Noncurrent Trade Receivables and Advances to Related Parties comprises the big bulk of the Noncurrent Assets at 86% of Total Non Current Assets of Philippine Estates Corporation (PHES) for the Y2011, thus we will focus on these two accounts.
| Non Current Assets (in millions) | Y2011 | Y2010 | Diff | Horizontal % |
| Noncurrent Trade Receivables | 148.6 | 266.3 | (117.70) | -44% |
| Advances to Related Parties | 365.9 | 345.8 | 20.09 | 6% |
| Investment Property | 1.1 | 1.1 | - | 0% |
| Property and Equipment | 56.5 | 0.1 | 56.41 | 60950% |
| Deferred Tax Assets | 15.5 | 15.3 | 0.18 | 1% |
| Other Assets | 7.7 | 9.8 | (2.13) | -22% |
| Non Current Assets | 595.2 | 638.4 | -43 | -7% |
Noncurrent Trade Receivables – is 25% of the total noncurrent assets. It decreased by 44% in Y2011. The decrease as discussed in the current ratio blog is that portion of the non current receivables in Y2010 became current and collectible in Y2011. (See Current Ratio) All installment contract receivables are secured by mortgage on the property purchased by the buyer with an 18% to 21% interest. I think PHES is offering buyers with In-house financing with the interest rates mentioned above. The past due over 121 days is 56% of the total trade receivables (current/noncurrent) which is very uncomfortable for an investor like me. This must be reduced significantly by improving collection systems and if possible, factor the receivables (selling of receivables to others). This is one aspect of the financial statements I must monitor on the next periods to see if the collections have been improving.
Advances to Related Parties- is 61% of the total noncurrent assets. It increased by 6% in Y2011. Its balance of 366 million pesos is the biggest noncurrent asset account. According to the Annual FS submitted to PSE, the recoverability of specific receivables and advances to related parties is evaluated based on the best available facts and circumstances, the length of the Group’s relationship with its debtors, the debtors’ payment behavior and know market factors. These specific reserves are reevaluated and adjusted as additional information received affects the amount estimated to be uncollectible.
PHES is loaning its affiliates with interest. In fact, in Y2011 the interest income it generated from its affiliates is 11.3 million which makes up for 60% of Other Income.
| Advances to related parties (in millions) | Y2011 | Impairment | Y2011 Net | % |
| Plastic City Corp | 160.0 | 22.5 | 137.5 | 38% |
| Forum Holdings Corp | 71.6 | 9.7 | 61.8 | 17% |
| International Polymer Corp. | 61.9 | 6.7 | 55.3 | 15% |
| Orient Pacific Corp. | 32.4 | 3.2 | 29.2 | 8% |
| Kennex Container Corp | 27.0 | 3.6 | 23.4 | 6% |
| Heritage Pacific Corp. | 20.4 | 2.8 | 17.7 | 5% |
| Noble Arch Realty and Construction | 16.6 | 2.3 | 14.2 | 4% |
| Metro Alliance Holdings and Equity Corporation | 16.6 | 2.4 | 14.2 | 4% |
| Pacific Rehouse Corp. | 13.2 | 1.4 | 11.8 | 3% |
| Rexlon Industrial Corp | 0.0 | 0.0 | 0.0 | 0% |
| Weltex Industries Corp. | 0.1 | 0.0 | 0.1 | 0% |
| Waterfront Cebu City Hotel | 0.0 | 0.0 | - | 0% |
| Bataan Polyethylene Corp. | 0.2 | 0.2 | 0.0 | 0% |
| Ropeman International Corp. | 0.6 | 0.0 | 0.6 | 0% |
| Advances to related parties (in millions) | 420.5 | 54.7 | 365.9 | 100% |
Though some of the Group’s advances to and installment contracts receivable have no significant movements during the year, management is confident that these are collectible in full.
| Advances to related parties (in millions) | Remarks |
| Plastic City Corp | Payment is 21,475 sq.m. Plastic City property with value at P6,450/sq.m = 138.5 million |
| Forum Holdings Corp | secured by Pacific Rehouse Properties,fairvalue of 219 million |
| International Polymer Corp. | secured by Pacific Rehouse Properties |
| Orient Pacific Corp. | secured by Pacific Rehouse Properties |
| Kennex Container Corp | secured by Pacific Rehouse Properties |
| Heritage Pacific Corp. | secured by Pacific Rehouse Properties |
| Pacific Rehouse Corp. | secured by Pacific Rehouse Properties |
| Noble Arch Realty and Construction | 16,000 square meter in Valenzuela |
Most of the advances are secured by properties. These properties can be used by the Company for their real estate projects.
Summary:
Noncurrent Trade Receivables is 25% of the total noncurrent assets at 148.6 million pesos. It decreased by 44% in Y2011. The decrease as discussed in the current ratio blog is that portion of the non current receivables in Y2010 became current and collectible in Y2011. (See Current RratioThe past due over 121 days is 56% of the total trade receivables (current/noncurrent) which is very uncomfortable for an investor like me.
Advances to Related Parties are 61% of the total noncurrent assets. It increased by 6% in Y2011. Its balance of 366 million pesos is the biggest noncurrent asset account. Most of the advances are secured by properties. These properties can be used by the Company for their real estate projects.
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