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| Ayala Land Inc (ALI) |
Ayala Land Inc:continued build-up of recurring business
Sales slowdown not materializing. ALI management said that take-up sales in 2Q14 remained
robust despite market expectations of a slowdown. While the company did not give specific
figures, it said 2Q14 sales were stronger than the previous quarter wherein they sold Php21.3 Bil worth of units despite launching just Php12 Bil worth of new inventory. The company added that although sales may not be growing as fast as they did in 2009-2012 given the higher base that ALI now has, the company still expects sales to grow modestly over the short term.
Eyeing 50% of income from recurring business. Ayala Land is on track to reach its targets of
doubling retail GLA, tripling office GLA, and quadrupling number of hotel rooms by 2014. This
includes inventory under construction and those that are up for launch this year (See Exhibits
1, 2, and 3). ALI’s expansion will go beyond 2014 as it targets to increase the net income
contribution of its recurring business segments – malls, hotels and resorts, offices, and services – from 36% in FY13 to 50% in the medium term.
Taking a small piece of the retail pie. ALI already has an exposure to the consumer sector
through its malls but its exposure will increase through its various joint ventures. Recall that ALI has partnered with Specialty Stores Inc. for the development of its Wellworth department store and also partnered with Puregold for a new mid-income supermarket brand. ALI also has a stake in the convenience store chain FamilyMart in the Philippines. These products are not only meant to complete ALI’s offerings in each of its mixed-use developments but will also give the company a piece of the retail pie and thus further boost its recurring income base over the long term. ALI plans to have 15 Wellworth stores and 500 FamilyMart stores in five years. ALI has not disclosed plans for its JV with Puregold.
Reiterate BUY on ALI. We reiterate our BUY rating on ALI with a FV estimate of Php36.08. We
like ALI as it continues to grow in all segments of the property sector. It is the most diversified in terms of product offerings and also the most diversified in terms of geographical presence. This puts ALI in the best position to capitalize on opportunities in the market. With over Php100 Bil in unbooked revenues, earnings visibility is high and with land bank of more than 8,400 hectares spread out in 31 growth centers around the nation, long term growth potential is intact.
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