Vista Land & Lifescapes, Inc.

FRI 20 NOV 2020

9M20 profit exceeds forecast,

raising FV to Php5.12
3Q20 profit declines 39.1% due to effects of pandemic. VLL’s net profit for 3Q20
declined 39.1% y/y to Php1.93 Bil as quarantine restrictions limited construction and selling
activities of its residential segment while also negatively affecting sales and foot traffic in
BUY
malls, leading to a 19.2% decline in rental income y/y. For the first nine months, VLL’s net
profit is down 39.7% y/y to Php5.32 Bil as a result of the 31.3% and 9.8% decline in real TICKER: VLL
estate sales and leasing revenues respectively. VLL’s earnings are ahead of estimates due FAIR VALUE: 5.15
to higher than expected revenues.
CURRENT PRICE: 4.28
Capitalizing on higher demand for horizontal projects outside MM. Real estate UPSIDE: 20.33
revenues of VLL declined 36% y/y for 3Q20 and 31.3% for 9M20 mainly due lower
construction completion because of quarantine restrictions. Lower take-up sales also
contributed to the decline in revenues. Despite the decline from a year ago, VLL is doing
relatively better than any other property developer under our coverage. This is due to VLL’s
focus on horizontal projects outside Metro Manila. Construction completion of horizontal
projects are faster than that of vertical projects and areas outside Metro Manila were eased
into modified enhanced community quarantine (MECQ) or general community quarantine
(GCQ) earlier than Metro Manila, which meant construction activities were restarted sooner
compared to those whose projects are mainly inside Metro Manila. VLL’s business model
also bode well for sales as reservation sales for 9M0 were down just 35.7% y/y to Php39.6
Bil, outperforming most of its peers.
Raising earnings estimates. We are raising our earnings estimates for 2020 and 2021 to
factor in the faster the expected recovery in both real estate and rental revenues. We are
raising our 2020 net income forecast by 39.4% to Php7.08 Bil and our 2021 net income
forecast by 12.4% to Php8.69 Bil.
Maintain BUY with new FV estimate of Php5.15. We are raising our FV estimate on VLL
from Php4.64 to Php5.15 following the stronger-than-expected recovery of its residential
sales and revenue, and the higher than expected rental revenues. We are maintaining our
BUY rating on VLL as we expected them to continue capitalizing on the current demand
trends for horizontal projects. We also expect rental revenue to continue recovering going
forward as quarantine restrictions ease in line with the declining number of new COVID-19
cases.
FORECAST SUMMARY
Year to December 31 (Php Mil) 2016 2017 2018 2019E 2020E 2021E
Revenues 30,996 34,840 40,261 42,897 32,741 38,180
% change y/y 7.44 12.40 15.56 6.55 -23.68 16.61
EBITDA 11,481 14,760 17,006 17,934 14,562 16,829
% change y/y 11.01 28.56 15.21 5.46 -18.80 15.57
EBITDA margin (%) 37.04 42.37 42.24 41.81 44.48 44.08
EBIT 10,438 13,455 15,526 15,642 12,300 14,422
% change y/y 9.37 28.91 15.39 0.75 -21.36 17.25
EBIT margin (%) 33.68 38.62 38.56 36.46 37.57 37.77
Net Income 7,901 8,804 10,238 11,266 7,077 8,685
% change y/y 12.36 11.42 16.30 10.04 -37.18 22.72
NI margin (%) 25.49 25.27 25.43 26.26 21.62 22.75
EPS (in Php) 0.61 0.68 0.79 0.87 0.55 0.67
% change y/y 10.08 11.34 16.30 10.04 -37.18 22.72

RELATIVE VALUE
P/E(X) 7.00 6.28 5.40 4.91 7.82 6.37 Richard Lañeda, CFA
P/BV(X) 0.74 0.67 0.62 0.57 0.54 0.50 Senior Research Manager
ROE(%) 11.1% 11.0% 11.6% 11.7% 6.9% 8.0% richard.laneda@colfinancial.com
so urce: VLL

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 EARNINGS ANALYSIS I VLL: 9M20 PROFIT EXCEEDS FORECAST, RAISING FV TO PHP5.12

FRI 20 NOV 2020

3Q20 profit declines 39.1% due to effects of pandemic

VLL’s net profit for 3Q20 declined 39.1% y/y to Php1.93 Bil as quarantine restrictions
limited construction and selling activities of its residential segment while also negatively
affecting sales and foot traffic in malls, leading to a 19.2% decline in rental income y/y.
For the first nine months, VLL’s net profit is down 39.7% y/y to Php5.32 Bil as a result of
the 31.3% and 9.8% decline in real estate sales and leasing revenues respectively. VLL’s
earnings are ahead of estimates due to higher than expected revenues.

Exhibit 1. Results summary

% % of full year estimates

3Q19 3Q20 9M19 9M20 % change
in Php Mil change COL Consensus
Revenues 11,684 6,924 -40.7% 34,359 24,541 -28.6% 86.9% 76.7%
Real estate sales 8,186 5,241 -36.0% 26,212 18,014 -31.3% 84.8%
Leasing revenues 1,869 1,510 -19.2% 5,480 4,943 -9.8% 97.6%
Interest and misc. income 493 173 -64.9% 1,531 1,584 3.5% 82.8%
EBITDA 4,151 3,126 -24.7% 13,716 10,597 -22.7% 92.1% 76.1%
EBITDA margin 35.5% 45.1% 27.1% 43.2% 43.2% -0.1%
EBIT 3,565 2,566 -28.0% 12,089 8,851 -26.8% 90.9% 79.2%
EBIT margin 30.5% 37.1% 21.5% 38.5% 36.1% -6.3%
Net income 3,165 1,926 -39.1% 8,831 5,322 -39.7% 104.8% 85.1%

Source: COL, VLL, Bloomberg

Capitalizing on higher demand for horizontal projects

outside MM

Real estate revenues of VLL declined 36% y/y for 3Q20 and 31.3% for 9M20 mainly due
lower construction completion because of quarantine restrictions. Lower take-up sales
also contributed to the decline in revenues. Despite the decline from a year ago, VLL is
doing relatively better than any other property developer under our coverage. This is
due to VLL’s focus on horizontal projects outside Metro Manila. Construction completion
of horizontal projects are faster than that of vertical projects and areas outside Metro
Manila were eased into modified enhanced community quarantine (MECQ) or general
community quarantine (GCQ) earlier than Metro Manila, which meant construction
activities were restarted sooner compared to those whose projects are mainly inside
Metro Manila. VLL’s business model also bode well for sales as reservation sales for 9M0
were down just 35.7% y/y to Php39.6 Bil, outperforming most of its peers. With renewed
confidence in the market, VLL said is launching new projects to address demand.

COL Financial Group, Inc. 2

 EARNINGS ANALYSIS I VLL: 9M20 PROFIT EXCEEDS FORECAST, RAISING FV TO PHP5.12

FRI 20 NOV 2020

Rental revenues better than expected due to fewer rent

concessions

VLL’s leasing revenues declined just 19.2% y/y in 3Q20 despite the fact that 84% of its
commercial space being retail space. For 9M20, leasing revenues were down just 10%
to Php4.94, which is much slower than what other mall-centric landlords experienced.
Management said that the reason for this was because a good portion of their tenants
were deemed essential during the quarantine. VLL added that operational GLA reached
80% during GCQ which is also higher than other mall operators and is now at 90%. In
addition to this, management said that rent concessions were not given out across the
board. Evaluations were done on a case by case and so we believe rent concessions given
out by VLL were much less than expected. Other mall operators will continue to give rent
concessions to all their tenants until the end of the year.

Raising earnings estimates

We are raising our earnings estimates for 2020 and 2021 to factor in the faster the
expected recovery in both real estate and rental revenues. We are raising our 2020 net
income forecast by 39.4% to Php7.08 Bil and our 2021 net income forecast by 12.4% to
Php8.69 Bil.

Exhibit 2. Changes to forecast

2020E 2021E
in PhpMil Old New % change Old New % change
Revenues 28,227 34,840 23.4% 35,392 38,181 7.9%
Real estate 21,247 24,080 13.3% 27,078 28,670 5.9%
Rental income 5,066 6,561 29.5% 6,414 7,418 15.7%
Other revenues 1,913 4,199 119.4% 1,901 2,092 10.1%
EBITDA 11,510 14,562 26.5% 15,090 17,006 12.7%
EBIT 9,732 12,300 26.4% 13,183 14,422 9.4%
Net income 5,079 7,077 39.4% 7,729 8,685 12.4%

Source: COL estimates

COL Financial Group, Inc. 3

 EARNINGS ANALYSIS I VLL: 9M20 PROFIT EXCEEDS FORECAST, RAISING FV TO PHP5.12

FRI 20 NOV 2020

Maintain BUY with new FV estimate of Php5.15

We are raising our FV estimate on VLL from Php4.64 to Php5.15 following the stronger-
than-expected recovery of its residential sales and revenue, and the higher than expected
rental revenues. We are maintaining our BUY rating on VLL as we expected them to
continue capitalizing on the current demand trends for horizontal projects. We also
expect rental revenue to continue recovering going forward as quarantine restrictions
ease in line with the declining number of new COVID-19 cases.

COL Financial Group, Inc. 4

 EARNINGS ANALYSIS I VLL: 9M20 PROFIT EXCEEDS FORECAST, RAISING FV TO PHP5.12

FRI 20 NOV 2020

Vista Land & INCOME STATEMENT (PHPMIL)

Lifescapes, Inc. (VLL) Revenues

2016
30,996
2017
34,840
2018
40,261
2019
42,897
2020E
32,741
2021E
38,180
% Growth 7.4% 12.4% 15.6% 6.5% -23.7% 16.6%
COMPANY BACKGROUND EBITDA 12,124 14,760 17,006 17,934 14,562 16,829
% Growth 17.2% 21.7% 15.2% 5.5% -18.8% 15.6%
Vista Land is one of the Philippine’s largest
Operating Profit 11,080 13,455 15,526 15,642 12,300 14,422
homebuilder. It is the market leader by
% Growth 16.1% 21.4% 15.4% 0.7% -21.4% 17.3%
far in terms of total number of houses Interest Expense (2,236) (3,384) (4,170) (3,568) (4,467) (4,530)
built, having constructed more than Other Income/(Expense) 839 1,203 1,226 1,509 1,226 1,226
300,000 homes in  more than 100 cities Pretax Income 9,683 11,274 12,582 13,583 9,059 11,118
and municipalities  in Luzon, Visayas and Tax Expense (1,582) (2,211) (2,047) (1,973) (1,767) (2,168)
Mindanao. With well-known and distinct Net Income 7,907 8,804 10,238 11,266 7,077 8,685
% Growth 12.4% 11.3% 16.3% 10.0% -37.2% 22.7%
brands - Brittany, Crown Asia, Camella,
EPS 0.6 0.7 0.8 0.9 0.5 0.7
Lessandra and Vista Residences, and
% Growth 10.1% 11.3% 16.3% 10.0% -37.2% 22.7%
through its provincial marketing subsidiary
Communities Philippines - Vista Land caters BALANCE SHEET (IN PHPMIL)
to all income segments in the different 2016 2017 2018 2019 2020E 2021E
provinces of the country. VLL also owns Cash & Equivalents 9,003 11,840 20,162 14,156 20,962 13,600
Starmalls which operates malls and offices. Trade Receivables 28,329 35,356 21,850 38,438 28,195 33,570
Inventories 22,955 39,700 41,947 41,401 45,541 50,095
Other Current Assets 11,226 23,630 10,719 15,286 16,891 18,818
NET INCOME BREAKDOWN PPE and Investment Properties 32,888 59,987 75,545 103,982 111,715 119,803
Land and land improvements 30,487 - - - - -
HTM investments 19,142 13,694 - - - -
AFS financial assets 6,453 122 - - - -
23%
Other Non-Current Assets 14,139 15,371 15,503 25,488 25,488 25,488
23%
Total Assets 174,768 199,935 238,262 272,539 282,580 295,161
Accounts Payable 11,400 13,275 15,737 13,164 13,822 14,513
ST Debts 7,570 4,326 10,431 11,304 10,431 10,431
Other Current Liabilities 2,831 3,700 1,376 1,606 1,612 1,620
LT Debts 71,929 89,736 111,117 132,467 138,340 142,340
77% Other Non-Current Liabilities 4,542 4,890 5,371 8,442 8,442 8,442
77%
Total Liabilities 98,273 115,927 146,355 172,586 177,588 182,634
Total Equity 76,495 84,008 91,907 99,953 104,992 112,527
Total Liabilities & Equity 174,768 199,935 238,262 272,539 282,580 295,161
Residential Leasing BVPS (Php) 5.8 6.4 7.0 7.6 7.9 8.5
Residential Leasing
CASHFLOW STATEMENT (IN PHPMIL)
2016 2017 2018 2019 2020E 2021E
Pretax Income 9,683 11,274 12,582 13,583 9,059 11,118
Depreciation & Amortization 1,044 1,305 1,480 2,292 2,261 2,407
Other Non-Cash Exp (Gains) 112 76 37 20 - -
Interest Expense (Income) 729 1,638 2,131 2,059 2,841 2,913
Decrease (Increase) in Working Cap -1,974 -11,886 -12,664 -11,948 4,492 -10,816
Operating Cash Flow 6,064 1,986 3,067 4,458 16,894 3,461
Capex -8,954 -6,210 -13,155 -14,710 -6,796 -7,250
Other Investments -6,974 61 2,808 -6,389 1,626 1,618
Investing Cash Flow -15,927 -6,150 -10,348 -21,100 -5,170 -5,633
Proceeds (Payment) Debts 14,836 14,653 25,577 23,266 5,000 4,000
Payment of Cash Dividends -1,454 -1,653 -2,763 -3,181 -2,253 -1,415
Others -1,510 -6,245 -7,010 -9,516 -7,665 -7,774
Financing Cash Flow 12,348 6,755 15,804 10,569 -4,918 -5,190
Change in Cash 2,859 2,592 8,528 -6,077 6,806 -7,362

COL Financial Group, Inc. 5

 EARNINGS ANALYSIS I VLL: 9M20 PROFIT EXCEEDS FORECAST, RAISING FV TO PHP5.12

FRI 20 NOV 2020

INVESTMENT THESIS: KEY RATIOS (IN PHPMIL)

2016 2017 2018 2019 2020E 2021E
Resilient target market
EBITDA Margin (%) 39.1% 42.4% 42.2% 41.8% 44.5% 44.1%
Vista Land’s profits will be resilient in the
OPM (%) 35.7% 38.6% 38.6% 36.5% 37.6% 37.8%
face of the economic downturns given NPM (%) 25.5% 25.3% 25.4% 26.3% 21.6% 22.7%
its focus on the low- and mid-income Times Interest Earned (X) 5.0 4.0 3.7 4.4 2.8 3.2
segments. VLL’s projects are mostly Current Ratio (X) 3.3 5.2 3.8 4.0 4.1 4.2
horizontal projects and bulk of which are Net D/E Ratio (X) 0.6 0.8 1.1 1.3 1.2 1.2
ouside Metro Manila, thus their buyers are Days Receivable 333.6 370.4 198.1 327.1 314.3 320.9
mostly end usersand not investors thus are Days Inventory 334.8 525.1 480.6 460.3 690.3 637.8
less sensitive to overall economic growth. Asset T/O (%) 17.7% 17.4% 16.9% 15.7% 11.6% 12.9%
more than 70% of its sales come from its ROAE (%) 10.8% 11.0% 11.6% 11.7% 6.9% 8.0%
low-end brand Camella and more than 45%
of total sales come from outside Metro MAJOR CORPORATE DEVELOPMENTS (5-YEARS)
Manila.
VLL announced the acquisition of 88.3% of Starmalls Inc. (STR) through
11/10/2015
share swap with parent.
Strong growth in leasing business to
improve overall fundamentals
Since its acquisition of Starmalls, VLL has
been aggressively expanding its leasing
business to increase its source of recurring
income. The leasing segment started with
510,000sqm of GFA in 2015 and VLL plans
to growth this to 1.3 Mil sqm by 2018.
With majority of the space to come from
expansion of existing malls, the target is
highly achievable with risk on the upside.
The expansion of GFA will lead to higher
leasing income which improves its earnigns
quality and also ability to take on more
debt for future expansion.

Massive landbank assures future growth

VLL owns 2,200 ha of raw land for
development with an additional 330 ha
under joint venture agreements. This
includes their Vista City project which
covers a total of 1,500 hectares strategically
located where Muntinlupa, Las Pinas, Cavite
and Laguna meet. VLL envisions Vista City
to be an integrated urban development
that combines Lifestyle Retail, Prime Office
Space, University Town, Themed Residential
Developments, and Leisure components.

COL Financial Group, Inc. 6

 EARNINGS ANALYSIS I VLL: 9M20 PROFIT EXCEEDS FORECAST, RAISING FV TO PHP5.12

FRI 20 NOV 2020

Valuation NAV COMPUTATION

Methodology Landbank
Value (PhpMil) Value (Php/Sh) % of GAV
112,587 8.71 47.7%
% of NAV
84.5%
Valuation Methodology
Market value
Residential properties 64,041 4.95 27.1% 48.1% DCF
Starmalls 59,581 4.61 25.2% 44.7% EBITDA cap rate
Nebt debt -103,000 -7.97 -43.6% -77.3% Book value
Net Asset Value 133,209 10.30 56.4% 100.0%
Less: 30% discount to NAV 66,604 5.15
FV Estimate 66,604 5.15

RELATIVE VALUATION
P/E EPS Growth
2020E 2021E 2020E 2021E
RLC 13.6 12.58 -26.6% 8.4%
ALI 62.77 33.22 -71.7% 89.0%
MEG 11.43 8.93 -36.4% 28.0%
SMPH 62.70 45.93 -52.2% 36.5%
VLL 7.82 6.37 -37.2% 22.7%
FLI 7.38 5.36 -46.2% 37.7%
Industry Ave 27.62 18.73 -45.0% 37.0%
Industry Median 12.53 10.75 -41.7% 32.3%

COL Financial Group, Inc. 7

 EARNINGS ANALYSIS I VLL: 9M20 PROFIT EXCEEDS FORECAST, RAISING FV TO PHP5.12

FRI 20 NOV 2020

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

JOHN MARTIN LUCIANO FRANCES ROLFA NICOLAS JUSTIN RICHMOND CHENG

SENIOR RESEARCH ANALYST RESEARCH ANALYST RESEARCH ANALYST
john.luciano@colfinancial.com rolfa.nicolas@colfinancial.com justin.cheng@colfinancial.com

ADRIAN ALEXANDER YU KERWIN MALCOLM CHAN

RESEARCH ANALYST RESEARCH ANALYST
adrian.yu@colfinancial.com kerwin.chan@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. 8