July 30, 2015

HOUSE earnings rebound in 2Q15

Mass housing developer 8990 Holdings Inc (HOUSE) reported a net income of P2.13b in 1H15, reflecting an 18% YoY growth. This also implies a strong rebound in 2Q15 when net income grew 36% after being flat in 1Q15.

Key drivers are the 19% hike In 2Q15 revenues (after growing by just 3% in 1Q15), and a 4% drop in operating expenses (vs. the 22% increase in 1Q15) and the 48% increase in other income (primarily interest income which grew 43% and miscellaneous income which grew more than threefold in 2Q). Owing to the overall dip in margins in 1Q15, HOUSE realized lower gross and operating margins in 1H15 at 59.3% and 42.9%, respectively, in 2Q15 (vs. the respective 60.5% and 43.5% in 1H14).

Our take: HOUSE’s 1H15 net income accounts for 53% of the full-year 2015 consensus forecast. Last year, it generated 55% of its full-year net income in 1H14. HOUSE ended 1H15 with a cash balance of P503m and current portion of trade and other receivables of P1.24b On the other hand, it had current portion of loans payable worth P3.37b and trade and other payables of P2.95b. Earlier this month, the company raised P9b from the issuance of fixed-rate bonds to refinance existing debt obligations. – WealthSec