Residential sales drive ALI profit higher in 2016
AYALA LAND, Inc. (ALI) sustained a 19% growth in earnings last year, as residential and office sales continued to boost its property development business while its portfolio of leasable properties expands further.
In a statement issued on Wednesday, the listed company said its net income surged to P20.9 billion, following a 16% increase in consolidated revenues to P124.6 billion. It reported a profit of P17.6 billion from revenues totaling P107.2 billion in 2015.
In the fourth quarter alone, Ayala Land realized a 22% increase in net income to P5.8 billion from the P4.8 billion booked in the comparable 2015 period. Revenues likewise rose 22% to P39 billion from P32 billion.
“It’s another banner year for Ayala Land,” President and Chief Executive Officer Bernard Vincent O. Dy said during a media briefing in Makati City on Wednesday, citing the core businesses’ strong growth that pushed revenues to a record.
Ayala Land booked P79.2 billion in revenues from property development during the year. Residential and office sales drove the amount 17% higher from the 2015 level.
The property arm of the Ayala Group launched P61.5 billion worth of for-sale products under its residential brands Ayala Land Premier, Alveo, Avida, Amaia and BellaVita last year. Its residential sales accordingly rose 3% to P108 billion.
At the same time, Ayala Land grew its revenues from commercial leasing, 8% to P26.6 billion on the continued expansion of its portfolio of malls, offices, hotels and resorts across the Philippines.
Revenues from the mall portfolio jumped 12% to P15 billion, while the office folder increased 7% to P5.5 billion with the new contributions of UP Town Center in Quezon City and Bonifacio Stopover in Bonifacio Global City.
The hotels and resorts raked in flattish revenues at P6.1 billion alongside, following the initial operation of additional rooms.
Ayala Land had 1.62 million square meters (sq.m.) of gross leasable space across its shopping malls at end-December 2016, with the completion of Ayala Malls Legaspi and Ayala Malls South Park as well as the addition of the 55,920-sq.m. Tutuban Center in Manila to the portfolio.
The company has acquired a 51.36% stake in Prime Orion Philippines, Inc., the owner of Tutuban Center, in exchange for a P5.63-billion investment in the redevelopment of the property.
In the office segment, Ayala Land had 835,742 sq.m. in gross leasable space. The hotels and resorts had 2,027 rooms, including those in newly opened Casa Kalaw in the Lio estate development in El Nido, Palawan and Balay Kogon in Sicogon, Iloilo.
Contributions from the company’s new and emerging estates surged 36% to 40% last year. It has 20 estates across the country to date, including the newly launched One Ayala in the Makati Central Business District and the 17.5-hectare Gatewalk Central in Mandaue, Cebu.
ON TRACK TO 2020 GOAL
Following its strong performance last year, Ayala Land has taken another step toward its profit target of P40 billion for 2020.
“We continue to remain committed towards achieving that target,” Mr. Dy said, with the property developer having sustained double-digit increases in net income since unveiling its growth target back in 2014.
“Since then, we actually grew by 26%, in 2015 by 19%, and then again by 19% in 2016. So, from 2017 to 2020, we now have to grow by about 18% to be able to reach the 40 billion target. In fact, we will exceed a little bit,” Mr. Dy noted.
The residential business, in particular, should supposedly manage to survive the anticipated increase in borrowing costs and continue to serve as the company’s main growth engine going forward.
“It is true that they are actually projecting an increase in interest rates but nobody is expecting a huge increase and, if that’s the case, the property sector I think will remain buoyant. What is important is there is no sudden rise in interest rates,” Mr. Dy said.
The office segment should likewise remain afloat, Ayala Land Senior Vice-President and Group Head of Commercial Business Jose Emmanuel Jalandoni noted, citing the narrow vacancy rates in the office market.
“Looking now to 2017, we feel that the company continues to be well positioned to capitalize on the growth of the economy primarily because we have a landbank in place. We have close to 10,000 hectares -- an increase of 1,000 hectares from a year ago,” Mr. Dy said.
To sustain its growth, Ayala Land earmarked about P88 billion for capital expenditure this year, an increase from the P85.40 billion disbursed in 2016.
The company will spend P40.7 billion on residences, P11.8 billion on malls; P10.6 billion on land acquisition; P9.2 billion on offices; P5.5 billion on estates; P4.4 billion on hotels and resorts; and 4.9 billion on others.
The residential business accounts for bulk of the capital layout, with the launch of P100 billion worth of products for sale. It targets to introduce 19,000 units or almost double the 7,300 offered last year in projects worth P61.5 billion.
The company plans to complete seven shopping centers with a total gross leasable space of 224,000 sq.m. These include Ayala Malls The 30th, which opened in January in Pasig City; Ayala Malls Vertis North; Ayala Malls Feliz in Cainta, Rizal; and Ayala Malls One Bonifacio High Street in Taguig City.
Ayala Land also targets to bring online a total of 185,000 sq.m. of gross leasable office space in Vertis North, Circuit Makati and The 30th in Pasig within the year.
In addition, the company will open its largest Seda Hotel in Quezon City and first resort-type accommodation under the homegrown brand within its Lio estate in El Nido, Palawan, following the launch of Casa Kalaw in El Nido and Balay Kogon in Sicogon, Iloilo in 2016.
Ayala Land is looking to launch two more estate developments spanning 20 hectares in Davao and 35 hectares in Pasig City alongside.
“A bulk of that (capital spending) will be funded by internally generated cash, while P15 billion to P20 billion will be in debt -- less than what we went out last year,” Ayala Land Treasurer and Deputy Chief Finance Officer Augusto Cesar D. Bengzon said.
Ayala Land tapped the fixed-income market four times in 2016, issuing corporate and homestarter bonds cumulatively worth P25 billion from a three-year shelf offering approved in March that year.
“We’re studying our options more closely. I think the bond market is our base case scenario,” Mr. Bengzon said, noting that Ayala Land may explore the potential of issuing corporate notes and other financing opportunities.
Shares in the company closed 40 centavos or 1.12% higher at P36 apiece on the Philippine Stock Exchange on Wednesday, bucking a general downtrend in the market.