No signs of slowing down for Ayala Lands property segment

August 9, 2015

AYALA Land, Inc. (ALI) said growth at its residential property business should pick up pace despite a slowdown in the first half and threats of higher interest rates.

The property giant has also been beefing up its leasing business to account for half of earnings in the next five years.

ALI Chief Financial Officer Jaime E. Ysmael told reporters last week the 10% growth in the company’s residential revenues in the first half -- significantly slower than the 40% expansion a year ago -- is still “quite reasonable” given the high base as a result of its aggressive launches since 2009.

Reservation sales -- an indicator of future growth -- grew 8% to P52.47 billion in the first half.

“The development side, residential will continue to grow -- that’s our assumption for the next five years,” Mr. Ysmael said.

“We will not slow down... We will launch to the extent the market will bear, to the extent the market will continue to be conducive. From where we are standing right now, there is no reason to believe the market will not grow given what is happening in the global economy,” Mr. Ysmael said.

Rising remittances from Filipinos abroad, robust business process outsourcing and tourism sectors, growth in per capita income and low interest rates remain a favorable backdrop for expansion, he said.

“Last year, if you look at our performance, we grew our sales by more than 10% but the entire market contracted so we gained market share,” Mr. Ysmael said.

Higher US interest rates -- with the Federal Reserve widely expected to raise them by September -- will have a “muted” impact on Philippine credit conditions, he said.

“If that happens, we believe the Philippine banking system is resilient compared to the other markets. The central bank... has not followed the other economies in increasing interest rates because they feel the Philippine situation is a bit different and we can afford not to raise interest too much,” Mr. Ysmael said.

“If you look at mortgage rates, there is room for banks to even reduce mortgage rates because the net interest margin is quite high for the banks. They are charging 8-9% for a one-year fixed [loan] and their funding cost is less than that even if you add the intermediation cost,” he said.

ALI is beefing up its leasing portfolio with a plan to raise its contribution to 50% of earnings by 2020, or the end of its five-year plan when the property firm is expected to post a net profit of P40 billion.

Recurring income accounted for 44% of bottom line in the first half.

“The tripling of leasable space will deliver that,” Mr. Ysmael said, referring to a plan to triple the size of shopping malls, office space and hotel and resorts businesses over the next seven years from 2013 levels.

Shares in Ayala Land added 55 centavos or 1.44% to close at P38.70 each last Friday.

By Krista A. M. Montealegre, Senior Reporter

Original article can be found here >>