The ratings assigned reflect the following key considerations: healthy growth of the company’s real estate and leasing operations resulting in strong income generation; sound debt position and financial flexibility; FLI’s established brand name and diversified portfolio; and the relatively favorable economic and industry conditions.
PhilRatings’ ratings are based on available information and projections at the time that the rating review is on-going. PhilRatings shall continuously monitor developments relating to FLI and may change the ratings at any time, should circumstances warrant a change.
In 2011, revenues from FLI’s core businesses of real estate and leasing operations, which amounted to P6.95 billion and P1.53 billion, respectively, resulted in a 20% hike in total revenues to P8.48 billion. Significant revenue contributions came from the middle-income segment, particularly sales of units from mid-rise buildings (MRBs) and high-rise buildings (HRBs). On the other hand, the increase in rental income was due to higher overall occupancy rates and the additional gross leasable area (GLA) from the completion of an office building at the Northgate Cyberzone.
Despite the increase in cost of sales and operating expenses which resulted from higher sales volume, net income surged by 21.20% to P2.94 billion. If the one-time gain of P526 million booked in 2010 as a result of the purchase of FLI’s stake in Northgate Cyberzone and part of Timberland Heights were considered, net income would have been flat.
In the near- to medium-term, forecasted hikes in real estate revenues will be derived from the expected continued strong performance of the affordable and middle-income segments. MRBs and HRBs located in various areas in Metro Manila and at the South Road Properties (SRP) development in Cebu are likely to enjoy healthy sales take-up. Worth mentioning also is the expected significant growth in the company’s recurring rental income, coming from the completion of the expansion of the Festival Supermall, the retail project developments at SRP in Cebu and new office buildings.
The generally positive outlook for the real estate industry supports the growth forecasts of the company in the near-term to medium-term. Overseas Filipino remittances, which are projected to remain strong in 2012, bode well for real estate companies. In FLI’case, OFs account for nearly half of the company’s sales take-up. The 50 basis point reduction in interest rates in 2011 will likewise boost demand for housing as this translates to lower monthly amortizations for buyers. In addition, FLI’s office buildings at the Northgate Cyberzone and those to be constructed in Cebu stand to benefit from the sustained performance of the economy and expectations of continued growth of the Off-shoring and Outsourcing sector.
Although the company’s debt level grew by 38.44% to P16.49 billion in 2011, its debt to equity ratio remained conservative at 0.38. Even with the issuance of the additional P11 billion in fixed-rate bonds, debt to equity ratio is expected to remain conservative. The company’s capital structure provides flexibility in terms of obtaining additional loans should these be required. Liquidity is seen to improve as more buyers avail of bank financing. This will free up cash tied up in contract receivables and will allow the company to receive cash payments at an earlier time as compared to when it provides in-house financing. Bullet payments for the rated bonds will come from internally generated funds.
Over-all, FLI focuses on the market segments (i.e. first time buyers of affordable and middle-income housing) which are perceived to be more resilient even in the face of economic volatilities. As such, the company is seen to be less negatively affected by the cyclicality of the property development market.
- https://www.affordablecebu.com/
