Stocks in Focus: MON 18 FEB 2019

ALI: FY18 profit jumps 15.6%, meeting

expectations
4Q18 profit grew 13.02% y/y. ALI’s 4Q18 net income grew 13.02 % y/y to Php8.47 Bil. This was (AS OF FEB 15, 2019)
driven by an 8.5% increase in revenues and a 440-basis point expansion in operating profit margin INDICES
during the quarter. For the full-year 2018, revenues jumped 17.8% y/y to Php162.9 Bil, fueling Close Points % YTD%
the 15.6% growth in net income to Php29.24 Bil. ALI’s FY18 net income is in line with consensus PSEi 7,908.89 -82.36 -1.03 5.93
estimates and slightly ahead of COL estimate because of higher than expected revenues and All Shares 4,823.32 -28.32 -0.58 6.76
operating profit margin. Financials 1,786.39 -48.71 -2.65 0.37
Holding Firms 7,901.93 9.52 0.12 7.63
Maintain BUY with FV estimate of Php49.33. We are maintaining our BUY rating on ALI with Industrial 11,457.29 -91.59 -0.79 4.62
a fair value estimate of Php49.33 We remain positive on the short- and long-term outlook of ALI. Mining & Oil 8,492.91 -23.28 -0.27 3.57

They continue to deliver solid earnings growth and expansion of its leasing portfolio is on track Property 4,036.70 6.93 0.17 11.27
Services 1,568.54 -21.92 -1.38 8.72
to reach their 2020 target. Continued growth in its take-up sales despite the high base also helps
buoy revenue growth in the short and medium term. The strong income growth in FY18 means
Dow Jones 25,883.25 443.86 1.74 10.96
they are still on track to reach their Php40 Bil income target by 2020. Over the long term we
S&P 500 2,775.60 29.87 1.09 10.72
believe ALI is positioned to benefit from the infrastructure projects planned by the government
Nasdaq 7,472.41 45.45 0.61 12.62
given its strategically located landbank. ALI is also most complete property company in terms
of product offering and geographical exposure. This diversification puts the company in a good
position to capitalize on the numerous growth areas available and at the same time make the INDEX GAINERS
company’s operations more sustainable over the long term. Ticker Company Price %
BLOOM Bloomberry Resorts 13.00 7.62
AEV Aboitiz Equity Ventures 66.00 5.52
Other News: AC Ayala Corporation 961.00 3.78
URC Universal Robina Corp 146.00 1.53
MWC: MWC earmarks Php197.8Bil for capex until 2037 LTG LT Group Inc 15.30 1.32

Market Summary:
INDEX LOSERS
Shares fell for the second consecutive day on Friday, tracking the decline of most regional Ticker Company Price %
markets, amidst news reports that the US and China failed to narrow the gap on the structural AP Aboitiz Power Corp 34.00 -5.56
reforms that the US has requested on China’s economy. BDO BDO Unibank Inc 133.60 -4.98
TEL PLDT Inc 1112.00 -4.96
RRHI Robinsons Retail Hldgs Inc 85.00 -4.92
The PSEi retreated by 82.36 points or 1.03% to close at 7,908.89. The main drags were by BDO
GTCAP GT Capital Hldgs Inc 990.00 -2.94
(-4.98%), SM (-2.02%), TEL (-4.96%), MBT (-2.91%), and ALI (-1.11%). On the other hand, these were
partially offset by gainers such as AC (+3.78%), AEV (+5.52%), BLOOM (+7.62%), URC (+1.53%),
and LTG (+1.53%). TOP 5 MOST ACTIVE STOCKS
Ticker Company Turnover
BDO (-4.98%) and GTCAP (-2.94%) both fell following block sales of 40Mil and 760,000 shares BLOOM Bloomberry Resorts Corp 1,516,414,000
priced at Php133/sh and Php969/sh, respectively. On the other hand, BLOOM (+7.62%) rose BDO BDO Unibank Inc 1,138,896,000
while PCOR (-1.32%) declined ahead of the effective date of the PSEi rebalancing. AC Ayala Corporation 903,254,200
BPI BDO Unibank Inc 798,729,300
Value turnover jumped to Php16.4Bil from Php5.1Bil in the previous session. Meanwhile, GTCAP GT Capital Hldgs Inc 316,544,500
foreigners turned net sellers, disposing Php490Mil worth of shares. This brought the year-to-
date net foreign buying to Php22.4Bil.

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 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

MON 18 FEB 2019

Stock in Focus:

RICHARD LAÑEDA, CFA ALI: FY18 profit jumps 15.6%, meeting

SENIOR RESEARCH MANAGER expectations
AYALA LAND INC
BUY
4Q18 profit grew 13.02% y/y
PHP49.33
ALI’s 4Q18 net income grew 13.02 % y/y to Php8.47 Bil. This was driven by an 8.5% increase in
revenues and a 440-basis point expansion in operating profit margin during the quarter. For
the full-year 2018, revenues jumped 17.8% y/y to Php162.9 Bil, fueling the 15.6% growth in net
income to Php29.24 Bil. ALI’s FY18 net income is in line with consensus estimates and slightly
ahead of COL estimate because of higher than expected revenues and operating profit margin.

Exhibit 1: Results Summary

% % % of full-year estimate
4Q17 4Q18 FY17 FY18
in Php Mil change change COL Consensus
Revenues 41,851 45,404 8.5% 138,256 162,856 17.8% 103.3% 102.6%
Operating profit 11,484 14,430 25.7% 43,926 53,425 21.6% 105.4% 108.3%
Operating profit margin 27.4% 31.8% 15.8% 31.8% 32.8% 3.3%
Net income 7,495 8,471 13.02% 25,305 29,241 15.6% 103.4% 100.2%

Source: ALI, COL estimates, Bloomberg

Residential, office leasing drive 4Q18 growth

Although residential development revenues grew just 5.3% in 4Q18, it was still the biggest
driver of growth for the group. We believe the lower growth rate in 4Q18 was simple due to
timing of bookings and our outlook going forward remains positive due to strong take-up
sales in 2018. For the full-year, residential revenues grew 19.7% to Php101.1 Bil. Office for
sale revenues were also strong in 4Q18, growing 22.3% to end the year with Php11.4 Bil in
revenues, which is 13.6% higher than a year ago.

The second major growth driver in 4Q18 was office leasing, whose revenues surged 68% y/y
to Php3.26 Bil. Management attributed the jump in revenues to 9% growth in leasable space,
5-percentage point improvement in average occupancy rate, and also expiration of rent-free
periods of recently opened offices. For the full year, office revenues grew 29.3% y/y to Php8.6
Bil.

Shopping centers and hotel revenues continued to trend up in line with estimates on higher
lease rates and expanded footprint. Shopping mall revenues jumped 12.7% in FY18 to Php19.9
Bil driven by same-mall-rental growth of 6% and 6% y/y increase in GLA. Meanwhile, hotel and
resorts revenues were up 13.6% y/y due higher room count and improved occupancy rates.

COL Financial Group, Inc. 2

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

MON 18 FEB 2019

Exhibit 2. Revenue breakdown

4Q17 4Q18 % change FY17 FY18 % change

in Php Mil
Residential development 25,547 26,897 5.3% 84,454 101,110 19.7%
Office for sales 3,340 4,086 22.3% 10,051 11,417 13.6%
Commerical lots 2,201 2,113 -4.0% 7,040 7,728 9.8%
Shopping centers 5,053 5,617 11.2% 17,657 19,908 12.7%
Office leasing 1,943 3,264 68.0% 6,664 8,614 29.3%
Hotels and resorts 760 710 -6.6% 5,621 6,387 13.6%
Gross construction 17,685 20,014 13.2% 67,403 71,421 6.0%
Property management 2,472 2,272 -8.1% 5,407 5,297 -2.0%
Sub-total 59,001 64,973 10.1% 204,297 231,882 13.5%
Intercompany adjustments -17,151 -19,569 14.1% -66,042 -69,027 4.5%
Total real estate revenues 41,850 45,404 8.5% 138,255 162,855 17.8%
Source: ALI

Strong demand from Filipinos offset weak international take-up

During the fourth quarter, sales to non-Filipinos declined 49.2% y/y, this however, was offset
by the 44.6% y/y surge in sales to Filipinos (local +46.6%, overseas +31.4%). Total sales in 4Q18
reached Php33.5 Bil y/y which is 20.1% higher y/y despite the contraction in non-Filipino sales.
According to management, the decline in sales to other nationalities, majority of which are
Chinese, was due to lack of inventory in areas and price points that are appealing to Chinese
buyers. We believe this is not a cause for concern given that demand from Filipino buyers are
still very strong and this segment is more sustainable over the long term. The decline in sales
to non-Filipinos may also just be a timing issue with the project launches.

We remain positive over ALI’s residential development segment given the resilience of local
and overseas Filipino demand. For the full year 2018, sales to Filipinos jumped 27.1% y/y (local
+26.1%, overseas +34.1%) while sales to other nationalities contracted 17% to Php24.8 Bil.

Exhibit 3. Take-up sales breakdown

in Php Bil 4Q17 4Q18 % change FY17 FY18 % change

Local Filipino 18.1 26.5 46.4% 80.4 101.4 26.1%
Overseas Filipino 2.5 3.3 31.4% 11.7 15.7 34.1%
Other Nationalities 7.3 3.7 -49.2% 29.9 24.8 -17.0%
Total 27.9 33.5 20.1% 122.0 141.9 16.3%
Source: ALI

COL Financial Group, Inc. 3

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

MON 18 FEB 2019

Maintain BUY with FV estimate of Php49.33

We are maintaining our BUY rating on ALI with a fair value estimate of Php49.33 We remain
positive on the short- and long-term outlook of ALI. They continue to deliver solid earnings
growth and expansion of its leasing portfolio is on track to reach their 2020 target. Continued
growth in its take-up sales despite the high base also helps buoy revenue growth in the short
and medium term. The strong income growth in FY18 means they are still on track to reach
their Php40 Bil income target by 2020. Over the long term we believe ALI is positioned to
benefit from the infrastructure projects planned by the government given its strategically
located landbank. ALI is also most complete property company in terms of product offering
and geographical exposure. This diversification puts the company in a good position to
capitalize on the numerous growth areas available and at the same time make the company’s
operations more sustainable over the long term.

Other News:

RESEARCH ANALYSTS MWC: MWC earmarks Php197.8Bil for capex until 2037
ANDY DELA CRUZ
JOHN MARTIN LUCIANO
MWC will allot Php197.8Bil for capex until 2037 based on its latest approved business plan
FRANCES ROLFA NICOLAS
for the Manila Concession. Of this amount, 58.2% or Php115.2Bil would be allocated for its
JUSTIN RICHMOND CHENG
used water management efforts, while the remaining Php82.6Bil would be used for its water
ADRIAN ALEXANDER YU
supply business. The company said that it intends to complete seven used water projects,
which would increase sewerage coverage to 38% from the current 22%. MWC also said that
the targeted capex also covers the rehabilitation of existing sewer lines and the upgrade of
currently operating sewage treatment plants to comply with the standards of the Department
of Environment and Natural Resources (DENR) for biological nutrient removal in the wastewater
treatment process. (source: Philstar)

COL Financial Group, Inc. 4

 CALENDAR OF EVENTS DAILY NOTES I PHILIPPINE EQUITY RESEARCH

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K E Y E V ENTS HOL IDAY

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HOLI DAY: CH INESE N E W YEA R T F C : A N N UA L SH A R E H O L D E R S M E E T I N G R C B : A N N UA L S H A R E H O LD ER S MEE TING

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FE B 8 HO LIDAY: E D S A P E O PL E P O W E R R E V O LU T I O N
MED: ANNUAL SH ARE HO LD ER S M EE T ING A NNIV ER SA RY

COL Financial Group, Inc. 5

 DAILY NOTES I PHILIPPINE EQUITY RESEARCH

MON 18 FEB 2019

IMPORTANT RATING DEFINITIONS

BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the next six to
12 months.

HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might be poor
or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the next six to twelve
months.

SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.

IMPORTANT DISCLAIMER
Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount invested.
Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said information may be
incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the report and are subject to change
without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. COL Financial and/
or its employees not involved in the preparation of this report may have investments in securities of derivatives of the companies mentioned in this report and may trade
them in ways different from those discussed in this report.

COL RESEARCH TEAM

APRIL LYNN TAN, CFA

VP & HEAD OF RESEARCH
april.tan@colfinancial.com

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA

DEPUTY HEAD OF RESEARCH SENIOR RESEARCH MANAGER SENIOR RESEARCH MANAGER
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com

ANDY DELA CRUZ JOHN MARTIN LUCIANO FRANCES ROLFA NICOLAS

SENIOR RESEARCH ANALYST SENIOR RESEARCH ANALYST RESEARCH ANALYST
andy.delacruz@colfinancial.com john.luciano@colfinancial.com rolfa.nicolas@colfinancial.com

JUSTIN RICHMOND CHENG ADRIAN ALEXANDER YU

RESEARCH ANALYST RESEARCH ANALYST
justin.cheng@colfinancial.com adrian.yu@colfinancial.com

COL FINANCIAL GROUP, INC.

2402-D EAST TOWER, PHILIPPINE STOCK EXCHANGE CENTRE,
EXCHANGE ROAD, ORTIGAS CENTER, PASIG CITY
PHILIPPINES 1605
TEL NO. +632 636-5411
FAX NO. +632 635-4632
WEBSITE: www.colfinancial.com

COL Financial Group, Inc. 6