Mabuhay Holdings Corporation
President’s Report – 2015

Valued Shareholders of Mabuhay Holding Corporation, Ladies and Gentlemen,

Welcome to the 2015 Annual General Meeting of Mabuhay Holdings Corporation.

This may not be the best time for us to hold our shareholders’ meeting. The stock markets throughout the world are experiencing a roller coaster type of share price fluctuations recently. Our Philippine Stock Exchange Index cannot escape the same fate and has suffered a big drop this year. We are grateful that despite the unfavorable market atmosphere, you still find time to join us in our annual gathering this afternoon.

For those shareholders who had joined us in our AGM’s in the past years, you will notice that we move our meeting to Sofitel Philippine Plaza this year, giving us a much nicer and more comfortable environment for our gathering. I hope you will enjoy this new venue and take it as a symbol of the improvements of our company.

In the past years, before we report to you on the operations and business development of our company, we always spent a few minutes to take a look at the international economic situation, and then talked a little bit about our own Philippine economy. Let us follow this tradition today.

We know that traditionally, some developed countries are serving as the engines to supply power for the growth of the world economy. These so-called “engine states” include the United States, some European countries like Germany, Great Britain, France and Italy, then we also have Japan and in recent years, China. Unfortunately, most of these countries appear to be powerless in boosting the international economic development at this time.

The fact that almost all stock markets throughout the world took a deep dive recently is a sign that the international economy is not performing well, maybe with the exception of the United States. The U.S. government has just reported an unemployment rate of 5.1 % for August this year, which is the lowest in many years. The Federal Reserve had announced earlier that it has scrapped the Quantitative Easing policy (QE) which had taken place for several years. In fact, the Fed is even contemplating the increase of interest rate this month in order to curb inflation. Of course, with the poor performance in Wall Street stock market recently, the Federal Reserve is now expected to postpone the interest rate hike. However, we should take note that although the U.S. economy has improved substantially in recent months, the US government is still encountering huge budget and fiscal deficits. The U.S. national debt continues to grow with a horrifying speed and we cannot expect the United States to contribute much to boost the world economic growth at this stage.

The European Community has recently rescued one of its members, Greece, from the edge of bankruptcy. But the serious financial and economic problems of many European countries are still far from being gone. As a whole, the European economy is still sluggish. Adding fuel to the fire is that hundreds of thousands of refugees from Syria, Iraq, Libya and other war-torn regions are now flocking into the various European countries. The whole European Union is now facing a series of social and economic problems. We therefore cannot count on Europe to serve as an engine for world economic growth now.

The Japanese economy has been stable lately but the policies adopted by Prime Minister Shinzo Abe are not as effective any more comparing to the time when they were newly implemented. As I said last year, the measures of Abe are “cosmetic” in nature, which included the printing of more money and devaluating the Japanese currency, patterned after the U.S. policy of Quantitative Easing. These actions may have temporary effects on the Japanese economy but they may cause Japan more fiscal and social problems in the long run. Abe’s desire to increase the military spending and expand the Japanese military presence in the world may affect the livelihood of the common people. Japan recorded a debt to GDP ratio of 230 % last year, which is worse than the United States. It is good that most of the Japanese government debts are domestic rather than foreign borrowing, but still the Japanese government has to address to this problem. Therefore, Japan would only have limited resources to assist the developing countries at this stage.

In recent years, China is always looked up to as another engine that provides energy to the recovery and development of the world economy. But we notice that the economic growth of China is also slowing down gradually. The Chinese stock market is the worst performing market in the world in the past few months. In fact, many people attribute the recent worldwide stock market crash to the slow-down of the Chinese economic growth. However, China is still expecting a 7% GDP growth rate this year. The Chinese government has also announced the so-called “One Belt, One Road” strategic plan, pouring sizeable funds to help develop the various countries included in the master planning. China has also launched the AIIB, Asian Infrastructure Investment Bank, trying to pool resources to finance the infrastructure construction of the developing countries. Hopefully, these two projects of China can bring some new ingredients to the pot of economic development, particularly among the countries in Southeast Asia and Asia Minor.

Being a member of the international community, the Philippines cannot avoid being influenced by the international economic undercurrents. Just like the stock markets worldwide, the Philippine stock market also took a very big downward adjustment in recent months. Our currency also devalues substantially. However, the special structure of our economy allows our country to continue performing better than our neighboring countries. According to the World Bank and IMF, the GDP growth rate of the Philippines this year is expected to rank number 4 in the world, only next to India, Qatar and China.

The Philippines is generating no less than 2 billion U.S. dollars in foreign currency every month from the remittances of the Overseas Filipino Workers. With these remittances, we observe very strong consuming power among the Filipino people, and the retail market in this country is booming. The OFW families are the key buyers of housing units, appliances, furniture and other household items. Members of these OFW families frequently patronize restaurants, shopping malls and other retail establishments, bringing prosperity to our economy. Aside from the OFW’s, Philippines is now the number 1 country in the world for servicing Business Process Outsourcing. This explains why the Philippine economy is least affected when the whole world is going down. Although we observe a drop in the Foreign Direct Investment in the first half of this year, the Philippines is still considered an attractive market for overseas investors to put their money, as evidenced in our subsidiary, IRC Properties, Inc. which has recently placed shares to some Japanese investors.

Let us now come to our Company, Mabuhay Holdings Corporation. As I reported to you in the AGM last year, Mabuhay would exert all possible efforts to nurture our affiliated company, IRC Properties, Inc., of which we hold substantial equities. We continue to assist IRC in the clearing and consolidation of its vast property in Binangonan, Rizal which measures more than 2,200 hectares in land area. In the past years, IRC went into joint ventures with other property developers for the construction of low cost housing units. IRC had completed the Sunshine Fiesta Subdivision with Dreamhauz Management and Development Corporation, building close to 900 housing units. IRC is now undertaking another development project call Fiesta Casitas Subdivision with Green Roof Corporation as its partner, building more than 1,000 housing units. Furthermore, IRC has invited a Japanese construction company, Tamura Kensai, as its partner in the development of yet another housing project which is named Casas Aurora, comprising more than 400 houses. In the Casas Aurora project, IRC is taking the leading role as the developer.

I reported to you last year that IRC has entered into an agreement to sell a piece of land, with an area of around 18 hectares to a leading property developer in our country. The negotiation has been concluded but we are still waiting for some technical issues to be resolved before the deal can be announced to the public. The presence of this property group in our area will definitely add prestige and value to the whole IRC property.

IRC has conducted a Private Placement this year and issued 127.2 million new shares to a Japanese investment company by the name of Rizal Partners Co. Inc. By inviting Japanese strategic partners into the company, IRC will become more international in its exposure and outlook. In fact, some other Japanese investors have already contacted IRC for joint venture undertakings.

Mabuhay has another affiliated company called Tagaytay Property & Holdings Corporation. This company owns a very valuable property located near the Tagaytay rotunda overlooking Taal Lake. Tagaytay Property Holdings was able to eject the squatters but still pending the final dismissal of a Homestead Patent registration. We expect the case to be resolved very soon and then we can plan out how to develop that piece of property. 

The management of Mabuhay Holdings Corporation would like to extend to you, our valued shareholders, our heartfelt gratitude and sincere appreciation for your continued support and trust. We will continue to monitor the domestic and international economic conditions and diligently explore business and investment opportunities. We are committed to work for the continuous growth of our company and look forward to a better year for Mabuhay. Thank you.


Esteban G. Peña Sy
President
September 10, 2015