Rating BUY 8990 Holdings, Inc. HOUSE · 8990 Holdings, Inc. (HOUSE) presents a BUY rating with a...
Transcript of Rating BUY 8990 Holdings, Inc. HOUSE · 8990 Holdings, Inc. (HOUSE) presents a BUY rating with a...
Rating
AP Securities, Inc. (formerly Angping & Associates Securities, Inc.) BUY
Property Company Ticker 24 November 2016
8990 Holdings, Inc. HOUSE Theodore T. Tan Research Analyst +632 848 2915 local 147 [email protected]
Jerrie Mae Hyvi P. Respicio Research Assistant +632 848 2915 local 147 [email protected]
Initiating Report
Time To Buy A House
November 23 Stock Price
P 6.95 Target Price
P 11.47 Return Potential
65% Market Cap
P 39 Bn
AP Securities, Inc. This research report was prepared by the APS Research Department. The opinions contained in this report are those of APS Research Department. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1
Aggressive Expansion to Drive Growth
The housing backlog remains largely unmet and is estimated to reach
5.5 Mn by year-end. Of the total projected housing needs from 2012-
2030, which is around 6.23 Mn units, the economic housing segment
accounts for 41.6%. This shows a more than adequate demand for
mass housing projects.
8990 Holdings, Inc. (HOUSE), as one of the leading mass housing
developers in the Philippines has taken advantage of these growth
opportunities by launching 14 projects in 2016, totaling 75,608 units,
valued at ~P 66.95 Bn.
In addition, the Company has a land bank of 548 ha, on which the
Company expects to build 109,818 units with an estimated value of P
128.88 Bn.
DECA Nation to Benefit from Regional Growth
HOUSE has built its self-styled "DECA Nation" in the growing regions
outside Metro Manila.
The Company has strategically established its market presence in these
expanding regions, banking on growing population, income, and
demand for goods and services, such as housing.
With its good brand following in Visayas and Mindanao, the Company
delivered a total of 32,421 units in VisMin, as of December 2015.
Currently, the Company is aggressively expanding its footprint in Luzon
with 22,124 units is in its pipeline for 2016.
More so, continued economic growth is expected in the Visayas and
Mindanao regions under the current administration‟s bid to invigorate
areas outside the nation‟s capital.
With the Company's strong record and brand acceptance in
aforementioned regions, HOUSE will be one of the companies that
should benefit from faster regional domestic growth.
Emerging Dividend Player
Under its dividend policy, the Company has consistently distributed
cash dividends to its shareholders.
For 2015 and 2016F, HOUSE distributed dividends with an average
yield of 3.4%.
HOUSE‟s 2016F dividend yield of 3.6% is the highest among its direct
comparables FLI (3.5%) and VLL (2.3%), as well as other big property
players, having an average yield of 1.3%.
12-month Price Performance
1m 6m 12m
Absolute -4.49% -8.71% -2.37%
PSEi -10.08% -6.99% -2.15%
Stock Data
Sector Property
Ave. Value Traded (last 30 days) Pm 1.18
12m high/low P 8.34 / 6.41
PER FY 2016F x 7.7
PBV FY 2016F x 1.8
86
96
106
116
HOUSE PM PCOMP
Initial coverage on 8990 Holdings, Inc. (HOUSE) presents a BUY rating with a target price of P11.47/share. As regional growth expands outside Metro Manila, the Company’s well-established businesses in Visayas and Mindanao should benefit from the anticipated growth. The Company’s aggressive stance and sustainable margins provides an edge to its competition.
8990 Holdings, Inc. Industry Overview
Industry Overview
Rising Need for Houses
Alongside the Philippines‟ economic expansion, with GDP hovering between
6.0%-7.0% since 2012, population has also increased dramatically. Philippine
population, measured by the number of families in the Family Income and
Expenditure Survey of National Statistics Office, grew 16.1% in 2009-2012
compared to 6.0% in 2006-2009.
Based on the study of Subdivision and Housing Developers Association (SHDA)
and Center for Research and Communication of University of Asia & Pacific
entitled “The Housing Industry Road Map of the Philippines: 2012-2030”, UN
World Population Prospects showed that the average increase in the number of
Philippine households from 2001-2015 stands at 333,537 per year. Likewise,
housing needs are seen to grow hand-in-hand with the number of households in
the succeeding years.
Despite the growing demand for housing, the average supply of houses in the
Philippines for the past 15 years has stayed below 200,000 units per year. This
has led to a housing supply deficit. Cumulatively, the housing backlog as of 2015
reached 4.7 Mn housing units, and is estimated to reach up to 5.5 Mn by year-end
(Exhibit 1).
Exhibit 1: Current Housing Backlog in the Philippines
Source: Housing Industry Road Map of the Philippines: 2012-2030
(1,000,000)
(800,000)
(600,000)
(400,000)
(200,000)
-
200,000
400,000
600,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
New Surplus/(Deficit) Total Demand Total Supply
8990 Holdings, Inc. Industry Overview
Using the same projected households in the succeeding years, a total of about
10.1 Mn housing units are needed to eradicate housing backlog in the Philippines.
Exhibit 2. Future Housing Needs
Source: UN World Population Prospects
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Can't Afford Socialized Economic
Low Cost Mid End High End
8990 Holdings, Inc. Investment Highlights
Investment Highlights
The DECA Nation
8990 Holdings, Inc. (HOUSE PM) is one of the leading mass housing developer
in the Philippines. Under its DECA Homes and Urban DECA Homes brands, the
Company caters to economic housing of single attached units and medium-rise
condominium units, respectively. HOUSE has also ventured into high-rise
condominium projects called Urban DECA Towers. The Company‟s DECA brand
is already present in 10 cities nationwide as HOUSE builds its so-called “DECA
Nation” (Exhibit 3).
Exhibit 3: GRDP Growth Rates in DECA Nation (Project Sites)
Source: Philippine Statistics Authority, Company Data
55..33%% CAVITE
Units Delivered: 4,396
Subdivisions: 5
55..33%%
55..99%%
44..88%%
77..99%%
88..33%%** 33..33%%
88..33%%
* Growth in Western Visayas was used. No data yet for the newly-created Negros Island Region
CEBU
Units Delivered: 16,302
Subdivisions: 15
DAVAO
Units Delivered: 12,867
Subdivisions: 10
LAPU - LAPU
Units Delivered: 0
Subdivisions: 0
GENERAL SANTOS
Units Delivered: 280
Subdivisions: 0
ILOILO
Units Delivered: 2,972
Subdivisions: 2
NCR
Units Delivered: 316
Subdivisions: 0
BACOLOD
Units Delivered: 0
Subdivisions: 0
BULACAN
Units Delivered: 0
Subdivisions: 0
PAMPANGA
Units Delivered: 4,486
Subdivisions: 2
66..66%%
44..88%%
8990 Holdings, Inc. Investment Highlights
The Company has established a strong record and good brand acceptance in the
Visayas and Mindanao, more particularly in Iloilo, Cebu City, Davao, and General
Santos. In 2006, the Company expanded its footprint in Luzon, with its first
subdivision in Angeles, Pampanga. The Company, then, launched another DECA
Homes project in CALABARZON Region (Cavite) and its first DECA Tower in
Metro Manila (EDSA). This year, the two latest additions to its DECA Nation are to
be located in Bacolod and Bulacan.
Aggressive Expansion to Drive Growth
Growth Opportunities in Underserved Market
Amid the current mismatch between supply and demand in the property industry,
HOUSE has focused on supplying affordable housing units to the underserved
market. In the past two years, a slowdown in sales-take up was recorded in the
residential segment, specifically in the condominium market, on increasing supply
albeit with fewer takers. In contrast, housing backlog remained high with 4.7 Mn
initial housing needs, as of 2015. This disconnect has led to a deficit that requires
attention.
Most of the housing requirements come from the socialized, economic, and low-
cost segments. Affordable housing developers remain few and the backlog
continues to increase. Given that the economic housing segment accounts for
41.6% of the total need from 2012-2030, there is more than adequate demand for
mass housing projects, such as HOUSE‟s units which are priced from P 400,000
to P 1,250,000.
In total, regarding the whole market, around 10.1 Mn houses are needed in order
for the backlog to be completely addressed and served. For the foreseeable future
this translates to an estimated average of 264,805 units needed per year in terms
of economic housing. HOUSE has a present production target of 12,454 housing
units in 2016 which only accounts for 4.7% of the total segment‟s need. This
solidifies the company‟s growth prospects moving forward as demand remains
largely unmet.
Exhibit 4: New Housing Need (2012-2030)
Market Segment Price Range Surplus/ (Deficit) Units Needed % of Total
Needed 2001-2011 2012-2030
Can't Afford/Needs Subsidy P 400k and Below (832,046) 1,449,854 23.3%
Socialized Housing P 400k and Below (663,283) 1,582,497 25.4%
Economic Housing P 400k – P1.25 Mn (1,962,077) 2,588,897 41.6%
Low-Cost Housing P 1.25 Mn – P 3.00 Mn (462,160) 605,692 9.7%
Mid-Cost Housing P 3.00 Mn – P 6.00 Mn 250,403 No Need High-End Housing P 6.00 Mn and Above 224,011 No Need
Total Need (3,919,566) 6,226,940 100.0%
Source: The Philippine Housing Industry Roadmap: 2012-2030
8990 Holdings, Inc. Investment Highlights
To take advantage of the growth opportunities given the massive demand,
HOUSE launched 14 projects in 2016, with a total of 75,608 units in the pipeline,
which is valued at around P 66.95 Bn.
HOUSE to Maintain a Rolling Inventory of Land Bank
As of 9M2016, the Company has a land bank of 548 hectares, on which the
Company expects to build 109,818 units with an estimated value of P 128.88 Bn.
With their total existing pipeline of 182,984 housing units, the Company can easily
cover their target production of 123,667 units from 2016 to 2021, an implied 20.0%
increase in units per year.
Exhibit 6: Land Bank (as of 9M2016)
Location Hectares No. of Units Value (Php Bn)
North Luzon - - -
NCR 72.3 50,603 77,361
South Luzon - - -
Visayas 301.6 45,580 38,061
Mindanao 173.6 13,635 13,422
Total Need 547.5 109,818 128,884
Source: Company Data
Exhibit 5. Future Housing Needs vs HOUSE Production
Source: The Philippine Housing Industry Roadmap: 2012-2030, Company Data
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Total Economic Housing Need HOUSE Production
8990 Holdings, Inc. Investment Highlights
Recently, HOUSE bought into property firm Primex Corporation (PRMX)
through a private placement. After buying a total of 45.00 Mn shares at P
4.00/share, the Company will get 2.8% of the latter. Due to this, HOUSE will
have access to PRMX‟s Meycauayan property, while the others remain open
for future developments as shown in Exhibit 7. With HOUSE‟s mass housing
expertise, the Company can tap into and develop PRMX‟s significant land
bank.
Moving forward, HOUSE aims to maintain a rolling inventory land bank of
around 500 ha. Since the Company mostly offers economic housing projects,
of which competitive location is not of primary importance like those of
premium developers, a limited land bank should be easier to address as the
company continues to grow. For the foreseeable future, its existing pipeline of
projects should continue to support revenue growth.
Exhibit 7: PRMX Investment Properties
Particular Location Total Area (in sqm)
Land Annapolis, Greenhills 1,000
Land Sumulong Highway, Antipolo 140,029
Land & Building Panghulo Ave. Malabon 16,232
Land National Highway, Tagaytay 69,599
Land Gov. Pascual Ave, Malabon 29,391
Land Meycauayan, Bulacan 11,508
Land Richdale Subdivision 25,272
Land Goldendale Village 35,118
Source: Company Data
8990 Holdings, Inc. Investment Highlights
DECA Nation to Benefit from Regional Growth
Strategically Located Projects
HOUSE has strategically located its DECA projects in regions (highlighted in blue)
where there is high demand. Six out of its seven DECA regions were consistently
the top six contributors to GRDP in the past three years. Moreover, average
growth recorded in DECA regions is at 6.7%.
With increasing income brought about by a burgeoning economy, demand for
goods and services, such as housing, also tends to increase in the said regions
(Exhibit 9).
Exhibit 9: Projected Households and Housing Need (in Mn)
2006-2009 2009-2012
DECA Region Number of
Families Average Income
Average Expenditure
Number of Families
Average Income
Average Expenditure
NCR 4.2% 14.6% 19.8% 18.5% 6.5% 5.1%
III ‐ Central Luzon 6.2% 11.7% 10.7% 17.7% 17.4% 12.0%
IVA ‐ CALABARZON 6.9% 18.5% 14.1% 28.1% 14.4% 14.2%
VI ‐ Western Visayas 6.0% 22.7% 23.4% 10.5% 26.7% 13.8%
VII ‐ Central Visayas 6.3% 27.3% 22.8% 14.8% 13.7% 8.0% XI ‐ Davao Region 5.1% 22.9% 22.8% 21.9% 17.4% 9.9%
XII ‐ SOCCSKSARGEN 6.9% 34.9% 37.6% 23.3% 5.8% 6.1% Average Growth 5.9% 21.8% 21.6% 19.3% 14.6% 9.9%
Source: National Statistics Office, Family Income and Expenditure Survey
Exhibit 8: Gross Regional Domestic Product
Region % Contribution
(2015)
Growth
„12-„13 „13-„14 „14-„15
NCR 36.4 9.1 5.9 6.6 IVA 17.3 6.7 5.1 5.9 III 9.1 4.3 9.3 5.3 VII 6.3 7.4 7.8 4.8 VI 4.0 4.1 5.2 8.3 XII 3.8 8.4 6.2 3.3 X 3.7 5.6 7.1 5.5 I 3.1 7.7 6.4 5.0
XIII 2.7 7.8 9.4 4.2 VIII 2.2 5.7 (2.4) 3.9 IX 2.0 4.3 6.6 7.2 V 2.0 9.4 4.3 8.4 II 1.8 6.6 7.2 3.7
CAR 1.8 6.0 3.3 3.7 IVB 1.6 1.7 8.3 1.7 XI 1.3 6.8 9.3 7.9
ARMM 0.7 3.6 3.0 (0.8)
Source: Philippines Statistics Authority
8990 Holdings, Inc. Investment Highlights
Exhibits 10 and 11 show the projected increase in households per highly
urbanized cities and other regions/areas, respectively. Hence, the increase in the
number of housing needs per region.
Exhibit 11: Breakdown of Households per Region Exhibit 12: Population Growth per Region
Source: Housing and Urban Development Coordinating Council Source: Housing and Urban Development Coordinating Council
HOUSE has already established a solid market in key urbanized cities such as
Davao, Cebu, General Santos, Bacolod, Angeles, Lapu-Lapu, and Iloilo City. With
this, the Company should benefit from an ever growing population. NCR has
remained the most populated among highly urbanized cities with a total of 5.0 Mn
projected households this year. Following are key cities in Visayas and Mindanao
(Exhibit 10).
Moreover, the Company recently expanded towards specific areas such as
Regions IVA (Cavite), III (Bulacan), VII (Lapu-Lapu), and NIR (Bacolod), where
population is expected to grow faster (Exhibit 11).
Exhibit 10: Projected Households in Highly Urbanized Cities (HUC)
13.6%
1.75%
0.93%
0.84%
0.71%
0.64%
0.58%
0.47%
0.45%
0.43%
Source: Housing and Urban Development Coordinating Council
NCR
DAVAO CITY
CEBU CITY
ZAMBOANGA CITY
CAGAYAN DE ORO CITY
GENERAL SANTOS CITY
BACOLOD CITY
ANGELES CITY
LAPU-LAPU CITY
ILOILO CITY
0%
1%
1%
2%
2%
3%
3%
CA
R
RE
GIO
N I
RE
GIO
N II
RE
GIO
N III
RE
GIO
N IV
A
RE
GIO
N IV
B
RE
GIO
N V
RE
GIO
N V
I
RE
GIO
N V
II
NIR
RE
GIO
N V
III
RE
GIO
N IX
RE
GIO
N X
RE
GIO
N X
RE
GIO
N X
I
RE
GIO
N X
III
IVA
III
V
IVIIARMM
VIII
XII
VI
X
II
XI
IVBIX
XIII NIRCAR
8990 Holdings, Inc. Investment Highlights
Riding on Regional Growth
Aside from the key cities touched upon, economic growth is expected to continue
especially in the VisMin regions under the new administration. President Duterte
aims to invigorate these regions and spur growth through increased infrastructure
spending. Some of the 17 infra projects the government targets to bid out until
2017 are the operations, maintenance, and development of the airports in Davao,
Bacolod, and Iloilo, along with the Davao Sasa Port modernization project.
As such, regional growth with the help of better infrastructure should lead to a
boost in businesses within the aforementioned regions. From 2013 to 2015, apart
from the NCR, growth in Regions XI and XII of Mindanao are among the top five
fastest in terms of gross value added in real estate, renting and business activities.
Again, HOUSE has a long-standing presence in these areas and should be one of
the companies that stand to benefit going forward.
8990 Holdings, Inc. Financial Analysis
Financial Analysis
Superior Margins
HOUSE‟s margins are superior compared to its peers. Its pre-cast technology
provides a cost advantage that often enables the company to achieve a target
gross margin of around 60.0%. However, in 2015, rising costs in developing
projects (specifically mid-rise and high-rise condominiums) and higher prices of
cement and steel caused the Company to record lower margins of 55.0% in 2015
from 63.3% in 2013. These 2015 figures put HOUSE at par with its competition.
Through economies of scale, HOUSE plans to add an additional 13,440 units to its
existing capacity. Moreover, the Company aims to reach a 50:30:20 ratio on its
revenues from its subdivision segment, mid-rise and high-rise condominium units
to sustain overall gross profit margin.
Meanwhile, HOUSE maintained its advantage over its peers in terms of net profit
margin. Aside from ample CTS income, which is 32.5% of the Company‟s total net
income in 2015, the Company also benefits from the minimal wages given to its
management and employees. In comparison, only 5.9% of HOUSE‟s total
operating expenses are spent on salaries and employment benefits versus 13.3%
and 18.1% of FLI and VLL, respectively. As per management, Company
executives do not receive monthly income and instead are compensated through
dividends. This minimizes agency cost that can drag Company‟s overall
performance. Hence, this keeps net profit margins at a three year average of
41.6% (versus FLI at 29.8% and VLL at 25.8%)
Exhibit 13: Net Profit Margin Comparables Exhibit 14: Breakdown of Operating Expenses
Source: Company Data Source: Company Data
2013 2014 2015
HOUSE 40.8% 43.2% 40.1%
VLL 25.3% 25.8% 26.3%
FLI 31.3% 28.7% 29.5%
20%25%30%35%40%45%
HOUSE VLL FLI
35.7% 37.2% 49.0%5.9%
18.1%13.3%
58.4% 44.7% 37.8%
0%
20%
40%
60%
80%
100%
HOUSE VLL FLI
Marketing and Selling
Salaries, Wages and Employee Benefits
Other operating expenses
8990 Holdings, Inc. Financial Analysis
As such, following the Company‟s target of 60.0% gross profit margin and 40.0%
net profit margin, the 41% increase in unit volume this year can lead to ~P 12.10
Bn and ~P 4.55 Bn in revenues and net income, respectively.
Exhibit 15: Income Statement Highlights (Php Mn)
2014A 2015A 2016F 2017F
Total Revenues 7,657 9,280 12,102 14,841
Gross Profit 4,528 5,105 7,261 8,905
EBITDA 3,247 3,478 5,064 6,361
Net Income 3,309 3,724 4,997 6,371
EPS 0.60 0.67 0.91 1.15
Growth Rates
Revenue Growth 45.4% 21.2% 30.4% 22.6%
EBITDA Growth 37.1% 7.1% 45.6% 25.6%
Net Income Growth 51.5% 12.5% 34.2% 27.5%
EPS Growth 51.5% 12.5% 34.2% 27.5%
Source: Company Data, APS Forecast
Turnaround in Operating Cash Flow
In addition to expected higher net income for the next five years, a significant
decrease in installment receivables should lead to a turnaround in HOUSE‟s
operating cash flow.
Exhibit 16: Operating Cash Flow
Source: Company Data, APS Forecast
(5,000)(4,000)(3,000)(2,000)(1,000)
-1,000 2,000 3,000 4,000 5,000 6,000
2013 2014 2015 2016F 2017F 2018F 2019F 2020F 2021F
8990 Holdings, Inc. Financial Analysis
One of the exit mechanisms for HOUSE‟s CTS receivables is through Home
Development Fund (HDMF) take out. Under this program, PAG-IBIG accredits
developers that will pre-process applications of PAG-IBIG members to purchase
lot, house and lot, or condominium units. The government agency will, then, fund
the purchase of unit that meets the program‟s criteria. With the Company‟s
comprehensive financing scheme, comparable to HDMF, HOUSE is capable of
transferring P 2.42 Bn worth of receivables in 2015, 35.3% up from P 1.79 Bn in
2014. For 2016, the Company expects P 6.0 Bn worth of receivables to be directly
taken out. And for every year thereafter, HOUSE targets to transfer 50% of its
receivables.
As a result, the Company has sufficient cash, hovering at an average of P 8.46 Bn
in the next six years, to finance its pipeline of projects (Exhibit 18).
Exhibit 18: Balance Sheet Highlights (Php Mn)
2014A 2015A 2016F 2017F
Cash & Equivalents 605 600 545 735
Inventories 3,078 5,092 5,378 6,596
Installment Receivables 14,113 18,767 18,825 24,117
Total Assets 27,147 36,077 43,412 52,654
ST Liabilities 2,381 1,981 2,956 4,481
LT Liabilities 6,453 12,862 14,324 17,125
Total Liabilities 6,870 13,387 14,855 17,655
Total Equity 14,889 17,343 20,960 25,420
BVPS 2.70 3.14 3.80 4.61
Source: Company Data, APS Forecast
Exhibit 17: HDMF Take-Out
Source: Company Data, APS Forecast
-
20,000
40,000
60,000
80,000
100,000
2016F 2017F 2018F 2019F 2020F 2021F
Trade Receivables HDMF Take-Out
8990 Holdings, Inc. Financial Analysis
Emerging Dividend Player
Since its listing in 2013, the Company has consistently distributed cash
dividends to its shareholders under its dividend policy.
Despite having negative cash flow up till recently, the company was able to
offer an average of 3.4% yield in 2015 and 2016F. HOUSE‟s 2016F dividend
yield of 3.6% is the highest among its direct comparables FLI (3.5%) and VLL
(2.3%) as well as other big property players, having an average yield of 1.3%.
Looking ahead, as income is expected to increase in the coming years and a
turnaround is expected in its operating cash flow, the Company is in a strong
position to consistently distribute cash dividends (Exhibit 21).
Exhibit 19: Cash Dividends Exhibit 20: Dividend Yields of Comparable Companies
Year Type Dividend
Per Share Dividend Payout
Dividend Yield
2016F 2017F
Company Dividend
Yield Dividend
Ratio Dividend
Yield Dividend
Ratio
2013
---------- Back-door Listing ---------- HOUSE 3.6% 26.7% 4.2% 26.7%
FLI 3.5% 26.6% 4.0% 26.6%
2014 Special Cash 0.05 12.6% 6.7%
VLL 2.3% 19.2% 2.6% 19.2%
2015 Regular
Cash 0.23 38.4% 3.2% ALI 1.6% 34.0% 1.8% 34.0%
MEG 1.4% 14.5% 1.6% 14.5%
2016 Regular
Cash 0.25 37.0% 3.6% RLC 1.4% 22.5% 1.6% 22.5%
SMPH 0.9% 26.9% 1.0% 26.9%
Source: Company Data Source: Bloomberg-compiled data
From P 9.28 Bn in 2015, the Company targets its revenues to reach P 24.00
Bn by 2020, with an average of 21.2% increase annually. With 30% average
dividend payout ratio for the past three years, cash dividends can reach up to
P 0.35 per share in 2017F, a 5.0% yield based on the previous close of P 6.95
per share.
Exhibit 21: Forecasted Dividend Yield
Source: Company Data, APS Forecast
0%
2%
4%
6%
8%
2013 2014 2015 2016F 2017F 2018F 2019F 2020F 2021F
8990 Holdings, Inc. Valuation
Valuation and Recommendation
While the company expects rapid urbanization in the Philippines, HOUSE has
gained a head start by already establishing its market presence in key cities
outside the Metro. Moreover, the Company is also strategically expanding to
regions with higher needs of housing.
With the Company‟s aggressive expansion and sustained margins, HOUSE is
rate a BUY rating with a target price of P 11.15/share. As of the last closing
price of P 6.95 (23 November 2016), our TP represents an upside of 65.0%.
This translates to a 7.7x implied 2016F PER and 1.8x 2016F PBV.
Exhibit 22: WACC Assumptions
WACC 6.79%
Pre-tax Cost of Debt 4.60%
Tax Rate 9.69%
Post-tax Cost of Debt 4.15%
Risk-free Rate 3.63%
Equity Beta 1.00
Risk Premium 6.25%
Cost of Equity 9.88%
Capital Structure 54%
Source: Company Data, APS Research
Exhibit 23: Valuation
NPV [Php] 84,571,719,110
Net Financial Debt [Php] 21,288,873,472
Equity value [Php] 63,282,845,638
Outstanding shares # 5,517,990,720
Equity value/share [Php] 11.47
Last Traded Price [Php] 6.95
Upside [%] 65.0%
Source: Company Data, APS Research
8990 Holdings, Inc.
STOCK RATING
BUY HOLD SELL
BUY.
Anticipates appreciation of
10% or more within the
next 12 months, and/or a
total return of 10%
including dividend
payments, and/or the
ability of the shares to
perform better than the
leading stock market
averages or stocks within
its particular industry
sector.
HOLD.
Anticipates stock will trade
at or near current price
and generally in line with
leading market averages
due to perceived absence
of strong dynamics that
would cause volatility
either to upside or
downside, and/or will
perform less well than
higher rated companies
within its peer group.
SELL.
Anticipates stock will
depreciate 10% or more in
price within the next 12
months due to
fundamental weakness
perceived in company or
for valuation reasons, or
are expected to perform
significantly worse than
equities within its peer
group.
This publication and the contents hereof are intended for information purposes of selected individuals only, and may be subject to change without further notice. The
information contained in this report is obtained from sources we believe to be reliable. Neither AP Securities, Inc. nor its affiliates nor any of its directors and employees,
represent nor warrant the accuracy or completeness of the contents hereof or as to the existence of other facts which might be significant, and will not accept any
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