8990 Holdings targets 42% rise in profit as it launches 8 projects

By Keith Richard D. Mariano Posted on February 08, 2017 http://www.bworldonline.com/content.php?section=Corporate&title=8990-Holdings-targets-42%-rise-in-profit-as-it-launches-8-projects&id=140300 8990 HOLDINGS, Inc. is targeting a 42% surge in earnings this year, with the launch of eight residential developments previously stuck in the permitting stage, and three other projects expected to deliver P3.7 billion in sales. The listed mass housing developer looks to book P5.4 billion in net income by yearend, President and Chief Executive Officer Januario Jesus B. Atencio told reporters and analysts during a briefing in Makati City on Tuesday. Last year, 8990 Holdings netted P3.81 billion or 2% above the P3.72 billion recorded for 2015. Its earnings growth was tempered by a slower 1% growth in gross sales to P9.41 billion because of delays in project launches. The property developer benefitted from an 11% decrease in operating expenses to P1.53 billion from P1.72 billion, mainly due to reduced marketing and documentation costs as well as lower tax and license payments. 8990 Holdings also registered unrealized sales of P1.9 billion for 1,332 units, including those in buildings undergoing construction in Tondo and Marilao, Bulacan. In the fourth quarter alone, 8990 Holdings’ profit increased 12% year on year to P674 million from P673 million, despite a 2% decline in gross sales to P2.23 billion from P2.28 billion a year ago. 8990 Holdings managed to book higher earnings during the three-month period because of lower tax due on re-sold units as well as the tax exemption of more projects under the Investment Priority Program of the Board of Investments. The company had targeted to advance 14 developments into the construction stage, but eight failed to progress from the permitting stage after the local governments hosting them adopted new and tighter regulations. For instance, Davao City now requires property developers to secure certificates from the Water Resource Task Force and Floodway Mitigating Zone Task Force along with an additional land usage certification. In Iloilo, the provincial assessor must now certify the classification of the land as residential by the local government. Cebu, meanwhile, now requires a traffic study and detailed drainage study for the issuance of an environmental compliance certificate. 8990 Holdings could have generated P2.4 billion from the turnover of 2,706 units across the eight projects located in Iloilo, Cebu, Bacolod and Davao. Mr. Atencio had expected earlier that only five projects would be delayed.“We wish to emphasize that these revenues are not lost, but merely delayed,” Mr. Atencio noted, as the company expects the eight projects to finally hurdle the permitting stage within the year. 8990 Holdings will launch three more projects alongside. The 2017 pipeline will add 60,765 units to the company’s inventory. Of the total, about 3,994 units worth P3.7 billion are scheduled for turnover within the year. “We expect to launch three projects in the first quarter followed by five in the second, and closing the third with three more,” Mr. Atencio noted. 8990 Holdings expects to realize P9.8 billion more revenues from the delivery of 7,894 units in 11 ongoing projects in Pampanga, Bulacan, Cavite, Cebu, General Santos, Manila, Mandaluyong and Muntinlupa this year. Accordingly, the listed company expects its revenues to increase at least 7% to P10 billion and as fast as 43% to P13.5 billion this year. “We are prepared to sacrifice some growth for cash generation in 2017, which would mean the stoppage of in-house CTS (contract to sell) in most of the projects in favor of direct takeouts from the Pag-IBIG Fund as well as the slowdown of purchase of raw land,” Mr. Atencio said. “Given an environment of stricter licensing and permits, coupled with the possibility of interest rates increasing in the short term, the thrust for 2017 is generation of cash from increase takeout levels with HDMF (Home Development Mutual Fund), CTS purchase of banks, securitization and issuance of preferred shares, which will be used to pare down debts.” 8990 Holdings is looking at inflows of P6 billion from the Pag-IBIG takeouts, P3 billion from the securitization of CTS, P3 billion from CTS sales to banks and P5 billion from a preferred share issue. 8990 Holdings is looking to issue 50 million preferred shares to raise P5 billion in July. The offer represents the first tranche of the mass housing developer’s P10-billion shelf offering of 100 million preferred shares. Shares in 8990 Holdings closed a centavo or 0.14% higher at P7.14 apiece on the Philippine Stock Exchange on Tuesday.