II.

Research Design and Methodology

A. Research Design

In examining the general environment of the chosen company, the strategists

derive its information from various news websites, blogs, and previous strategic
management papers about the real estate industry.
 Leechiu Property Consultants
 Rappler
 Department of Trade and Industry
 The Manila Times

Government websites such as the Bangko Sentral ng Pilipinas (BSP),

Philippine Statistic Office (PSO) and Philippine Retirement Authority (PRA) were also
entered into for the required projections.

B. Major assumptions

The discussion in this paper is limited only to DMCI Homes, the real estate
arm of DMCI Holdings.

IV. External Analysis

A. General Environment

1. Economic developments

Low interest rates projected

The Bangko Sentral ng Pilipinas (BSP) left its benchmark interest rate at a
record low as it forecasts inflation will remain inside the target band this year and
in 2019. While a rising inflation rate is noticeable as of 2018 due to higher taxes on
fuel, and other commodity items, a weak peso, and firmer global oil prices, the
latest forecasts continue to show inflation remaining within the inflation target in
2018 and moderating further in 2019.

As of July 2018, the inflation rate was recorded to be at 5.7% which is the
highest inflation rate for the past 5 years. While the quoted lending rates of
commercial banks averages from 4.6% to 7.01% as of August 2018.

Relevance: The lower the mortgage rate, the lower the down payment and interest
a buyer of property must pay.

Continued growth of the BPO sector

Business Process Outsourcing (BPO), as defined by the Philippines

Department of Trade and Industry, is the delegation of service-type business
processed to a third-party service provider. BPO in the Philippines is becoming a
key developing industry, primarily due to the relatively low cost of living, and a
workforce which composed mainly of young and educated Filipinos with good
spoken English language skills. In fact, majority of research studies have placed
the Philippines as the No. 1 trending country as the top destination for outsourcing.

In an article from Rappler, the number of BPO employees is seen to

increase from 1.3 million to 1.7 million this year and the coming years. Annual
growth, however, is forecasted to slow down to 9% until 2022 due to its larger
scale, sluggish industry growth globally, and security headwinds in the Philippines.

Relevance: BPO sector makes a new breed for condominium dwellers. With their
growing number and their need to live near their workplace, there is definitely
a housing backlog that needs to be addressed and demand for dormitories will
rise.

Increasing intensity of competition among the industry's numerous players

The Philippines real estate market has been penetrated with high
investments arising from the presence of both international and domestic players
in the market. According to the National QuickStat conducted by the Philippine
Statistics Authority (PSA), there have been 4,826 establishments engaged in real
estate activities as of 2015.

From the report of Pinnacle Real Estate Consulting Services whose main
business is to manage property assets, it was stated that the residential market
remains the most competitive among the real estate segments in the country.

Relevance:

Possible manpower shortages

With the government’s BBB program, the real-estate industry may face
another challenge, this time on the possible manpower shortages. The secretary of
Public Works said the government is getting on a massive hiring program –
especially for technical people – that will be called “Jobs, Jobs, Jobs”. It was
revealed that the JJJ will cover Filipino professionals in the country and abroad,
and recognized that the government would be competing with private employers,
including salary rates, to get the required number of skilled people to improve the
implementing agencies’ absorptive capacity.

“And with Digong’s [Duterte’s] Build, Build, Build program, the scarcity of
labor will be even more felt,” former 8990 president Januario Jesus Gregorio B.
Atencio said.

Relevance: Slow labor productivity, coupled with increased demand for manpower,
may impact a property developer with real estate projects suffering delays in
turnover.
2. Political, legal, governmental aspects

Continued promotion of the Philippines as a retirement haven for foreigners

by the PRA

On 05 May 2011, the Philippine Retirement Authority (PRA) introduced

different options or packages as promotion for foreign retirees and former Filipinos
who would like to make the Philippines their retirement destination. In an article
from Philippine Daily Inquirer, PRA plans to increase the number of foreign retirees
in the country to 80,000 by 2020 through various incentives.

According to records of PRA, at least 27,000 foreign retirees from 107

countries have chosen to live in the Philippines through this promotion in 2017.
These retirees have registered with the agency to avail of tax perks when they buy
real estate in the country.

Relevance: This ongoing promotion of PRA add-up to the market of DMCI Homes
it can cater. It can develop more properties that will provide for the needs of
these retirees.

3. Socio-cultural, demographic trends, lifestyle changes

Growing population with favorable demographics and a large base of more

financially empowered young professionals

One of the demand drivers in the real estate industry is the population
growth. Based on the Leechiu Property Consultants published ‘Insights on the
Philippine Real Estate Market’, the urban population growth is projected to rise to
56.3% by 2030 and 66% by 2050.

The population in the Philippines is expected to reach around 107,190,081

by 31 December 2018, according to the latest estimate of the Commission on
Population (PopCom). On average, the Philippine population increased by 1.72
percent annually during the period 2010 to 2015. In addition, 63.4% of the
population as of Aug 2015 are ages 15 to 64 years old.

Relevance: This means that the demand for housing also continuously rises for
DMCI Homes. This is an opportunity for expansion or new construction.

4. Environmental aspects

Heightened risk of flooding due to climate change

Based on projection of PAGASA as of 2011, heavy daily rainfall will

continue to become more frequent, as extreme rainfall is projected to increase in
Luzon and Visayas in 2020 and 2050. This poses a threat to the current occupants
and to the existing projects itself of the DMCI Homes when not handled properly.

Relevance: Real estate properties in areas affected by extreme weather and sea
level rise are losing value relative to less exposed properties. Although prices
 are not likely to depreciate due to the flooding, buyers might become more
hesitant and anxious in buying properties in certain locations.

The Big One

A big earthquake may strike the Philippines once the West Valley Fault
moves. The west valley fault traverses various parts of Metro Manila and
surrounding provinces. This includes Quezon City, Taguig, Pasig, Cavite,
Muntinlupa and Laguna as identified by PhiVolcS. Most of the projects of DMCI
Homes from high-rise condominiums to subdivisions -- new projects, under
construction, ready for occupancy -- are at these places. This big earthquake that
will definitely come poses threat to DMCI Homes in the form of future losses.

Relevance:

Land prices will be skyrocketing over the next five or six years

According to Isidro A. Consunji, chairman of construction firm DMCI

Holdings Inc., land prices will be skyrocketing over the next five or six years, and
that prices already went up some five times in about six years in places like Pasig,
Mandaluyong, Mall of Asia (MOA) in Pasay and Bonifacio Global City (BGC).
“That’s good if you are selling land. But if it’s your raw material, then you will
have problems because I think the price increase is too high,” Consunji said.

Relevance: