Company Report

PHILIPPINE EQUITY RESEARCH

Ayala Land Inc: Key meeting takeaways

SHARE DATA No weakness seen in residential demand. Although details were not provided, Ayala Land
Rating BUY said that July and August take-ups remained good and that they haven’t seen any weakening
in demand. ALI mentioned that there may be a few project delayed, but these are mainly due
Ticker ALI
to delays in securing permits following the change in administration, not because of weakening
Fair Value (Php) 19.75 demand. ALI is confident that issues will be resolved and the projects will still be launched. Recall
Current Price 17.70 that ALI targets to launch 9,275 units this year, with a sales value of Php49 Bil.
Upside (%) 11.58
2014 targets not contingent on REIT listing. The implementations of the REIT law may have
hit another obstacle when Secretary Purisima proposed a number of changes to the REIT law,
one of which is raising the initial portion sold to the public to 51%, then raised to 67% in three
years. The proposed change on the minimum public ownership is something that may deter
ABSOLUTE PERFORMANCE (%) property developers from spinning off its investment properties to a REIT. Despite delays in the
1M 3M YTD REIT implementation, ALI assured us that its 2014 targets are not contingent on its REIT listing. The
ALI 7.80 30.96 57.16 company has ample cash for its near term expansion and can easily lever up for future expansion
PSEi 14.30 20.86 33.53 given its low leverage ratio of 0.01X net-debt-to-equity as of end 1H10.

BPOs making comeback. The BPO recovery remains intact with take-ups increasing and
lease rates improving. ALI said that take-ups in UP Technohub improved this year after having
difficulties last year. Out of the ten buildings, only one and a half are not yet leased out. This is
MARKET DATA (Php) around 16,000sqm. ALI expects the strength in the BPO sector to be sustained in the long term,
Market Cap 230,253.10 Mil thus reiterating its plan to double its BPO GLA to around 570,000 sqm by 2014.
Outstanding Shares 13,001.28 Mil
Looking to grow its tourism and hospitality business. Ayala Land sees strong potential in the
52 Wk Range (Php) 9.90-18.70 tourism and hospitality sector and is looking expand its reach. Recall that ALI recently acquired a
3 Mo Ave Daily T/O 160.75 Mil 60% stake in Ten Knots Group, whose operations include Lagen, Mniloc and Apuli Island Resorts in
El Nido, Palawan. The group also has 535 hectares of landbank in Palawan for future development.
Aside from growing organically, ALI will also be on the lookout for potential acquisitions. ALI also
wants to grow its hotel business given its view that there is an inadequate supply of good hotels
outside Metro Manila. The company plans to address this by rolling out its own brand of hotels.

BUY with FV of Php19.75. We have a BUY rating on ALI. We like the Company for its proactive
stance, allowing it to capitalize on the general uptrend of the industry. We forecast a 24.6%
growth in income this year and 26.52% next year, driven the strong residential revenues and
margin expansion through cost saving efforts. Our FV is Php19.75 based on a 10% discount to
NAV of Php21.95

FORECAST SUMMARY
Year to December 31 (Php Mil) 2008 2009 2010F 2011F 2012F
Operating Revenues 30,617 28,074 36,032 43,732 51,647
% change y/y 19.12 -8.31 28.35 21.37 18.10
EBIT 6,927 7,249 9,072 11,118 13,071
%change y/y 2.14 4.65 25.14 22.55 17.56
Net Profit 4,812 4,039 5,033 6,367 7,675
%change y/y 9.71 -16.06 24.60 26.52 20.54
EPS (in Php) 0.37 0.31 0.39 0.49 0.59
%change y/y 9.52 -15.59 24.60 26.52 20.54

RELATIVE VALUE
P/E(X) 47.95 56.81 45.59 36.04 29.89
P/BV(X) 4.68 4.38 4.10 3.82 3.53
RESEARCH CONTACT ROE(%) 10.16 7.96 9.29 10.98 12.27
Richard Lañeda, CFA Dividend Yield (%) 0.36 0.34 0.66 0.97 1.17
[email protected] *Source: Ayala Land, CitisecOnline estimates
 30 SEPTEMBER 2010

INVESTMENT RATING DEFINITIONS

BUY HOLD SELL

Over the next six to twelve Over the next six to twelve Over the next six to twelve
months, we expect the share months, we expect the share months, we expect the share
price to increase by 15% or price move within a range of price to decline by more
more. +/- 15%. than 15%.

TOP PICK DEFINITION

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