June 17, 2015

Filinvest Land Inc (FLI) to raise up to P8b through bond issuance

Filinvest Land Inc (FLI) has reportedly filed an application with the SEC to issue P5b worth of unsecured fixed-rate retail bonds with an oversubscription option of up to P3b. Proceeds of the offering will be used to refinance existing liabilities and finance the company's development program for its residential, office and commercial leasing projects.

Our take: While the bond issue could lead to higher interest expense for FLI, the impact to earnings could be tempered in the near term if interest costs will be capitalized pending the completion of the company's aggressive expansion program for its commercial and office leasing businesses. More importantly, we believe that the borrowing plan can help preserve operating cash flows and allow FLI the balance sheet leeway to support the expansion of its investment assets.

FLI plans to triple its leasing space by 2019 from last year (or by 44% this year and 26% next year). Initial gains in its leasing space expansion plan has seen FLI's leasing EBITDA expanding by 15% YoY in 1Q15, with the leasing EBITDA margin rising by 400bps to 93.7% which one of the highest in the industry. FLI also offers the highest dividend yield among property firms.– WealthSec