August 27, 2015

Properties Corp (DD) eyes lease income from Jollibee Tower project

In a press statement, Double Dragon Properties Corp (DD) announced that it has signed a deal with Jollibee Foods Corp (JFC) for the construction of a 40-storey commercial and office tower on JFC’s 3,002sqm lot in the Ortigas Center.

In exchange for the lot, JFC will be given selected floors for its offices and restaurants. DD intends to lease out the remaining floors to corporate and BPO companies.

DD said that the Jollibee Tower project will complete its land bank requirement to develop 300,000 sqms of leasable commercial and office space in Metro Manila. This is in addition to the 32 prime lots (out of the targeted 100 locations) that it has acquired to develop 700,000 sqms of leasable space in the provinces in relation to its target to roll out 100 CityMalls until 2020. So far, the company has secured 42 hectares that will enable it to build 560,000 sqms of leasable space across the country.

Our take: JFC’s share in the project will depend on the final valuation of its lot in proportion to the DD’s overall cost (which has yet to be finalized) of constructing the building. Initial estimates of DD put its potential annual lease income from the project at around P350m.

DD is looking to grow its net income to P1b next year and P4.8b by 2020, with 90% of revenues sourced from recurring lease income. In 2Q15, DD increased its net income by 154% QoQ and 46.5% YoY on a 67% YoY rise in core revenues. DD is currently trading at 29x its 2016 earnings guidance vs. a potential quadrupling of net income. – WealthSec