MON 27 MAY 2019

Earnings mixed on timing

of real estate sales

Profits grew an average of 15.2% but ALI and RLC lagged

estimates
Net income of property companies that we cover grew by an average of 15.2% y/y in Ayala Land, Inc.
1Q19. All companies registered higher net income year on year driven by higher property BUY
development and recurring revenues. FLI reported better-than-expected profit on the back PHP49.33

of faster-than-expected growth in real estate revenues. Meanwhile, ALI and RLC profits
Filinvest Land Inc.
lagged estimates on slower-than-expected real estate sales growth. However, this was BUY
mainly due to timing of sales booking and construction progress of projects. Real estate PHP1.70
sales growth is expected to pick up for both companies in the succeeding quarters as both
Megaworld Corporation
launches and construction progress increase. The remaining companies – MEG, SMPH, and
BUY
VLL – reported profits that were in line with estimates. PHP5.84

Robinsons Land Corporation

BUY
Exhibit 1. Earnings of property developers
PHP26.78
YTD % of estimates
1Q18 1Q19 % growth
in Php Mil COL Consensus SM Prime Holdings, Inc.
ALI 6,517 7,322 12.4% 22.1% 21.4% HOLD
SMPH 7,597 8,786 15.7% 23.9% 24.0% PHP40.70
MEG 3,299 3,836 16.3% 21.2% 22.6%
FLI 1,450 1,794 23.7% 26.8% 26.5% Vista Land & Lifescapes
RLC 1,543 1,832 18.7% 20.1% 21.4% HOLD
VLL 2,537 2,849 12.3% 24.5% 24.4% PHP6.67
Total 22,943 26,419 15.2%

Source: Company data, Bloomberg, COL estimates

Timing of sales booking led to slower revenue growth

Total revenues from sale of residential and office units grew by an average of 7.6% y/y in
1Q19 driven by higher completion of projects and sales of existing inventory. SMPH, MEG,
FLI, and VLL reported revenue growth that were in line with estimate but ALI and RLC’s
Richard Lañeda, CFA
real estate revenues lagged our estimates because of the timing of sales booking and Senior Research Manager
completion progress of projects. Nevertheless, we expect RLC to book a significant amount richard.laneda@colfinancial.com

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 PROPERTY SECTOR I EARNINGS MIXED ON TIMING OF REAL ESTATE SALES

MON 27 MAY 2019

of revenues in 2H19 from the sales of its condo units in Chengdu. ALI could also see a
bump in revenue growth in the succeeding quarters as sales bookings improve.

Exhibit 2. 1Q19 revenues from residential and offices for sale

in Php Mil 1Q18 1Q19 y/y growth

ALI 24,135 25,442 5.4%
SMPH 13,849 14,985 8.2%
MEG 8,526 9,474 11.1%
FLI 4,649 5,112 10.0%
RLC 2,108 1,969 -6.6%
VLL 7,843 8,787 12.0%
Total 61,110 65,769 7.6%
Source: Company data

Residential demand remains firm

Take-up sales growth slowed to 11.3% in 1Q19 from 23% in FY18. The slower growth
was due to the high-base effect and because of fewer project launches. Total project
launches in 1Q19 amounted to Php77 Bil, 13% lower than the Php88.5 Bil worth of
projects launched in 1Q18. Growth of reservation sales was driven by higher demand
from both local and international buyers with Chinese buyers still accounting for bulk of
sales to non-Filipinos.

Exhibit 3. 1Q19 take-up sales

in Php Bil 1Q18 1Q19 y/y growth

ALI 31.5 34.1 8.3%
SMPH 14.8 17.8 20.3%
MEG 33.5 0.0 -100.0%
GERI 1.9 0.0 -100.0%
SLI and ELI 7.3 0.0 -100.0%
RLC 3.7 3.8 1.8%
FLI 5.5 5.6 3.5%
VLL 18.0 19.9 10.6%
Total 116.1 116.1 0.0%

Source: Company data

COL Financial Group, Inc. 2

 PROPERTY SECTOR I EARNINGS MIXED ON TIMING OF REAL ESTATE SALES

MON 27 MAY 2019

Exhibit 4. 1Q19 residential project launches

in Php Bil 1Q18 1Q19 y/y growth

ALI 10.9 5.3 -51.4%
SMPH 18.7 34.1 82.4%
MEG 35.6 23.1 -35.1%
GERI 1.0 0.9 -11.1%
SLI and ELI 0.0 0.0 -
RLC 8.0 0.0 -
FLI 1.9 2.8 47.4%
VLL 12.4 10.8 -12.9%
Total 88.5 77.0 -13.0%

Source: Company data

Despite the lower value of launches in 1Q19, all companies are targeting to either
maintain or increase the value of launches this year compared to 2018. This means we
can expect more launches in the succeeding quarters and this may be a catalyst for sales
to grow faster.

Recurring income grows on higher rates and leasable space

Recurring income from property companies’ leasing businesses continued to grow due
to higher lease rates and higher contribution from spaces added in the past two years.
Recurring revenues, which include office, retail and hotel rental revenues grew 14.5% to
Php39.35 Bil. FLI’s revenues grew the fastest due to higher revenue contribution from the
six office buildings completed last year with a total GLA of 118,000sqm (23.1% of total
office portfolio).

Exhibit 5. 1Q19 recurring revenues (malls, offices, hotels)

in Php Mil 1Q18 1Q19 y/y growth

ALI 7,711 9,162 18.8%
SMPH 15,841 17,256 8.9%
MEG 3,738 4,500 20.4%
FLI 1,214 1,719 41.6%
RLC 4,221 4,781 13.3%
VLL 1,642 1,934 17.8%
Total 34,367 39,352 14.5%
Source: ALI, SMPH, MEG, FLI, RLC, VLL

COL Financial Group, Inc. 3

 PROPERTY SECTOR I EARNINGS MIXED ON TIMING OF REAL ESTATE SALES

MON 27 MAY 2019

Office demand grew 9% y/y

Colliers recorded 340,000sqm of transactions in 1Q 2019, about 9% higher than the

total transactions recorded in the same period in 2018. Outsourcing firms accounted for
36% of transactions while 29% came from offshore gaming firms. Meanwhile, the strong
performance of the domestic economy led to strong demand by the traditional office
segment which accounted for 35% of demand. Groups that are part of the traditional
segment include multinational corporations, engineering firms, logistics companies,
flexible workspace operators, and government agencies.

COL Financial Group, Inc. 4

 PROPERTY SECTOR I EARNINGS MIXED ON TIMING OF REAL ESTATE SALES

MON 27 MAY 2019

IMPORTANT RATING DEFINITIONS

BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the
next six to 12 months.

HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might
be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the
next six to twelve months.

SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.

IMPORTANT DISCLAIMER
Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount invested.
Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said information may
be incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the report and are
subject to change without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of
a security. COL Financial and/or its employees not involved in the preparation of this report may have investments in securities of derivatives of the companies
mentioned in this report and may trade them in ways different from those discussed in this report.

COL RESEARCH TEAM

APRIL LYNN TAN, CFA

VP & HEAD OF RESEARCH
april.tan@colfinancial.com

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA

DEPUTY HEAD OF RESEARCH SENIOR RESEARCH MANAGER SENIOR RESEARCH MANAGER
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com

ANDY DELA CRUZ JOHN MARTIN LUCIANO FRANCES ROLFA NICOLAS

SENIOR RESEARCH ANALYST SENIOR RESEARCH ANALYST RESEARCH ANALYST
andy.delacruz@colfinancial.com john.luciano@colfinancial.com rolfa.nicolas@colfinancial.com

JUSTIN RICHMOND CHENG ADRIAN ALEXANDER YU

RESEARCH ANALYST RESEARCH ANALYST
justin.cheng@colfinancial.com adrian.yu@colfinancial.com

COL FINANCIAL GROUP, INC.

2402-D EAST TOWER, PHILIPPINE STOCK EXCHANGE CENTRE,
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COL Financial Group, Inc. 5