Republic of the Philippines

Pangasinan State University

ALAMINOS CITY CAMPUS
College of Management and Technology
Department of Business Administration

DMCI Holdings
A Market Analysis

In partial fulfillment of the requirements of

FM 105: Investment and Portfolio Management

Submitted by:

III BSBA FM A

Balagot, Princess Zaira

Nastor, Armida

Nilo, Jaycel Mae

Raniaga, Keen Rogel

Sales, Princess Lyka

Submitted to:

Ms. Cherylyn J. Reyes

Faculty

May 2024

I. Introduction
 Republic of the Philippines
Pangasinan State University
ALAMINOS CITY CAMPUS
College of Management and Technology
Department of Business Administration

The company name DMCI Holdings or D.M. Consunji, Inc. originated by the founder whose
name is David M. Consunji a young engineer who believed in the value and nobility of principled
contracting and inspired a generation of engineers with his passion to build and commitment to serve.
DMCI Holdings, Inc. (PSE: DMC) is the only publicly listed holding company in the Philippines that
has construction as its core competency.

DMCI was founded in the year 1954 to take advantage of the postwar construction boom in
Manila. To unlock the value and growth potential of DMCI, he led the establishment and public listing
of DMCI Holding in 1995. DMCI Holdings, Inc. is in the construction sector and engages in the
provision of civil engineering and general construction services. They build landmarks and large-scale
infrastructures in the Philippines and other parts of the world, becoming one of the largest and most
reputable construction companies in the country. Also, DMCI Holdings is involved in mining, energy
generation, and water infrastructure. DMCI Holdings operates through the following segments:
Construction and Others, Coal Mining, Nickel Mining, Real Estate, On-grid Power, Off-grid Power, and
Water.

DMCI Holdings shows its successful operation and improvement from the past years up to the
present. This results in them being the highest dividend-paying stocks in the local market, with a
dividend payout ratio of at least 25% of the preceding year’s consolidated core net income and having
100% shares owned.

The company has five operating subsidiaries and affiliates, namely: D.M. Consunji
(construction services), DMCI Project Developers (real estate development), Semirara Mining (coal
mining), DMCI Mining (nickel mining), and DMCI Power (power generation). It also has affiliates in
water distribution, DMCI-MPIC Water Company, and road infrastructure, Private Infra Dev.

D.M. Consunji Inc. (DMCI) is one of the Philippines’ leading engineering-based integrated
construction companies. The company has been operating for almost 70 years and is involves in
buildings, energy, infrastructure, utilities and plants, concrete products, equipment management and
steel fabrication with 100% shares owned.

DMCI Homes is one of the leading mi-segment developers in the Philippines, offering best-in-
class amenities and value-for-money properties in Metro Manila and other key urban areas with 100%
shares owned.

Semirara Mining and Power Corporation (PSE: SCC) is the largest coal producer in the
Philippines, accounting for 99% of the domestic output. It is the only power generator in the country
that runs on its own fuel with 56.6% shares owned.

DMCI Mining operates open-pit mines in Palawan and Zambales through its subsidiaries
Berong Nickel Corporation (BNC) and Zambales Diversified Metals Corporation (ZDMC) with 100%
shares owned.

DMCI Power is one of the largest electricity suppliers in the off-grid market in terms of
installed capacity. It has long-term power supply contracts in three of the six biggest missionary areas
in the Philippines, namely Masbate, Palawan and Oriental Mindoro with 100% shares owned.

Maynilad Water Services, Inc. (Maynilad) is the largest private water concessionaire in terms
customer base in the Philippines. It serves nearly 10 million people in 17 cities and municipalities in
Metro Manila and Cavite Province with 25% shares owned.
 Republic of the Philippines
Pangasinan State University
ALAMINOS CITY CAMPUS
College of Management and Technology
Department of Business Administration

The company’s mission is to invest in engineering and construction-related businesses that

bring real benefits to people and the country. This mission generalized the DMCI creed that promotes
growth, stability, fair competition, and unity among all construction industries as well as valuing one
another not only serving man but humankind and building not only an enterprise. DMCI Holdings has
EESG Highlights that create shared value by applying engineering and management solutions to
some of the most critical social issues in our country while generating economic returns for our key
stakeholders. Additionally, they believe in creating and delivering value to their stakeholders through
their products and services.

As DMCI Holdings market growth and market size, it has been growing earnings at an
average annual rate of 24.8%, while the Industrials industry saw earnings growing at 7.4% annually.
Revenues have been growing at an average rate of 13.3% per year. DMCI Holding’s return on equity
is 26.8%, and it has net margins of 20.1%.

In an article published by Philippine News Agency (17 May 2023), DMCI chairman and chief
executive officer Isidro Consunji says in an interview that one of the challenges they expect is the
blend of challenges in their business portfolio because of moderate global economic recovery,
persisting geopolitical tensions, and elevated domestic inflation. For example, due to high inflation, the
central bank has raised key policy rates by a total of 425 basis points since May last year. Also, price
volatility, cost inflation, high interest rates, and the lingering impacts of the pandemic. On the other
hand, Consunji said that despite these challenges, DMCI sees bright spots in the power and water
businesses that would benefit them in recovering consumption and better prices.

Market Analysis is a detailed assessment of a business’s target market and the competitive
landscape within a specific industry. To determine the competitive intensity and attractiveness of
DMCI Holdings in the real state/corporation industry analyzing its market is essential. In this analysis,
we will be going to use a framework developed by Michael Porter, Porter’s Five Forces which involve
5 forces: competitive rivalry, supplier power, buyer power, the threat of substitution, and the threat of
new entry. This will focus on DMCI Holdings including its leading industries including the following:
Construction and Engineering, Real Estate Development, Mining, Power Generation, and Water
Services.

These will be the scope of this market analysis. The findings will provide a high-level overview
of the market trends, challenges, and opportunities faced by DMCI Holdings and give the reader a
clear preview and understanding of the company and the market landscape in which it operates.

II. Porter’s Five Forces Analysis

Here’s how each of the five forces applies to DMCI Holdings’ industries:

A. Competitive Rivalry

DMCI Holdings, Inc. stands with a diverse portfolio including construction, real estate,
mining, energy, and infrastructure, DMCI Holdings shows a strong commitment to excellence in
many areas. However, it faces strong competitors who mirror its ambition and drive for
prominence.

Companies such as Robinsons Land Corporation, Ayala Land Inc., EEI Corporation, and
Aboitiz Construction Inc. are among its key rivals, engaging in fierce competition across
construction contracts, real estate developments, and infrastructure projects. But despite this
 Republic of the Philippines
Pangasinan State University
ALAMINOS CITY CAMPUS
College of Management and Technology
Department of Business Administration

rivalry, DMCI Holdings remains determined in its dedication to deliver quality, efficiency, and
sustainability.

i. EEI Corporation

EEI Corporation is a top construction firm in the Philippines, known for its diverse
range of services including infrastructure, buildings, and industrial projects. It has extensive
experience and partnerships across the globe, particularly in the Middle East, Africa, and Asia
Pacific. It shows off world-class project management skills. It also proudly holds a quadruple-
A rating from the Philippine Contractors Accreditation Board and certifications for quality,
environmental management, and occupational health and safety. It was recognized for its
quality work and safety standards. EEI remains at the forefront of technology and construction
methods, that makes it a preferred choice for global engineering and construction companies.

ii. Aboitiz Construction Inc.

Aboitiz Construction, part of the Aboitiz Group, brings nearly five decades of
experience in construction across heavy and light industries, infrastructure, and industrial
maintenance. They are specialized in plant construction for various sectors and infrastructure
projects. They also offer maintenance services and equipment rental. With a Quadruple A
license from PCAB, ACI focuses on professionalism and reliability. Their dedicated team
ensures timely, safe, and high-quality project deliveries through close collaboration with
clients and stakeholders.

iii. Ayala Land Inc.

Ayala Land, Inc. is the leading real estate developer in the Philippines, known for
creating large scale communities that become thriving economic centers. Their expertise lies
in master-planned, sustainable developments in urban and rural areas, maximizing land use
for the benefit of communities and investors. Ayala Land offers a harmonious mix of
residential, commercial, office, hospitality, and investment properties. They are the innovators
of sustainable development standards, which ensures every project aligns with their
commitment to long-term value creation for stakeholders.

B. Supplier Power

Since DMCI Holdings Inc. operates across various industries mainly construction, real
estate, energy, mining, and water distribution, this means that the supplier power may also vary
depending on the industry.

DMCI relies on various suppliers of raw materials, equipment, and subcontracted services
but that doesn’t literally imply a low/weak supplier bargaining power. For example, in construction,
different materials are needed but they have specific materials and equipment in mind that they
think are essential to their projects. The fact that DMCI has been in the business and running in
the industry for a long time, therefore, they will always want to have and seek high-quality
materials and equipment that will translate into producing quality output or services. With this
scenario, suppliers may have moderate to high supplier bargaining power.

C. Buyer Power

In the industries where DMCI Holdings operates, buyer power plays a significant role in
shaping market dynamics.
 Republic of the Philippines
Pangasinan State University
ALAMINOS CITY CAMPUS
College of Management and Technology
Department of Business Administration

i. Construction and Engineering:

Due to market competition where not only DMC Construction is the one that supplies
construction materials as well as services, but it can also increase buyer bargaining power
since they have several options to choose from and can negotiate better prices and terms. If
construction projects are in demand but have limited supply, the buyer bargaining power is
less negotiable. However, if demand is low or there are many available suppliers, buyers may
have more leverage. When it comes to larger buyers who require significant quantities of
concrete engineering products may have more bargaining power and can negotiate better
prices and terms.

The bargaining power of buyers may likely be low if suppliers offer unique features,
quality, or value-added services because they have fewer alternatives. The bargaining power
of buyers is also affected by industry regulations, if there are restrictions on certain suppliers
or if government contracts have specific requirements, it can impact buyer negotiation.

As inflation, interest rates, and overall market conditions are rampant, it can affect the
buyer's bargaining power because, during this crisis, buyers may have more leverage to
negotiate lower prices. The bargaining power of buyers is high because of informed
information about market prices, quality standards, and available options enhancing their
bargaining position.

As DMCI’s customers are typically large-scale infrastructure projects, real estate

developers, and industrial/commercial clients, buyers have significant purchasing power and
can negotiate favorable terms. Since DMCI has only several capable competitors, the
customer’s switching cost is low because it can be costly and time-consuming for buyers to
switch construction contractors, giving DMCI’s customers more leverage.

ii. Real Estate Development:

In the real estate market condition, factors like supply and demand, can impact buyer
bargaining power. If there is an abundance of available properties and limited demand,
buyers may have more negotiating power and vice versa. Also, economic factors such as
interest rates, inflation, and employment rates, can affect buyer bargaining power because if
lower interest rates and a stable economy may give buyers more confidence and leverage in
negotiations and vice versa. If multiple real estate developers are present in the market can
increase buyer bargaining power because they have options to choose from, and they can
negotiate better prices and terms.

DMCI Homes differentiation can affect buyers' bargaining power, because of the
uniqueness and quality of the properties being offered by developers like highly sought-after
features, amenities, and locations, buyers may have less bargaining power as they have
fewer alternatives. Developers with a strong reputation like DMCI Homes for delivering quality
properties and excellent customer service may have less incentive to negotiated with buyers.
DMCI Homes issues with their customers like slow elevators, unresponsive property
management, and restrictive rules can make buyers bargaining power high as they can voice
their complaints about the quality of their offerings.

iii. Mining:

Multiple suppliers can impact bargaining power of buyers because suppliers that
offers similar mining products such as diamonds, platinum, and coal, give buyers more
 Republic of the Philippines
Pangasinan State University
ALAMINOS CITY CAMPUS
College of Management and Technology
Department of Business Administration

negotiating power. Buyers are price-sensitive and have high negotiation skills that may have
more leverage in negotiations. If there are more options in mining supplies, the bargaining
power of buyers is strong. On the other hand, the bargaining power of buyers is weak
because of limited choices and potential monopolies.

Overall market conditions, demand for mining products, economic factors, and
competition among mining companies can also influence the bargaining power of buyers. The
bargaining power of buyers is most likely high when the price is low and high costs.

iv. Power Generation:

The bargaining power of customers is most likely high when market competition is
high since they have more options and buyers have more negotiating power. The demand for
electricity as one of the buyers’ necessities can impact their bargaining power. If the demand
is high but limited source buyers may less negotiating power.

Regulatory policies can also affect bargaining power of buyers, as government if

there are restrictions on certain suppliers or if government contracts have specific
requirements, it can impact buyer negotiation. The availability of alternative energy sources
can impact bargaining power of customers. The more alternative, the higher the bargaining
power and vice versa.

v. Water Services:

Buyers' bargaining power can be higher if there are multiple suppliers offering similar
water services, giving buyers more options and negotiating power. The level of buyer demand
for water services can also impact bargaining power. If demand is high and supply is limited,
buyers may have less negotiating power. Economic factors such as interest rates, inflation,
and overall market conditions can also influence buyer bargaining power.

D. Threat of Substitution

DMCI Holdings Inc. has been operating in the industry since 1995, and this gives them
the upper hand when compared to newly established businesses within their industry (if there’s
any) certainly because they have established a good reputation and earned the trust of
consumers through the years. Direct substitutes for DMCI’s core construction, real estate, and
infrastructure services are limited. This being the case, for DMCI Holdings Incorporated, the threat
of substitutions is low to moderate.

E. Threat of New Entry

It is important to identify the chances that newcomers may enter an industry because they
might steal existing competitors' market shares and revenues. Newcomers to the residential
property market are relatively powerless when it comes to battling with industry giants. Certainly,
in the past few years or so there have been quite several big players involved in residential
property markets, but few have managed to carve out names for themselves and leave an
indelible mark among the buyers.

i. Diseconomies Of Scale

In residential real estate, economies of scale are what allow big players to have
access to a wider market through their ability to operate over a larger area. Newcomers in this
sector on the other hand have their constraints about size. It may reach a point where an
 Republic of the Philippines
Pangasinan State University
ALAMINOS CITY CAMPUS
College of Management and Technology
Department of Business Administration

increase in production output leads to a rise in average cost prices. This in essence would be
a heavy expenditure without guaranteeing instantaneous development concerning gaining
new market share.

ii. Weak Brand Identity and Differentiation

Brand identity is critical to consumers’ recognition of products. It differentiates your

products from those offered by other businesses and shapes how they perceive them. On the
other hand, competition in the residential real estate sector is largely based on project
concept and design. Filinvest Land’s Bali Oasis adopted an Indonesian architectural style
which drew many potential buyers ultimately leading to the sale of homes in their latest
project. To establish themselves in a niche market, for example, through sophisticated
advertising campaigns, they need to have innovative concept designs that would trounce the
huge players in the industry.

iii. High Capital Requirements

The industry requires substantial capital to enter, high-rise residential projects need
huge sums to construct, and land must be purchased at a cost. In 2011, Megaworld, which is
a very significant player in this sector, invested Php25 billion in its development programs.
Some of the areas touch commercial and other property types but residential areas are
covered in the package.

iv. High Switching Costs

It is common for companies to adopt coercive strategies aiming to retain their

customers by incurring more costs compared with their competitors. For instance, many firms
charge extremely high cancellation fees upon termination of a contract. They carry out such
actions in anticipation that the switching costs would discourage their customers from leaving
them. It is for this reason that fresh entrants in the industry are at a disadvantage in
competing with well-known and reputable firms.

v. Insubstantial Access to Distribution

There are established distribution channels set up by huge companies that have
made it difficult for the industry giants to be beaten by the newcomers. Thus, comers have to
set up theirs.

vi. Low Land Liability

Virtually every business in the industry relies considerably on the availability of vast
areas of land that are suitable for development. As the new entrant and its competitors
attempt to locate sites for development, it may become more difficult to locate parcels of
suitable size in locations and at prices acceptable to the standards of the recent entrants.

vii. Non-Absolute Cost Advantages

Entities having absolute advantages can produce with less input compared to other
parties making the same product. Consequently, cuts cost and increases profits from absolute
advantage. There is however no way they can be able to compete with already successful
companies due to the large sums of capital required for the provision of raw materials as well
as paying builders to launch a new enterprise in this domain, adding to that would cost
attributable to key persons that need to be hired for the completion of a project.
 Republic of the Philippines
Pangasinan State University
ALAMINOS CITY CAMPUS
College of Management and Technology
Department of Business Administration

viii. Government Policies

Before starting a project, a newcomer has to begin by carefully considering potential

zoning changes, building permits, traffic studies, and environmental impacts. A newcomer like
Eton Properties, upon entering the industry had one of its construction projects suspended
due to lack of building permit after the building collapsed. Lack of sufficient documents leads
to the cancellation of construction licenses by the Housing and Land Regulatory Board.
Therefore, it is expected that new entrants abide by the provisions of the building code and
the requirements deemed necessary by the Philippine government to construct new projects.

ix. Expected Retaliation

There has been high competition in the industry. Each player is making bold moves
on how to be ahead of the other. Each one has revenge strategies. some players in the
industry are fast to revenge and easily adopt any other stronger ways their rivals may use to
win a competitive advantage over them. Because of this, the process of starting new
businesses becomes difficult as they do not fit in any game where instant response by other
competitors would overturn the situation. It seems that the business resembles chess in that
one must maneuver carefully; one’s opponents are powerful people who occupy certain key
places within an industry, hence one has to perform perfectly to overtake them or overthrow
their rule.

III. Conclusion

The performance of DMCI Holdings in several of sectors provides a detailed overview of their
overall operation. Prior to making an investment decision, we must carefully evaluate several key
details after assessing the company's Porter's Five Forces.

Positively, DMCI Holdings maintains its solid reputation and brand loyalty, especially in the
engineering and construction industries. This clarifies the mild risks of new competitors and
substitution. Their diverse portfolio, which includes holdings in mining, real estate, water services,
power production, and construction, reduces the risk of economic decline in any one of these
industries.

In the construction and real estate industries, consumers might have significant bargaining
power, particularly when there are several rivals providing similar goods and services. Industry-
specific factors can also affect supplier power, like construction, it may encounter conditions where
premium materials are more expensive.

Among DMCI Holdings' primary industries, strong competition is one of the major concerns.
Known companies like Ayala Land and Aboitiz Construction represent a significant challenge for the
company, requiring a constant innovation and cost-effectiveness from DMCI Holdings in order to
maintain its lead. Also, the increase in interest rates and inflation may have an adverse effect on
consumer behavior in all of DMCI Holdings' business segments.

Although DMCI Holdings exhibits a solid market position, economic and competitive issues
should still be considered. Our group recommends further research into DMCI Holdings' financial
performance, strategic plans to address competitive pressures, and risk mitigation strategies for
economic fluctuations.
 Republic of the Philippines
Pangasinan State University
ALAMINOS CITY CAMPUS
College of Management and Technology
Department of Business Administration

IV. References

https://www.wsj.com/market-data/quotes/ph/xphs/DMC

https://asia.nikkei.com/Companies/DMCI-Holdings-Inc

https://simplywall.st/stocks/ph/capital-goods/pse-dmc/dmci-holdings

https://www.pna.gov.ph/articles/1201672

https://tipalti.com/procurement-hub/bargaining-power-of-buyers/

https://corporatefinanceinstitute.com/resources/management/bargaining-power-of-buyers/

https://www.philstar.com/business/2024/04/02/2344531/dmci-hikes-capex-p59-billion-year

https://www.eei.com.ph/

https://www.aboitizconstructioninc.com/about/

https://www.ayalaland.com.ph/