AYALA Land Inc. will develop tourism complexes and hospitals as one of the Philippines’s biggest builders expands beyond housing, malls and offices to boost profit that rose to a record. Shares rose.
Net income at the developer climbed 30 percent to P11.7 billion ($262 million) in 2013, exceeding its P10-billion target a year ahead of a five-year plan. Sales of homes, offices and commercial property rose by more than half to P52 billion, accounting for two-thirds of revenue.
“Growth will have to be more balanced,” President Antonino Aquino, 66, said in an interview at his office in Manila on February 26. “We’ve laid down the foundation for future growth, while at the same time growing at a 30-percent rate. Now, there’s going to be a lot of investments on the recurring-income side of the business,” which refers to earnings from rentals of offices and commercial spaces, and revenue from the company’shotels and resorts business.
Record-low interest rates and increasing remittances from the nation’s 10.5 million citizens living overseas have helped increase home sales at Ayala Land and supported spending at its malls. The Philippines’ $250-billion economy expanded 7.2 percent in 2013 after gaining 6.8 percent the previous year, the fastest two-year pace since the 1950s, and is expected to grow between 6.5 percent and 7.5 percent this year.
Securing growth
AYALA Land will start developing this year a 300-hectare property in El Nido town in Palawan, a province facing the West Philippine Sea (South China Sea) where the company already operates four island resorts, into a mixed-use tourism complex, Aquino said. The development will include hotels, restaurants, shops and residential properties.
It will spend about P5 billion to build 10 new hospitals and the same number of clinics over a five-year period, Vice President David San Pedro said on February 19.
Tourism accounted for 6 percent of the economy in 2012 and employs more than a tenth of the nation’sworkers, according to government statistics. Foreign tourist arrivals rose about 10 percent to 4.68 million in 2013. Revenue from inbound visitors rose 15 percent to $4.4 billion, according to the Department of Tourism.
“There will be periods when the property sector wouldn’t be as strong,” said Richard Laneda, an analyst at COLFinancial Group Inc., who has a buy rating on the stock. “Building their recurring businesses will get them through the economic swings and ensure sustainable growth.” Higher interest rates would be a challenge for builders as they could damp demand, he said.
Infrastructure projects
SHARES of Ayala Land rose 1.7 percent as of 10:24 a.m. in Manila on Friday, poised for the highest close since October 30, while parent Ayala Corp. advanced 2.1 percent. The builder’s stock has risen 20 percent this year after a 6.4-percent drop in 2013.
Profit may rise to P14.4 billion this year, according to the median estimate of 14 analysts surveyed by Bloomberg.
“You will always see us in industries that are a priority of the government and will have a very good tailwind coming from the economy,” Aquino said. He cited the company’s mixed-use developments in Cavite and Laguna, provinces near the capital where a P35.4-billion, 47-kilometer expressway will be built. “We’re focusing on areas that will benefit from major infrastructure” projects.
Landbank increase
AYALA Land spending will rise about 5.6 percent to P70 billion this year from P66.3 billion in 2012 to complete developments and start 78 projects worth P142 billion. Residential units to be sold this year will rise to 30,000 units from 28,482 units in 2013.
The company, which has about 8,000 hectares in its landbank, mostly near Manila, is adding more locations and is scouting for large holdings, Aquino said. It is also open to joint ventures with property owners.
“We’re about 70 percent there, there’s still 30 percent to go,” he said. “If you truly believe the country has good economic prospects, the time to do your landbanking was yesterday.”
No bubble
LAND values in Makati City, where the main financial district is, rose 5.9 percent in the fourth quarter from the previous three months to an average P341,505 per square meter and are forecast to increase 8 percent this year, broker Colliers International said in a report released this month.
Competition among Philippines builders has kept home-price increases at “mid-single digit levels,” Aquino said.
The residential market should be watched closely as low interest rates may spur demand, Michael Wan, an analyst at Credit Suisse Group AG, wrote in a February 12 note.
“There’s no price bubble because competition keeps everybody honest,” Aquino said. “I am not discounting the point that there could be some market segment in some locations that all of a sudden may have an oversupply situation. It’s not what I call a price bubble.”
source: http://www.businessmirror.com.ph / Business Mirror / Home> Business> Companies / by Bloomberg News / February 28th, 2014
