Malaysian group to reopen sprawling hotel and casino on Samal Island

Written by Manuel T. Cayon | Reporter

DAVAO CITY—A Malaysian conglomerate has plans to reopen its sprawling hotel in the Island Garden City of Samal, sending fresh hopes of propelling tourism in the Davao region. The intent was indicated to the Mindanao delegation to the East Asean growth area meeting in Brunei Darussalam last week. In a report from the recently-held BIMP-Eaga meeting, Secretary Jesus Dureza, Presidential Adviser on Mindanao Affairs, said the Malaysian owners of Samal Casino Resort in Samal had signed an agreement with them to open again its hotel project. BIMP-Eaga stands for Brunei, Indonesia, Malaysia, the Philippines-East Asean Growth Area. “The Ekran Berhad Sdn, a Malaysian conglomerate that owns a chain of big hotels in Malaysia, will reopen its Ekran Berhad Samal Casino Resort in the Island Garden City of Samal [IGaCoS],” Dureza said in a message relayed to the Mindanao Economic Development Council, a copy of which was obtained by the BusinessMirror. Dureza said the discussion and signing of the agreement was made at the sidelines of the 18th Senior Officials and Ministers’ Meeting and 14th Ministerial Meeting in Brunei last week. The Philippine-Mindanao delegation was composed of Dureza, Samal Mayor Aniano Antalan, Davao del Norte Rep. Antonio Lagdameo, who chairs the House Committee on BIMP-Eaga Affairs, and officials of the Department of Tourism (DOT). The Malaysian delegation was represented by Tan Sri Datuk Ting Pek Khiing, executive chairman of Ekran Berhad Sdn. Dureza said that Ekran Berhad “also planned to work on mounting flights between Davao and Kota Kinabalu, in partnership with Malaysian Airlines to coincide with the reopening of the resort.” The airlines closed its Davao route in the late 1990’s due to the heavy and lingering effect of the Asian financial crisis in 1997. “We’re putting back on track the P1.5-billion Ekran Berhad investment in Samal,” said Dureza, who is also the Philippine signing minister in the BIMP-Eaga. “This is an indication of a sound business environment in Mindanao and across borders, there is now an opportunity to reconnect in the south.” Lagdameo told a press briefing in Malacañang that the hotel was an old project “but it had to close.” He said Davao business and government leaders have been bridging talks with the Malaysian investors to reopen the hotel several years ago “and we’re hoping that we can get them back before the end of the year.” A concrete timetable is hoped to be set before the Eaga leaders’ summit in October, he said. DOT Mindanao coordinator Undersecretary Merly Cruz, also a senior Philippine official in the BIMP-Eaga, said the Malaysian conglomerate’s plan to resume operations in Samal was based on a sound business decision. “In their view, the business environment in Mindanao is now satisfactory.” The Ekran Berhad opened only 245 rooms in 1998, from a planned 1,400-room resort, before it closed in 2001 after reeling from the Asian financial crisis. The resort and hotel sprawls on a 250-hectare area and includes a planned golf course. Before it closed, Michael Ting Se Ping, then the general manager of the resort and at the same time vice president of the family-owned Ekran Berhad Services that operates several hotels and resorts in Malaysia, said the company was poised to construct the P200-million golf course and wanted to infuse P700 million for the other expansion activities. These include the opening of another 300 rooms. The company later called off plans for a public offering and closed operations completely.

The Top 50 Companies of the Philippines

Written by Miguel Camus / Reporter

DESPITE the global financial crisis, Filipino firms can do more in terms of increasing a company’s economic value added (EVA), a metric used to measure creation of shareholder value, by changing certain mindsets in the management level, according to a top official of the New York-based management-consultancy group Stern Stewart & Co. Stern Stewart & Co. president-international Erik Stern said firms can gain more efficiency by allowing managers deeper within the company’s ranks to take part in key decisions. For instance, some firms can include more individuals in the operational level to offer their inputs. “I think that what a lot of companies do is to open decision-making to a small number of people,” said Stern. He said many big deals are crafted by financial professionals “who don’t know anything about operations.” “They look at the synergies, or some percentage of sales. This is one reason why deals don’t work,” he said. Stern clarified that this is not the failure of those in finance, and is instead a case of lacking information. “But if you talk to people in operations they are usually much better at saying what’s realistic. Not only that, they are usually the ones who have to deliver, and they don’t really like delivering on tough targets that they have nothing to do with,” he noted. “The inclusion of more people in the decision-making process can have some impact.” This also extends beyond the operating environment and even into the firm’s boardroom, where many of the company’s directors are too lax—at the expense of the firm’s performance. Citing cases in the US and Europe, Stern said there should be enough board members asking “tough” questions but, at the same time, making sure these are backed by facts. “Often, the problem I find is people chosen to be [board members] shouldn’t be in these positions. They need to take their job seriously and they have to study the company well. They also need to ask the right questions, and they need to have the right skepticism,” he said, adding that this is different from board members who simply want to aggravate the chairman or chief executive. Stern said these moves on the management side can help a company improve its EVA, which takes into account the difference between net operating profit after tax and the opportunity cost of invested capital. Stern Stewart & Co., which advocates the use of EVA, said this will measure a firm’s economic profit. Stern said, for instance, firms have become too bloated with unnecessary capital. “Most firms are in a sense too large under traditional metrics. My sense is that a lot of companies in the Philippines are overcapitalized with the wrong capital. In the sense they had this huge empire of assets without thinking how these assets were going to contribute to, say, sales or profit generation,” he said. “There is a lot of weight within companies that can very easily be reduced by focusing on a measure like EVA,” said Stern. One way, he explained, is fostering “capital accountability” in managers, which will likewise allow them to make smarter investments. “The idea is to look at EVA beyond a formula. It’s a mindset,” he said. Stern Stewart & Co.’s ranking was designed to create a method of comparison to sift through the firms which were able to maximize shareholder value while delivering on these same shareholders’ expectations regardless of the business cycle. Included on the list are 11 Philippine companies: Philippine Long Distance Telephone Co., SM Prime Holdings Inc., International Container Terminal Services Inc., Bank of the Philippine Islands, Aboitiz Equity Ventures Inc., Ayala Land Inc., Manila Electric Co., China Banking Corp., Jollibee Foods Corp., SM Development Corp. and First Metro Investment Corp. The Relative Wealth Added tables from Stern Stewart’s latest analysis show the top 50 Philippine companies in various business cycles and those that topped in the overall cycle.

Steady sale in P1M-P3M bracket drives growth for developers

Written by Rizal Raoul Reyes / Correspondent

THE underserved market is proving to be a steady growth driver for developers focused in the middle segment of the market, thanks to some silver linings in the economy, according to PA Metro Residence Builders Inc. (PAMRBI). PAMRBI president Juny Santillan said the company decided to focus on this market because this has been neglected by the banking sector, which preferred to give closer attention to the P5 million-P7 million range. “In response, PAMRBI decided to develop a niche in the P1 million-P3 million segment in the vertical housing,” said Santillan in an interview at the sidelines of the topping-off of the Amethyst Tower of East Residences Ortigas. PAMRBI said the affordable sector continues to show consistency in terms of property uptake because people in this group are serious buyers. “Basically, our market is comprised of buyers who’ll use their units for the long-term,” said Santillan. He said the growth of the business process outsourcing in the Libis area is also contributing to the high sales of East Residences Ortigas as workers in this group prefer to have homes very near their offices. “With a different working schedule compared to the regular offices, BPO workers would like to have a place near their work so they can rest after their work,” he said. Amethyst topping-off ceremony VIPs (from left) Tomas Tambunting (PDB Properties), Jonathan Lu (PAAPDC president), Engineer Lito Garay (PAAPDC), Romarico Alvarez (CEO), Noel Bernhard (AMSTEEL), Aidalyn Acoba (Allied Bank), Maria Luisa Alvarez (MZA Design), Jeric Tuazon of PA Metro Residence Builders Inc. (PAMRBI), Orlando Lina (ERO), engineer Rey Cruz (ERO) and Epifanio Santillan Jr. (PAMRBI president.) Another growth driver is the young nesters’ group, or young couples who are just starting to build their families. PAMRBI said the program led by the Housing and Urban Development Coordinating Council and the Home Development Mutual Fund (Pag-IBIG Fund) is also fueling the demand for housing units. According to Santillan, 90 percent of the buyers in East Residences have availed themselves of the Pag-Ibig window facility. Meanwhile, the overseas Filipino worker sector continues to be a stable force as most of their buyers work in service and medical sectors, Santillan said. In a recent forum, Subdivision and Housing Developers Association Inc. president Banson Choa revealed that the overseas Filipinos, mainly the professional sector, have shown consistency in their remittances to the Philippines. “Although the figures are lower than the 2008 level, it is still higher than expected considering the impact of the economic slowdown,” he said. This strong showing, he added, is “attributed to the deployment of more professional workers in the different parts of the globe.” Choa also said the middle segment has shown resiliency amid the current global economic crunch. Developers focused on the high-end market experienced stronger hits because their prospective investors tended to shy away from investing in more expensive properties, according to Choa. Amethyst is the first tower in East Residence Ortigas to be finished and sold out. The walk-up tower has a total of 116 units with a uniform size of 30 square meters. The company noted the warm response of the market continues as the second building (Topaz) and the third tower (Jade) are also registering brisk sales. As of the moment, Topaz is more than 80 percent sold and Jade, over 30 percent sold. Finally, PAMRBI said the Metro Manila condominium market offers a lot of opportunities as there is an early demand for more units

Lessons from the global crisis

Written by Roderick L. Abad / Special Features Writer

Thursday, 27 August 2009 22:20

Amid the ensuing global economic slowdown, the Philippine cement industry continues to grow, registering 5-percent volume growth in 2008. The country’s leading cement manufacturer, Holcim Philippines Inc. (HPHI), also reported record volumes during the first half. HPHI chief operating officer Ian Thackwray told the BusinessMirror that this market growth is the result of increased government infrastructure spending and low-cost and affordable housing activities. THACKWRAY: “Stick to the ‘golden rule.’” Although North Luzon still had the biggest volume while demand rose across all regions, it was southern Mindanao where growth was outstanding—thanks largely to infrastructure projects bankrolled by the government’s stimulus package during the crisis. Not to be ignored also was the prolonged housing-construction activities brought about by hefty inflows of overseas Filipino workers’ (OFWs) remittances and declining interest rates. Following an increase in cement demand of 2.9 percent in the second quarter of this year and 5 percent for the full semester year-on-year, HPHI registered revenues worth P6 billion for the second quarter, or 14 percent higher than last year’s P5.2 billion “The reason we’re doing better than expected is not only because the market is doing well, however, but also because of improved efficiencies, better quality and service, and most important, a better understanding of our customers’ needs,” explained Thackwray. Holcim owns about one-third of the market. Taking note of other positive performance indicators, earnings before depreciation, amortization interest and taxes of Holcim surged 33 percent to P2.2 billion from P1.6 billion in 2008, while net income reached P1.2 billion, a significant 58-percent growth compared with last year’s P742 million. For the first semester of this year, meanwhile, the cement firm generated profits of P11.4 billion, bringing net income to P2 billion from last year’s P1.2 billion. Furthermore, the company succeeded in enhancing net working capital, creating P4.1-billion cash flow from its operating activities. “This year will probably be the best-ever year for Holcim despite the recession worldwide. Although next year may be more difficult, we at Holcim are better prepared by continuing to invest wisely, focus on manufacturing productivity, and take care of the customers and employees,” Thackwray said. Unperturbed by crisis It’s been a year since the credit crunch has created its impact on economies the world over. While there may be countries that until now have been gravely affected by the crisis, there are those that already have risen to the challenges. One of them is the Philippines. According to Thackwray, this is due to the government’s significant fiscal reforms. “It’s interesting to note that the Philippines has not been so much touched by the global financial crisis. To some extent, it’s because the government has done at least its job in the last few years, particularly the secretary of finance and the governor of the central bank. The fiscal discipline has been good, and so it has given the country some sort of resilience,” he said. “But it’s also because OFW remittances have stayed strong and that helps a lot to support the domestic economy, particularly the investments in housing.” In response to this, he added that the Holcim Group, to which HPHI belongs, “has had an emphasis on cash conservation and being careful with spending—meaning we have been careful in the capital expenditure and also in managing our support cost.” While the group has been doing reasonably well in a better market like that of the Philippines, Thackwray reiterated that the company did not have to “cut back on anything that is simple and up to the long term health of the business.” Instead, “we’ve continued to invest on our plants to improve their productivity and cost-effectiveness,” he said. Since July last year, HPHI’s second production line in Lugait, Misamis Oriental has been put on hold following weak market demand. But recently, it announced that the plant would resume operations in November this year. “We recognize that government is hard at work, pump-priming the economy with infrastructure projects, and we want to make sure that we are able to continue supporting this initiative,” said Thackwray. “By operating a second line in Lugait, we ensure that there continues to be sufficient market supply.” To continue to invest in the programs deemed important for the company from its customer point of view in the future, HPHI has several strategic initiatives, which have been consistently fall out with energy for the last three years—one of which focuses on their customers. “One important thing that we must do in a downturn is not forget to continue to productively serve our customers well. That means good quality product, excellent service, and being attentive to new opportunities for our products for those customers,” explained Thackwray. The company also has a strong emphasis on manufacturing excellence, wherein it invests on people, capital as well as training and development to make sure that all of our manufacturing plants continue to improve that performance. “We also invest in alternative fuel and raw materials,” he added. “So we have a business for these—the Geocycle business, which is very well suited to help the country in the processing of wastes.” The Geocycle business of Holcim Philippines is focused on helping the waste management program in the country by turning wastes into fuel. As for its advantages, it helps in waste management thrust of the government and keeps an alternative fuel source. Recognizing the big contribution of its manpower to the business, the company also invests in its employees by not resorting to retrenchment despite the global economic turmoil. “We’ve not lain off any people as we recognize that job loss has far-reaching consequences to the employee, his family and community. We try to keep our people motivated and we communicate [with them] frequently so they understand what’s happening in our business. We have an organizational culture that drives open communication, skills training and professional development, and performance-based compensation and rewards,” Thackwray said. Holcim currently employs around 1,500 workers. Recognizing its role as corporate citizens, the company implements CSR initiatives through its flagship programs and community development projects. In all the areas where it operates, it has sustainable community programs that are focused on education, livelihood and infrastructure [like building farm-to-market roads and potable water sources]. Its flagship projects consist of the “WIWAG”, a business entrepreneurship appreciation program for college students and the “’galing Mason,” which provides skills training for masons, leading to national certification. Lessons learned So what have we learned from the challenges of the economic downturn? Says Thackwray, “Stick to the ‘golden rule.’ Don’t panic and don’t do anything that may hurt the business in the long run. “Don’t go for quick gains in the short term that could damage the long term. Protect your business for the long term—stay close to your customers, invest in productivity, keep your employees engaged and motivated. If you do these things while in a crisis, then chances are you emerge an even stronger and better positioned business,” he said.