First Pacific Company Limited

Good day, everyone. Thank you for joining this online briefing to discuss First Pacific, first 2025, first six months financial and operating results. The results presentation is available on First Pacific's website, www.firstpacific.com, under the investor relations session presentation page. This results briefing is being recorded, and the webpage will be available on First Pacific website this evening in the investor relations session. For participants from the media, please note the Q&A session is open for investors and analysts only. If you would like to ask questions, please contact us after the briefing. Today we have with us our Executive Director, Mr. Chris Yang, our Chief Financial Officer, Mr. Joseph Ng, Associate Directors, Mr. John Ryan and Mr. Stanley Yang, and other senior executives from First Pacific Head Office. Over to you, Jean, for the presentation piece.

Okay, thank you, everyone. This format is all very familiar to you. Once we flick the page to page two, let me remind you that all of these numbers with an underline are clickable links. So if you're looking at the presentation on screen and you want to look at the Maya Digital Banking Unit of PLDT, which is a great story, you just click on that 23 down there. When we turn to the next page, that familiar picture of some of the more important investments that we have hasn't changed since the last time we had such a meeting together. What has changed, I suppose, is on page four. As of the end of June, our gross asset value was about $5.6 billion. And as you can see, Three of our four core holdings are billion-dollar companies, Indifood over two, MPIC and PLDT over a billion dollars. The way we count our valuation, let me remind you, is the listed assets like PLDT, Indifood, and PhilX. We mark to market at the end of every day an email that the finance department sends to senior management. And MPIC, I'm sure most of you recall, we value at the share price of 5.3, as it adds, when it was privatized fully in way back in October of 2023. Now briefly about our earnings for the first half of the year on page five. I'm sure you all expected that our recurring profit would rise to a record because you all saw mostly the 1Q numbers of our operating companies were good and there was momentum. Lo and behold, there it goes. Our turnover rose just a tiny bit with an increase at MPIC, offsetting declines at PLP. Contribution from operations, however, that was up 8%, not far off a double-digit increase, well over $400 million, and that's versus the previous record high of 391%. million dollars. And if you're counting the five previous first half results at First Pacific were successive record highs. So we had a sixth one just now. And you'll remember that our FY 2024 earnings were a fourth successive record high. Now, Indofood, PLDT, MPIC, as they have been doing lately, delivered record high revenues. Because let's not forget, they are located in the fastest growing part of the world. And they are working in defensive industries, providing essential services. So people are eating more noodles, driving more on the roads, and they're consuming more electricity, and so on. With the interest rates trending down, our interest bill was down 10% to $35 million in the first half. Corporate overheads were up just a little bit. And recurring profit, again, a record high, that's a double-digit rise, of 11% to over $275 million. And there were little changes in forex exchange, losses swung to a gain, and non-recurring losses of $3.4 million a year ago swung to a gain of over $5. A recurring EPS up 10% to $0.082 U.S. cents. And our board of directors this morning approved an interim distribution of 13 Hong Kong cents a share. And I believe that's going to be distributed on September 30. Don't hold me to it, but somewhere around then. As we've been saying for a good year, a couple of years, we are confident of continuing earnings growth in the medium term for the reasons mentioned. aforementioned. Now, looking at the middle chart on the right-hand side, you can see the big factors in the change in recurring profit. Clearly, MPIC was the big driver in that. They've had a tremendous first half of the year. Now, let's look on the next page to have a view of our balance sheet and cash flows and things like that. Our debt maturity profile here is as at the end of June. There's already refinancing in place for the 200 million falling due in January, 2026. So there's really nothing essentially falling due until our only outstanding bond comes due the following year. As you can see, it's a bit under a quarter of all of our borrowings. We have historically said we like bond borrowing to be about half of the total. And that's kind of reflected in a sort of proxy I chart on the right hand side where you got the red and the blue showing our fixed rate borrowing is a little over half of the total. So I guess sometime in the next year or two, we might be going out to the bond market, but that all depends on market conditions as you all well know. Our CFO Josephine can speak to that. Now we've got a chart here on the bottom left that you've seen already in March. We didn't put in the first half of 2025 dividend income because Quite frankly, a very important source of dividend income comes from Indofood, and that's not delivered in the first half of the year. So it would be misleading to show you the half. But you can see our interest coverage ratio is down to four times at the end of the year, and that stayed the same by the end of June, as these various bullet points on the right-hand side describe to you. Essentially, we've got two... credit ratings, which are investment grade. And we've been investment grade ever since we began getting rated a couple of years ago. And as you can see, both S&P and Moody's give us stable outlook. You can see there on the dividend income chart that we went over 300 million for the first time in about eight to 10 years in 2023. Did it again in 2024. And that looks like a pretty comfortable figure for us. Going forward to Indofood on the next page now, please. As you can see, the sales keep hitting record highs. Every year since 2014, their sales have reached successive record highs because they sell more and more instant noodles and dairy products and other packaged foods. Now, sales up again to a record high. EBITDA 1% core profit up 2%. And if you've become used to in recent quarters of seeing core profit grow much faster, the slowdown really is explained by that blue box down at the bottom. The margins on many of the biggest sellers like noodles, got a little bit worse, and that's because input prices went up. Which input prices can we look at? Well, let's look at the agribusiness EBIT margin. CPO went much higher in price, so the agribusiness delivered excellent growth, and that was offset to a certain extent by the consumer branded products division, which nevertheless did manage to eke out an increase in sales of 2%. Now, going forward, you can expect more of the same from Indofood. They're going to look at market share and profitability and decide what needs to go in order to keep things going forward the way they like. Now, let's flip over two pages to page nine, where we can see the change in sales. at Indofood and what's been driving that. There you go, you can see the greater profitability of the agribusiness is reflected there. The biggest increase in sales was the plantations business followed by the ever-growing noodles business. The blue box on the right-hand side shows you that noodles make up almost half of all sales at Indofood, and that's been a pretty steady number over the years. I think their capacity for noodle production is now around 37 billion packs a year globally, and if you were to claim they are the biggest maker of instant noodles in the world, I think a few people would challenge you. Now we're going to move over to Metro Pacific on page 11. This is a page we're all extremely familiar with. There has not been much change in the past six months since the last time we spoke to you. But as you can see, or as you will recall, the toll roads business has been getting a lot of growth in the past year and a half, mostly in Indonesia. Now at page 12, let's remind ourselves, what is the ownership structure of MPIC? We own just under half of that company and we valued it at the half year at a little over $1.3 billion. That $1.3 billion makes up almost a full quarter of First Pacific's gross asset value. Now let's have a brief discussion of their earnings on page 13. The contribution rose enormously, 18%, a record high. And that was driven, as you can see in the chart on the bottom, by the power and water businesses. The water business benefiting especially from tariff increases, I believe their volumes actually shrunk a tiny bit. And the toll road business did not grow very much because our stake in that business was lower than it was a year earlier, owing to the entry of Marabeni on the shareholder register of the toll roads business. The key contributors are in the pie chart there on the top right hand side. And the contribution there is, we're only showing positive contribution. There are a couple of loss making businesses like I believe Rail lost a tiny little bit of money, but as you can see, power is enormously important. Now, in the interest of time and efficiency, we'll go over the operating companies under MPIC in the Q&A. And you can always follow up with messages to Sarah or to me for a more detailed one-on-one conversation. So we're going to flip forward several pages to 21. where PLDT, again, keeps having record high revenues. EBITDA also is getting to be record highs, but telco core profit was down a little bit. The entire industry in the Philippines, albeit made up of a very small number of players, is ferociously competitive and competitive. That's the result that we see here. Now, if you're talking about ordinary core profit, which is a bigger number than telco core, ordinary core profit includes the FinTech digital banking arm of PLDT, Maya Innovation Holdings, I believe it's called, Stan. They showed profit for the first quarter and the second quarter and, of course, for the first half of the year. And their contribution to PLDT was about $400. million pesos. And my colleague Stanley Yang can talk more about that. It's a company I am personally very excited about. I think it's the most interesting thing happening in PLDT because it's growing like Toxie. And because I regard it so highly, we'll flick to page 23 and you can look at this stunning growth in all of those column charts. Bank depositors growing up sevenfold over the three and a half years or so. Deposit balances doubling and almost tripling. And then the loan dispersals have grown enormously, I think 20-fold or something over that period, 30-fold if you look at that bullet point there. And as you can see, it's making money. The ownership is described at the bottom of that page. First Pacific has a direct 1.4% stake. PLDT is the biggest shareholder at 38%. Now, Pacific Light Power on page 25 has joined the ranks of holdings we regard as core in recent years. Because as you can see, beginning in about five years ago or so, they've had pretty decent earnings growth, maxing out in 2023 when they gave us an enormous dividend payment along with giving it to their other shareholder, which is Moralco, the power company that we are invested in via MPIC. 2024, there were non-fuel margins were a bit lower. So The revenues were down a bit. Their market share was a bit under 10%. And an interesting thing is almost all of the electricity sold was via vesting contracts and contracted sales, which gives them a very confident outlook looking into the future, the shape and flow of their revenues. Now over to my favorite small gold and copper mining company, Philex. Pad Cal, the mine up in north of Luzon, did what you expect it would do. It made a little bit of money on ore grades that are declining a little bit more every year. This mine's been operating, I think, for about six decades, which, about like me, really. but it's still managing to turn out a profit, helped by gold price being up by more than a quarter and offsetting a decline in copper prices, worse grades and lower recoveries, notwithstanding the higher production. Now, the exciting thing about Philex is the Salangan Mining Company, which is on the next page. That is scheduled to open phase one commercial operations next year. I personally find it very exciting because you can compare the ore grades at Salangan, there in the top right blue box, and where you're looking at copper of, you know, half a percent or more in terms of percentage of volume. And then the grams per ton of gold is, you know, not far under one gram per ton, whereas over in tired old Petkal, The gold grade is less than a third of what you can get at Solangan. Solangan is in Mindanao, and it is a main topic of conversation when directors meet to plan towards the opening of that mine in the first half of next year. We've got two directors of the Philex board with us. You can ask them some questions about it. Now I'm going to wind up the introductory remarks with a glimpse at page 30. which shows our adjusted net asset value per share over the two and a half years, beginning at the end of December, 2022. And I'm focusing on here, the share price and discount to our net asset value on the line below. So at the end of 22, we were $2.33, 60% discount. A year later, the share price was 33% higher and the discount was down by almost five percentage points. Then we had a 44% increase in the share price to 451, discount down quite a bit to 38%. And at the end of June, the share price was up again. I think it was maybe 30 some percent there. to over 550, discount down to a shade under 30%. In trading this morning, while our directors met to go over the interim results, the share price was down in the market, and we released our results shortly after noon. Trading reopened at 1 p.m., and bang, I'm told we reached a high of 666 in intraday trading before closing at 651, which is a new 10-year high. I haven't seen the end-of-day email about the NAV discount, but I wouldn't be surprised if it was a number below 15%. It's come down quite a lot as our share price has increased. But how you count First Pacific's gross asset value? Well, that's an interesting question, which we'll probably address in the Q&A, which I think we could have now, Sarah.

Yeah, that's right. Thanks, John. We are now ready for the questions. You can send your questions to the chat room or you can raise your hand and we will just take it in order.