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Friday, April 11, 2014

FLI: Earnings top estimates

Filinvest Land, Inc: Earnings top estimates

Earnings reach Php4Bil. Filinvest Land reported 4Q13 net income of Php1.6Bil, up by 10% from the same period of the previous year. This brought full year earnings to Php4Bil, up by 14% from last year and exceeding both COL and consensus full year forecasts by 6.5% and 9.1% respectively. Earnings growth was largely driven by higher real estate revenues. Real estate sales grew by 19% to Php10.5Bil. Leasing revenue grew by a slower pace of 8% to Php2Bil

Sales take-up grew by 11%. Filinvest’s sales take-up improved by 11% to Php14.5Bil. Meanwhile, gross margins declined to 42% in 2013 from 44% in 2012. Nevertheless, the drop in margins is not a cause for concern as FLI explained that this was brought about by the larger contribution of high rise buildings which earn a lower gross margin of 38-39%. Meanwhile, Filinvest was able to keep operating costs in check as SG&A expenses was up by only 5% to Php2.1Bil.

More aggressive in 2014. Filinvest Land plans to be more aggressive in terms of project launches this year. FLI is looking to launch Php17.5Bil worth of projects in 2014. This is more than double the Php7.5Bil worth of projects launched last year. As a result, FLI plans to double its capex to Php20Bil. The increase will mostly be funded by internally generated cash and debt.

With more projects to be launched this year, FLI expects sales take-up to increase by 15%.

Reiterate BUY rating. We continue to like FLI since we expect it to benefit from the favorable outlook of the property sector, especially with its plans to launch more residential projects this year. Plans to grow its rental income portfolio by 150% in the next five years should also provide it with a more stable source of recurring cash flow. Valuations are also attractive with the stock trading at only 9.2X 14E P/E vs. the sector average of 15X. We currently have a FV estimate of Php2.29/sh on FLI based on a 30% discount to NAV. At its current price of 1.60, capital appreciation potential is 43%

Source: Col Financial

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