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Cosco Capital sets 2014 capex at about ₱10 billion

Posted on June 27, 2014 07:56:25 PM [ BusinessWorld Online ]

COSCO CAPITAL, Inc., the listed holding firm of Lucio L. Co, is due to more than double its capital expenditure (capex) this year to around ₱10 billion, as it targets 20% growth on the back of acquisitions.

Capex in 2013 was only around ₱3.5-4 billion, Cosco President Leonardo B. Dayao told reporters Friday on the sidelines of the group’s annual shareholders meeting at the Acacia Hotel in Muntinlupa.

Mr. Dayao said 3 billion worth of capex this year will go to its retail arm Puregold Price Club, Inc., which will open 25 additional stores this year.

At the end of 2013, Puregold’s store network was 205 after it opened 40 new stores and acquired a chain of 15 stores, with locations in Davao City, Digos, Tagum and Butuan and Bacolod.

Plans are underway for the development of its 2.3-hectare property in Urdaneta, Pangasinan, on which the first of its three community malls will rise.

Cosco is also in talks for the acquisition of land in Laguna and Nueva Ecija for the two other malls, which will carry the brand Cosco Mall.

Construction of the three malls will cost ₱1.2 billion.

Also this year, the company completed its Divisoria 999 Shopping Mall and a commercial building at the Fairview Terraces - a joint project with Ayala Land, Inc.

Its real estate units are Ellimac Prime Holdings, Inc., Fertuna Holdings Corp., 118 Holdings, Inc., Nation Realty, Inc., Patagonia Holdings Corp., and Pure Petroleum Corp.

S&R Membership Shopping, which currently has eight warehouse stores, will be allocated ₱1 billion. It opened stores in Davao City and Shaw Boulevard in Mandaluyong City last year, running ahead of its customary pace of one store a year.

Another ₱350 million will go to its chain of Lawson convenience stores, a product of Puregold’s recent tie-up with Japanese convenience store group Lawson, Inc.

The partners will open 20-30 stores this year, which will eventually accelerate to 80-100 stores annually in the succeeding years, with a 500-store target by 2020.

Puregold contributed 70% to the joint venture, with Lawson taking up the remainder.

The company also spent ₱1.5 billion in March for the acquisition of NE Pacific Shopping Centers Corp., the largest mall operator in Cabanatuan City, Nueva Ecija.

Mr. Dayao said the remaining ₱4 billion in the budget will go to "various corporate acquisitions," but he refused to elaborated.

Its spirits and wine business is also expecting "double-digit growth" this year, according to J P Santamarina, president of subsidiary Premier Wine & Spirits, Inc.

"The new tax regime last year allowed us to introduce brands in price points that were impossible (before)," Mr. Santamarina said.

Cosco entered the low-priced imported segment of the spirits and wine market with the launch in November 2013 of Spanish brand Excelente.

Mr. Santamarina said the company sees this segment growing at a "better rate" as the P100-300 price range per bottle is "very accessible," resulting in better consumer reception.

"Our new ventures on wines and spirits have captured the local middle market and these are projected to grow in the coming years," the company said in its annual report.

Other subsidiaries in this segment are Meritus Prime Distributions, Inc. and Montosco, Inc.

Early this year, the company acquired Office Warehouse, which has 47 stores and is expected to contribute to the growth of Cosco as the latter expands its non-food retail segment.

The group of Mr. Co last year injected some ₱74.8 billion worth of equity in Cosco -- formerly known as Alcorn Gold Resources Corp. -- including a 51% stake in Puregold as well as 100% stakes in various commercial property developers and liquor distributors, and in oil storage company Pure Petroleum Corp.

Cosco’s first quarter net income rose to ₱1.279 billion from ₱3.081 million in the same three months last year as a result of the consolidation of Mr. Co’s various businesses under its roof.

These outsized results are due to the reorganization. Whereas 2013 results reflected only the mining business, financial reports in 2014 will include the results of 12 companies.

Gross revenue rose to ₱19.962 billion from ₱11.134 million a year earlier while costs and expenses increased to ₱2.5 billion from ₱8.954 million.

Cosco shares were unchanged at ₱9.58 in Friday trading. -- Daphne J. Magturo    

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