March 17, 2014

GERI ramping up development to unlock value

In our company note last Friday, we highlighted catalysts that could lead to unlocking the value of the land assets of Global Estates and Resorts Inc (GERI, Not rated). Among these is the involvement of Megaworld Corp in masterplanning and designing the development of GERI’s 561-hectare property into the Southwoods City township.

Development works on the Boracay Newcoast and Twin Lakes projects are also in full swing. We also roughly estimated GERI’s net asset value at P2.81/sh using very conservative assumptions such as up to 50% discount to market value for its ~2,000-hectare land bank, low efficiency ratio (30%) for its tourism estate related development, and factoring the P4.24b end-Sept 2013 net cash. Applying a 20% discount to our NAV points to a P2.25 target price.

We also emphasized that GERI’s sizeable land bank and its access to MEG’s strong track record for successful development and marketing acumen should provide a great leeway for profit growth and NAV enhancement. Alternatively, there is a possible play on Alliance Global Group Inc (which owns 49% of GERI and 63% of MEG) and MEG (which owns 23% of GERI) if the group pushes through with plans to consolidate all property assets under MEG. – WealthSec