October 23, 2014

RLC’s FY15 capex to focus on investment assets

The chief operating officer of Robinsons Land Corp (RLC) was quoted by the press as saying that the company has set a capex of P15b-17b for FY15. He also reportedly said that “a lot of the capex” will be used for the construction of new shopping centers and expansion of existing malls, as well as the construction of new office buildings and hotels.

Our take: Given the weak performance of its residential business, we believe that focusing on its core competence (mall, office and hotel operations) will bode well for RLC in the long run. This will ensure growth in its recurring income base and could stabilize earnings in the event of any volatility in the residential market. At present, about two-thirds of RLC’s revenues are generated from its investments assets.

In the meantime, however, we believe that earnings will continue to be weighed down by the ongoing rebalancing of tenant mix in flagship malls (which could continue until February 2015 when these new large tenants open for business), weak residential revenue growth, and relative slow takeup in new office buildings. The long-term prospects, however, will get a boost from continued expansion, improved mall tenantmix, and the development of a new mixed-used complex billed as Bridgetown Business Park in Quezon City which, by company estimates, can triple its existing leasable space. – Wealthsec