December 25, 2013

RLC’s unaudited FY13 results in line with consensus

Robinsons Land Corp yesterday disclosed some key data from FY13 unaudited results which showed that the company was tracking consensus forecasts. Sales grew 18% YoY to P15.98b on strength of its mall and residential businesses while EBITDA was up 15% YoY to P8.4b. No net income numbers were given pending final audit of the results. Mall operations and residential sales were the main growth drivers, with mall sales and realized residential revenues rising 16% and 30%, respectively. Office revenues were relatively flat (+3% YoY) with no expansion in leasable space and as the company relied on yearly rent escalation for growth.

Our take: We take note that the audited results showed lower margins with EBITDA and EBIT margins at 53.8% and 36.9%, respectively. These are slightly lower than the comparable 54.1% and 38.8% respective EBITDA and EBIT margins in FY12. The margin contraction arose as key mall anchor tenants underwent renovations during the year. Office business margins were also relatively lower given the limited average rental hike in FY13.

Going forward, the mall and residential business division should continue to drive growth. The company intends to expand its mall space by 18% (vs. the flat growth in FY13) next year with the opening of seven new malls. Residential revenues should also be underpinned by the 50% growth in sales takeup to P8.62b and the P14.3b in unrealized revenues in FY13. The company plans to launch P8b-10b worth of residential projects in FY14 vs. the P7.9b worth of project launches in FY13.

We do not expect the office division to be a key driver next year as the construction of the two new BPO office buildings has been delayed to next month from (3Q13). Only 10,000sqm of the 80,000sqm in total leasable space from the two buildings have so far been taken up by prospective lessees. The company said it is hoping to finalize talks with 4-5 potential clients by Jan-Feb next year. With the usual 2-3 months of rent-free period for fitting out given to clients, we reckon that RLC should be able to collect rent starting March next year or towards of it’s the end of 1H for FY14 ending September. Therefore, the full-year benefit should be felt by FY15 yet.

At any rate, we believe that the delay in the completion and turnover of the new office buildings has been largely anticipated by the market. Meanwhile, the strong growth in mall and residential revenues should enable earnings to grow 18% YoY in FY14 as per consensus estimates, implying an undemanding 14.7x FY14E PE multiple for a diversified property company that derives 65% of its sales and 82%% of its EBITDA from recurring sources. - WealthSec