restraint is welcome, but it cannot come at the cost of performance; the installed base still demands maintenance (₱2.70B) and utilities (₱2.15B) over nine months. The capex rule of thumb now is: spend only where it lifts EBITDA per site—densification that raises throughput in revenue‑rich pockets; enterprise builds with contracted returns; and upgrades that cut energy or maintenance per bit carried. That is how asset intensity turns into margin, not just footprint. 

    Work the P&L: opex trim without starving growth.
    GS&A rose 18% to ₱12.03B. Some lines must keep rising (network ops), but several can be bent: advertising was prudently down 35%; outside services were flat; yet taxes & licenses (+42%) and parts of repairs (+29%) warrant a deeper review—contract re‑cuts, shared services, automation in field ops, and energy optimization programs (smart cooling, solar hybrids) at base stations. Every ₱1B trimmed from opex is ₱1B closer to EBITDA levels that make break‑even plausible. 

    Fix the liquidity optics—then the substance.
    The optics are brutal: current ratio ~0.06x (₱6.08B current assets vs ₱96.12B current liabilities), total liabilities ₱304.65B, and capital deficiency ₱95.31B. Management itself discloses material uncertainty on going‑concern, citing undrawn portions of project finance and shareholder support as mitigants. Break‑even will not arrive without first de‑risking liquidity—locking in the undrawn facilities, terming out near‑dated trade/lease payables, converting portions of accrued project costs to longer‑tenor instruments, and most critically, closing equity infusions to rebuild the cushion. Markets reward certainty; paperwork in progress doesn’t pay interest. 

    Price, product, and partners: grow smarter.
    Two commercial pivots can raise EBITDA productivity per subscriber:

    • Price discipline—dial back deep free‑data promos, steer to tiered bundles with speed/latency guarantees for prosumers and SMEs; protect ARPU creep without choking gross adds.
    • Partnerships—expand MVNOs, campus and enterprise programs (already lifting carrier/enterprise revenue), and bundle OTT/video‑gaming that drives high‑margin nighttime traffic. More enterprise SLAs and wholesale carriage contracts mean stickier, forecastable EBITDA. 

    A reality check on timelines.
    Even with momentum—revenues +25%, EBITDA +112%, capex normalized—DITO is not “near” break‑even on earnings or fully‑loaded cash. Operating cash inflow (₱3.81B) was offset by capex and finance/lease payments, leaving cash down ₱416M for 9M25 and ₱763M on hand at period end (with ~₱558M pledged as collateral). The journey to earnings break‑even will be measured not in quarters but in EBITDA multiples, interest reductions, and FX stability achieved. Investors should benchmark progress against three quarterly scorecards: (1) EBITDA run‑rate (targeting ₱8–10B annual within 12–18 months), (2) interest/FX drag (cut by at least ₱3–5B p.a. via refinancing, hedging, and deleveraging), and (3) liquidity coverage (current ratio >0.5x via executed equity and extended vendor terms). Anything less, and break‑even remains theoretical. 

    The bottom line:
    Break‑even is not a mystery. It is the sum of bigger, higher‑margin EBITDA, smaller, cheaper debt, and less currency noise—backed by hard, executed capital. DITO’s network quality and subscriber growth are real strengths; now the company must turn them into cash at a pace that outstrips depreciation, interest, and FX. In telco finance, gravity always wins; DITO’s task is to lighten the load and power the engine—quickly.

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  • DoubleDragon’s Balancing Act: Growth on Paper, Pressure in Cash

    DoubleDragon’s Balancing Act: Growth on Paper, Pressure in Cash

    DoubleDragon Corporation’s latest quarterly filing paints a picture of ambition—and exposure. On the surface, the numbers sparkle: revenues surged 63% year-on-year to ₱10.5 billion for the first nine months of 2025, powered by real estate sales and steady rental streams. Net income held at ₱2.55 billion, barely up from last year, but enough to keep the optics positive.

    Scratch deeper, and the sheen dulls. Nearly 42% of that revenue came from unrealized fair value gains and tenant penalties—items that look good in a report but don’t pay the bills. Strip those out, and the core engine—rent and hotel operations—struggles to cover a ballooning interest tab. Financing costs doubled to ₱2.39 billion, and in the third quarter alone, they wiped out profits for common shareholders, leaving the parent with a ₱47.7 million loss.

    The balance sheet tells its own story: net debt hovers near ₱86 billion, cushioned by equity of ₱101 billion. Bonds issued this year lock in rates north of 7%, some as high as 9.5%, ensuring that interest pressure won’t ease soon. Operating cash flow? Deep in the red at negative ₱7.93 billion, offset only by ₱9 billion in fresh financing. Liquidity ratios look healthy on paper, but the reliance on debt markets is a vulnerability in any tightening cycle.

    Receivables ballooned to ₱21.8 billion, with impairment provisions climbing. Penalty income—₱2.5 billion so far—suggests tenants are paying late. Good for accounting, bad for cash. Add to that the execution risk of Hotel101’s global rollout and the long-promised industrial REIT, and you have a company juggling growth narratives with hard realities.

    To be fair, DoubleDragon is asset-rich and opportunistic. Investment properties rose to ₱169.6 billion, and its REIT arm continues to spin off dividends. But the question for investors is simple: can recurring cash flows catch up with the financing load before the next refinancing cycle? If leasing momentum and hotel pre-sales deliver, the story holds. If not, the cracks widen.

    For now, DoubleDragon remains a case study in modern property playbooks—leveraged growth, valuation-driven earnings, and a race against time to turn paper gains into hard cash. Watch the interest coverage ratio, operating cash flow, and receivables aging. In this game, liquidity isn’t just a metric—it’s survival. 

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  • Margins Diverge as Philippine Food Majors Face Cost Crosswinds

    Margins Diverge as Philippine Food Majors Face Cost Crosswinds

    SMFB widens profitability; CNPF and MONDE see compression; URC nudged lower; RFM holds firm despite cash flow squeeze

    The Philippines’ leading packaged food and beverage players posted mixed margin outcomes in their nine‑month 2025 results, highlighting how input-cost volatility, pricing discipline, and working‑capital choices are reshaping profitability across the sector. Sales growth was broadly positive, but margin trajectories diverged: San Miguel Food and Beverage (SMFB) expanded margins; Century Pacific Food (CNPF) and Monde Nissin (MONDE) saw compression; Universal Robina Corp. (URC) edged lower; and RFM Corp. preserved healthy margins while absorbing a hit to operating cash flows.

    Sales: Mid‑single to high‑single digit growth, with branded segments leading

    SMFB’s consolidated revenues rose 4% to ₱302.9 billion on resilient demand and brand execution across food, beer, and spirits—food up 7%, spirits up 7%, beer steady—supporting scale benefits into the third quarter. Management underscored supply chain productivity and capacity expansion as margin enablers alongside revenue momentum. 

    URC delivered ~5% top‑line growth (TTM revenue ₱166.1 billion), propelled by snacks and ready‑to‑drink beverages domestically and stronger performance from Munchy’s in Malaysia and Indonesia. However, elevated coffee input costs—still roughly twice 2023 levels—tempered EBIT expansion, setting the stage for margin pressure despite volume gains.

    CNPF’s sales grew 8% to ₱61.8 billion, with the branded portfolio up 12% and OEM exports recovering after a soft first half. Management flagged “all‑weather” staples demand, easing inflation (notably rice), and brand investments as the primary growth drivers into Q3, where quarterly revenue accelerated 15% year‑on‑year.

    Monde Nissin posted 3.5% growth to ₱63.3 billion, anchored by APAC Branded Food & Beverage (BFB) up 4.4% year‑to‑date, while meat alternatives contracted 3.9% on a constant‑currency basis. The company cited biscuits and “others” categories as domestic volume pillars and guided to sequential BFB margin improvement heading into 4Q25–2Q26.

    RFM recorded 1.8% sales growth to ₱15.23 billion, indicative of flat-to-steady demand in pasta, milk, flour, buns, and ice cream JV products. Despite modest revenue growth, management reiterated its confidence in a stronger fourth quarter driven by category momentum and historical seasonality.

    Margins: SMFB expands; CNPF and MONDE compress; URC softens; RFM resilient

    SMFB: Group profitability improved, with EBITDA up 13% to ₱58.4 billion and overall margins widening to 19%. Margin gains were attributed to cost and operational efficiencies across divisions, most notably in food and spirits, with disciplined pricing underpinning resilience against weather‑related disruptions.

    URC: Gross margin around 26.1% on a trailing basis, below FY2024’s ~27.0% and the company’s five‑year average (~27.7%), reflecting persistent coffee cost inflation and normalization across commodities. Management acknowledged EBIT pressure in the Philippines, partially offset by overseas scale and cost programs, implying modest margin decline versus last year despite top‑line strength. 

    CNPF: Gross margin compressed by 110 bps to 25.5% year‑to‑date, driven by normalizing input costs after a period of favorable commodity tailwinds. Notably, operating expenses fell 90 bps as a share of sales, cushioning the margin squeeze and allowing net income to grow 10% to ₱5.8 billion. 

    Monde Nissin: Consolidated gross margin declined 160 bps to 33.3% for nine months, with edible oil inflation weighing on APAC BFB even as sequential margin recovery emerged on pricing actions and reformulation. Meat alternatives posted gross margin improvement and EBITDA positivity, but the segment’s revenue contraction offset group‑level gains, resulting in overall margin decline year‑to‑date.

    RFM: Margins remained strong despite flat sales—EBITDA of ₱830 million, implying an EBITDA margin of ~15.2%—as lower selling and marketing expenses and lean G&A lifted operating margin to ~11.2%. While the company did not report year‑on‑year basis‑point changes, commentary and segment detail point to a stable-to‑improving margin mix led by consumer products.

    Operating Cash Flow: Strength for MONDE and URC; strain at RFM; SMFB and CNPF steady

    Monde Nissin reported ₱8.7 billion operating cash flow in the period, supported by lower operating costs in meat alternatives, foreign‑exchange tailwinds, and targeted pricing in APAC BFB, even as edible oils remained a drag on gross margins. URC likewise showed solid cash generation (TTM operating cash flow ₱12.86 billion), underpinned by working‑capital normalization across branded and commodities businesses.

    RFM’s operating cash flow fell sharply to ₱141 million from ₱1.3 billion a year ago, largely due to inventory buildup (over ₱1 billion) and reduced payables, which tightened liquidity despite sound income statement margins. Management emphasized inventory normalization and cash discipline as fourth‑quarter priorities. 

    SMFB highlighted a solid financial position—with sustained earnings power and prudent capital management—but did not disclose detailed nine‑month OCF figures. CNPF continued to invest in strategic growth (plant‑based and coconut operations) while maintaining low leverage and healthy liquidity metrics, reinforcing cash resilience despite gross margin compression. 

    Balance Sheets: Liquidity cushions intact; leverage disciplined

    SMFB’s disclosures show total consolidated debt of ₱ 187.2 billion as of September 30, 2025, balanced by robust earnings and margin expansion across key segments, providing flexibility for capacity investments and brand support. 

    URC’s financials reflect a strong asset base and conservative leverage, with ongoing margin headwinds from coffee mitigated by international scale and cost controls; CNPF maintains a current ratio of ~2.0 and a debt‑to‑equity ratio of ~0.24, indicating prudent gearing. 

    Monde Nissin maintains a net cash position (₱11.2 billion), a current ratio of 2.34, and minimal debt, reinforcing flexibility to sustain dividend payouts and fund margin‑restoration initiatives in APAC BFB. RFM also sits on net cash with current ratio ~1.36, though the nine‑month working‑capital swing is a near‑term watch‑item.

    Bottom Line: Five companies, five margin paths

    • SMFB stands out for margin expansion via cost discipline and pricing, despite weather and input‑cost noise. 
    • URC delivers volume‑led growth but faces slightly lower gross margin amid elevated coffee costs. 
    • CNPF sustains double‑digit profit growth even as gross margin compresses on commodity normalization.
    • Monde Nissin shows sequential margin recovery but a year‑to‑date decline, with edible oils the main headwind and meat alternatives improving.
    • RFM maintains strong margins but must rebuild operating cash flow after a working‑capital drawdown. 

    Investor lens: Expect continued focus on pricing, mix, and cost programs to protect margins, with working‑capital discipline (especially inventories and payables) a differentiator into year‑end. Companies with net cash and low leverage (Monde, RFM, CNPF) retain optionality for dividends and capex, while scale players (SMFB, URC) leverage brand strength to buffer input volatility.

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  • Century Pacific Food Posts Solid Q3 Growth, But Working Capital and Margin Pressures Loom

    Century Pacific Food Posts Solid Q3 Growth, But Working Capital and Margin Pressures Loom

    Century Pacific Food, Inc. (PSE: CNPF), one of the country’s leading branded food manufacturers, reported strong third-quarter results, with consolidated revenues and earnings accelerating on the back of robust branded segment growth. However, the company faces emerging financial and operational risks tied to margin compression, working capital strain, and export volatility.

    Earnings Surge Amid Branded Segment Strength

    For the nine months ended September 30, 2025, CNPF posted ₱61.79 billion in revenues, up 8.5% year-on-year, while net income rose 9.6% to ₱5.78 billion. Earnings per share climbed to ₱1.63 from ₱1.49 last year.
    Third-quarter performance was even stronger, with revenues jumping 14.9% to ₱22.07 billion and net income up 14.8% to ₱1.89 billion, signaling accelerating momentum in branded categories such as marine, meat, and dairy.

    Management attributed the gains to double-digit volume growth in branded products and improved consumer purchasing power amid stable inflation. Meanwhile, OEM exports (tuna and coconut) softened by 5% year-to-date but showed signs of recovery in Q3 as global trade conditions stabilized.

    Risk Areas Identified

    Despite the upbeat earnings, the report reveals several vulnerabilities that investors should monitor:

    1. Working Capital Pressure
      • Trade receivables surged 30% to ₱13.95 billion, while advances to suppliers more than doubled (+118%).
      • Operating cash flow fell sharply to ₱2.97 billion from ₱4.87 billion last year, reflecting heavier working capital requirements.
    2. Margin Sensitivity
      • Gross margin contracted 110 basis points to 25.5%, driven by higher input costs.
      • While operating expenses were trimmed to offset some pressure, commodity price volatility and FX risk remain key threats.
    3. OEM Export Volatility
      • Tuna and coconut exports declined 5% year-to-date, exposing CNPF to global trade uncertainties and demand cycles.
    4. Debt Maturity Concentration
      • Short-term notes payable ballooned to ₱4.02 billion from ₱200 million, with ₱4.0 billion due within 12 months.
      • Although gearing remains low at 0.19x, refinancing risk could rise if liquidity tightens.
    5. Inventory Build-Up
      • Inventories climbed nearly 9% to ₱20.24 billion, extending the cash conversion cycle to 80 days, which could increase exposure to obsolescence and price swings.

    Capital Allocation and Outlook

    CNPF declared ₱1.10 per share in dividends (₱0.55 regular and ₱0.55 special), representing a 61% payout ratio. Capital expenditures reached ₱2.2 billion, including plant upgrades and the acquisition of U.S.-based plant-based brand Loma Linda, reinforcing its health and wellness portfolio.

    Looking ahead, management will need to balance growth investments with tighter working capital discipline and margin protection. The company’s ability to manage input cost volatility, normalize cash flows, and sustain branded momentum will be critical as it navigates global trade uncertainties and domestic inflation risks.

    Bottom Line: Century Pacific Food delivered strong Q3 earnings and revenue growth, but rising working capital needs, margin compression, and short-term debt obligations underscore the importance of disciplined financial management in the coming quarters.

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  • Monde Nissin Faces Margin Squeeze Amid Rising Input Costs; Operating Cash Flow Softens, Meat Alternative Still in the Red

    Monde Nissin Faces Margin Squeeze Amid Rising Input Costs; Operating Cash Flow Softens, Meat Alternative Still in the Red

    Monde Nissin Corporation reported continued pressure on its profit margins for the first nine months of 2025 as soaring edible oil prices weighed on its core branded food business, even as net income rose on cost initiatives and foreign exchange gains.

    The company’s gross margin slipped to 33.3% from 34.9% a year earlier, with its Asia-Pacific Branded Food & Beverage segment posting a sharper decline to 34.8%. Management attributed the drop to higher palm and coconut oil costs, which offset stable wheat prices and early benefits from price adjustments and cost-saving measures.

    “Commodity inflation remains a key headwind,” the company said in its quarterly filing, noting that while raw material requirements for 2025 have been secured, volatility could persist into 2026.

    Despite the margin squeeze, Monde Nissin booked a 9.6% increase in net income to ₱6.67 billion, supported by lower financing costs and a swing to foreign exchange gains. However, cash generation showed signs of strain.

    Operating cash flow for the nine-month period edged down to ₱8.74 billion from ₱8.91 billion last year, as inventories climbed 6.3% to ₱9.48 billion and prepayments surged nearly 40%, tying up liquidity. The company also settled trust receipt payables early to manage interest and currency exposure, further reducing cash reserves.

    Meanwhile, Monde’s Meat Alternative business, which includes the Quorn brand, remained loss-making despite signs of improvement. The segment posted a ₱1.04 billion net loss year-to-date, narrower than last year’s ₱2.05 billion deficit, as supply chain transformation and cost efficiencies lifted gross margin to 25% from 21.4%. UK retail sales stabilized in the second and third quarters, but category softness and lower production volumes continue to weigh on performance.

    Monde Nissin closed the quarter with ₱14.45 billion in cash, a debt-to-equity ratio of 0.34x, and announced a ₱0.16 per share dividend payable in January 2026. Analysts say the group’s strong balance sheet provides a buffer, but warn that prolonged commodity volatility, working capital pressures, and ongoing losses in the Meat Alternative segment could weigh on future cash flows.

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  • China Bank: A Core Engine Running Strong—But Can It Outpace Market Headwinds?

    China Bank: A Core Engine Running Strong—But Can It Outpace Market Headwinds?

    When China Banking Corporation filed its third-quarter report with the SEC this November, the headline number—₱20.23 billion in nine-month net income—looked reassuring. A 10% year-on-year increase in profit is no small feat in a year marked by global volatility and a domestic economy slowing to 4% GDP growth. But as always, the story behind the numbers is where the real insight lies.

    The Core Strengths
    China Bank’s core banking engine is humming. Net interest income surged 15.2% to ₱53.5 billion, powered by a 6.2% expansion in loans and an improved net interest margin of 4.58%. These are enviable metrics in a competitive market. Efficiency gains are evident too: the cost-to-income ratio improved to 45% from 48%, signaling disciplined expense management even as the bank invests in technology and talent.

    Asset quality remains a bright spot. Non-performing loans are steady at 1.6%, and coverage is a robust 123%. Capital ratios—CET1 at 14.97% and total CAR at 15.85%—comfortably clear regulatory minimums, giving the bank room to grow and reward shareholders. Speaking of rewards, the board declared a hefty ₱ 2.50-per-share dividend earlier this year, including a special ₱1.00 payout. For investors seeking stability, these are reassuring signals.

    The Cracks Beneath the Surface
    Yet, the picture isn’t all rosy. Treasury operations have been a thorn in China Bank’s side, with trading and securities losses ballooning to ₱10.54 billion year-to-date. In a rising-rate environment, a securities book that accounts for roughly a third of total assets is a double-edged sword—liquid, yes, but vulnerable to mark-to-market swings. Add to that a funding mix tilted toward time deposits (CASA ratio stuck at 44.7%), and you have a franchise more exposed to interest rate pressures than peers with stronger low-cost deposit bases.

    Credit provisioning is another watchpoint. The bank set aside ₱6.99 billion for impairment and credit losses—nearly five times last year’s level. While this speaks to prudence, it also eats into earnings momentum. And while non-interest income flipped positive, much of it came from one-off gains: ₱6.99 billion from asset foreclosures and a ₱1.4 billion boost from associates, thanks to the renewal of its bancassurance joint venture with Manulife. Strip these out, and the underlying run-rate looks less spectacular.

    The Bigger Picture
    China Bank’s franchise remains formidable. It boasts strong governance credentials, industry accolades, and a diversified footprint spanning retail, institutional, and wealth segments. Subsidiaries like China Bank Savings and China Bank Capital add breadth to its offering. But the challenge ahead is clear: sustain core growth while taming volatility in treasury and building a more resilient funding base.

    For investors, the takeaway is nuanced. If markets stabilize and credit costs normalize, China Bank’s fundamentals could shine brighter than its current headline numbers suggest. But if rate swings persist and one-off gains dry up, expect earnings to feel the strain.

    In short, China Bank is a study in contrasts—a high-quality engine navigating a bumpy road. The question for 2026 is whether management can keep the wheels turning smoothly when the terrain gets rough.

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