Ayala Land Inc.

THU 04 NOV 2021

9M21 profit in line with estimates,

outlook improves
9M21 profit up 34.9%. Ayala Land’s profit for 3Q21 grew 37.8% Y/Y to Php2.55 Bil as
revenues from commercial lot sales, office leasing, hotels, and residential development
improved. The third quarter results brought 9M21 profit to Php8.59 Bil, 34.9% higher
BUY
vs. 9M20. ALI’s results for 9M21 are on track to meet COL’s full year estimates but lags
consensus estimates. TICKER: ALI
FAIR VALUE: 43.20
Raising mall valuation on improved outlook. We expect the government to continue CURRENT PRICE: 36.25
relaxing quarantine restrictions given the steady decline in daily new COVID-19 cases. This
has been a result of the continuous increase in vaccinated individuals in the country. The UPSIDE (%): 19.17
increasing rate of vaccination and declining daily infections prompted us to have a more
positive outlook on the malls segments. We maintained our 2022 mall revenue forecast
which already implies a 50% Y/Y increase in revenues, but we raised our 2023 and 2024
forecast by 10% and 15% respectively. The result is a 23.6% increase in our valuation
estimate for the malls from Php101.8 Bil to Php125.8 Bil.

Pricing in AREIT’s market value. We are also factoring in the value realization exercise
made by ALI when it listed AREIT and the subsequent acquisitions it made which realized
a sizable portion of ALI’s office segment value. Using the current market value of AREIT,
which is around Php67.9 Bil (assuming completion of the asset-for-share swap with ALI)
and ALI’s stake would be around 68%, we raised our valuation estimate for ALI’s office
segment by 30.5% to Php112.5 Bil.

Raising FV estimate to Php43.20, BUY rating maintained. We are raising our fair value
estimate for ALI from Php39.10 to Php43.20 after factoring in higher estimate values for
its mall and office segments. We maintain our BUY rating on ALI given the 19.1% upside
from the current market price to our fair value estimate. We believe ALI is one of the main
beneficiaries of the continued relaxation of the country’s quarantine restrictions through its
malls, hotels, and residential segments.

FORECAST SUMMARY
Year to December 31 (Php Mil) 2018 2019 2020 2021F 2022F
Operating Revenues 162,997 165,740 94,568 108,786 134,004
% change y/y 17.7% 1.7% -42.9% 15.0% 23.2%
EBITDA 59,885 71,645 40,042 41,130 50,500
%change y/y 21.3% 19.6% -44.1% 2.7% 22.8%
EBIT margin 36.7% 43.2% 42.3% 37.8% 37.7%
EBIT 53,566 62,586 30,470 31,558 40,927
%change y/y 21.3% 16.8% -51.3% 3.6% 29.7%
EBIT margin 32.9% 37.8% 32.2% 29.0% 30.5%
Net Profit 29,241 33,188 8,727 12,215 17,632
%change y/y 15.6% 13.5% -73.7% 40.0% 44.4%
Net profit margin 17.9% 20.0% 9.2% 11.2% 13.2%
EPS (in Php) 1.99 2.25 0.59 0.83 1.20
%change y/y 15.3% 13.5% -73.7% 40.0% 44.4%

RELATIVE VALUE
P/E(X) 18.25 16.08 61.16 43.70 30.27
P/BV(X) 2.85 2.53 2.40 2.36 2.27 Richard Lañeda, CFA
ROE(%) 16.52 16.66 4.03 5.44 7.64 Senior Research Manager
Dividend Yield (%) 1.41 1.46 1.52 1.57 1.63 richard.laneda@colfinancial.com
*So urce: A yala Land, COL estimates

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside of
the COL Financial website as these may be subject to tampering or unauthorized alterations.
 EARNINGS ANALYSIS I ALI: 9M21 PROFIT IN LINE WITH ESTIMATES, OUTLOOK IMPROVES

THU 04 NOV 2021

9M21 profit up 34.9%

Ayala Land’s profit for 3Q21 grew 37.8% Y/Y to Php2.55 Bil as revenues from commercial
lot sales, office leasing, hotels, and residential development improved. The third quarter
results brought 9M21 profit to Php8.59 Bil, 34.9% higher vs. 9M20. ALI’s results for 9M21
are on track to meet COL’s full year estimates but lags consensus estimates.

Exhibit 1. Results summary

Y/Y Q/Q % % of full-year estimate

3Q21 9M20 9M21
in Php Mil change change change COL Consensus
Real estate revenues 23,450 8.7% -1.1% 61,937 70,140 13.2% 64.5% 68.1%
Operating profit 6,652 8.9% -10.8% 20,154 21,383 6.1% 67.8% 66.8%
Operating profit margin 28.4% 0.2% -9.8% 32.5% 30.5% -6.3%
Net income 2,548 37.8% -21.9% 6,367 8,589 34.9% 70.3% 59.7%

Source: ALI, Bloomberg, COL estimates

Revenues flat Q/Q despite longer ECQ in 3Q21

Total revenues in 3Q21 were up 8.7% Y/Y but was down just 1.1% Q/Q despite the longer
period of ECQ in 3Q21 than in 2Q21. Shopping mall revenues were resilient as it grew
1.7% Q/Q while office revenues improved 13% both Y/Y and Q/Q. One developmental
side of the business, office for sale revenues, were up 194.4% Q/Q, while commercial lot
sales grew 82.8%. However, the 12.2% Q/Q decline in residential revenues offset these
improvements. The decline in sales could be a result of the tighter quarantine restrictions
but we expect improvements going forward on higher construction capacity. Take-up
sales during the quarter reached Php21.8 Bil, bringing 9M21 sales to Php70.1 Bil or 15%
higher compared to 9M20.

Exhibit 2. Revenue breakdown

Y/Y Q/Q Y/Y
3Q21 9M20 9M21
in Php Mil change change change
Residential development 14,425 3.0% -12.2% 34,484 44,475 29.0%
Office for sales 836 -0.2% 194.4% 2,282 2,897 27.0%
Commercial lots 2,153 140.0% 82.8% 3,849 4,149 7.8%
Shopping centers 1,493 -8.3% 1.7% 7,608 4,925 -35.3%
Office leasing 2,619 13.0% 13.2% 7,115 7,450 4.7%
Hotels and resorts 635 23.1% 10.1% 2,601 1,852 -28.8%
Net construction 732 -1.2% -25.0% 1,624 2,660 63.8%
Property management 558 -10.3% 14.3% 2,373 1,733 -27.0%
Total real estate revenues 23,451 8.7% -1.1% 61,936 70,141 13.2%
Source: ALI

COL Financial Group, Inc. 2

 EARNINGS ANALYSIS I ALI: 9M21 PROFIT IN LINE WITH ESTIMATES, OUTLOOK IMPROVES

THU 04 NOV 2021

Raising mall valuation on improved outlook

While the third quarter was challenging due to tighter quarantine restrictions, we have
seen much improvement in terms of controlling the spread of the COVID-19 virus. In the
past several weeks, we have seen daily new COVID-19 cases on a steady decline, prompting
the government to slowly relax quarantine restrictions in Metro Manila. Starting October
15, Metro Manila was placed under alert level 3, which is the most relaxed quarantine
level since March of this year. Indoor dining, recreational venues, and movie houses are
now allowed to operate at limited capacity, and this should help increase foot traffic in
malls. Increasing foot traffic is beneficial because it will not only lead to higher tenant
sales but will also make it possible for mall operators to start collecting portions of basic
rent from tenants. As restrictions are relaxed, the portion of basic rent charged by mall
operators should also increase.

We expect the government to continue relaxing quarantine restrictions given the steady
decline in daily new COVID-19 cases. This has been a result of the continuous increase in
vaccinated individuals in the country. As of October 18, 24.3 Mil Filipinos have received
two doses of vaccine while 28 Mil have received their first dose. Although this is only
slightly more than 20% of the country’s population, the numbers are much higher in the
NCR. As of September 27, 50% of the NCR’s population have already received two doses,
while 60% have received one dose.

Exhibit 3. Vaccination trend in the Philippines

Source: DOH

COL Financial Group, Inc. 3

 EARNINGS ANALYSIS I ALI: 9M21 PROFIT IN LINE WITH ESTIMATES, OUTLOOK IMPROVES

THU 04 NOV 2021

The increasing rate of vaccination and declining daily infections prompted us to have
a more positive outlook on the malls segments. We maintained our 2022 mall revenue
forecast which already implies a 50% Y/Y increase in revenues, but we raised our 2023
and 2024 forecast by 10% and 15% respectively. The result is a 23.6% increase in our
valuation estimate for the malls from Php101.8 Bil to Php125.8 Bil.

Pricing in AREIT’s market value

We are also factoring in the value realization exercise made by ALI when it listed AREIT
and the subsequent acquisitions it made which realized a sizable portion of ALI’s office
segment value. Prior to injecting the assets into AREIT, we valued ALI’s office projects
using a capitalization rate of 9.5%, which is much higher than the market-implied yield of
AREIT of around 4.1% for 2022.

Using the current market value of AREIT, which is around Php67.9 Bil (assuming completion
of the asset-for-share swap with ALI) and ALI’s stake would be around 68%, we raised our
valuation estimate for ALI’s office segment by 30.5% to Php112.5 Bil

Raising FV estimate to Php43.20, BUY rating maintained

We are raising our fair value estimate for ALI from Php39.10 to Php43.20 after factoring
in higher estimate values for its mall and office segments. We maintain our BUY rating on
ALI given the 19.1% upside from the current market price to our fair value estimate. We
believe ALI is one of the main beneficiaries of the continued relaxation of the country’s
quarantine restrictions through its malls, hotels, and residential segments.

Exhibit 4. NAV breakdown

Value (PhpMil)
Old New Value (Php/sh)
Retail 101,809 125,843 8.55
Offices and AREIT stake 86,205 112,505 7.64
Hotels 4,629 4,629 0.31
Residential development 76,008 85,308 5.79
Estate projects 263,780 263,780 17.91
Land bank 315,358 315,358 21.42
Net Debt -207,481 -199,948 -13.58
Net Asset Value 640,306 707,474 48.00
Less: 10% Discount to NAV 64,031 70,747 4.80
FV estimate 576,276 636,727 43.20

Source: COL estimates

COL Financial Group, Inc. 4

 EARNINGS ANALYSIS I ALI: 9M21 PROFIT IN LINE WITH ESTIMATES, OUTLOOK IMPROVES

THU 04 NOV 2021

Ayala Land Inc. (ALI) INCOME STATEMENT (PHPMIL)

2017 2018 2019 2020 2021E 2022E
Revenues 138,508 162,997 165,740 94,568 108,786 134,004
COMPANY BACKGROUND % Growth 12.9% 17.7% 1.7% -42.9% 15.0% 23.2%
EBITDA 49,357 59,885 71,645 40,042 41,130 50,500
Ayala Land is the one of the largest and % Growth 8.4% 21.3% 19.6% -44.1% 2.7% 22.8%
most diversified real estate company in Operating Profit 44,178 53,566 62,586 30,470 31,558 40,927
the country. Its core businesses include % Growth 11.4% 21.3% 16.8% -51.3% 3.6% 29.7%
residential development, shopping centers, Interest Expense (7,914) (9,594) (12,200) (12,746) (13,350) (14,350)
offices and hotels and resorts. Support Other Income/(Expense) 1,728 1,229 443 (2,671) 648 182
Pretax Income 37,991 45,201 50,830 15,053 18,856 26,758
businesses include construction and
Tax Expense (9,825) (11,984) (13,315) (4,059) (3,394) (5,619)
property management. ALI has one of the
Net Income 25,305 29,241 33,188 8,727 12,215 17,632
best track records in developing large- % Growth 21.0% 15.6% 13.5% -73.7% 40.0% 44.4%
scale, integrated, mixed-use, sustainable EPS 1.72 1.99 2.25 0.59 0.83 1.20
estates that are developing into economic % Growth 20.4% 15.3% 13.5% -73.7% 40.0% 44.4%
centers in their respective regions.
BALANCE SHEET (IN PHPMIL)

OPERATING INCOME BREAKDOWN 2017 2018 2019 2020 2021E 2022E

Cash & Equivalents 26,278 27,558 21,516 18,361 19,068 34,242
Trade Receivables 75,917 126,719 105,039 101,146 91,031 81,928
5% Rea Estate Inventories 90,846 104,372 120,288 146,744 146,744 146,744
22% Other Current Assets 47,811 44,181 48,592 58,021 63,823 70,205
3% PPE and Investment Properties 228,764 260,755 286,106 266,132 270,146 278,852
19% Noncurrent Receivable 44,523 38,805 45,564 46,021 50,623 55,686
Other Non-Current Assets 59,853 66,431 86,819 85,070 85,518 86,022
Total Assets 573,992 668,820 713,923 721,494 726,954 753,679
11%
11% Accounts Payable 137,684 171,999 162,979 144,626 149,626 154,626
ST Debts 24,217 37,652 35,284 27,864 27,864 27,864
59% 3%
61% 6% Lease Liability - 725 467 490 515
Other Current Liabilities 22,722 31,133 27,596 26,773 25,969 26,395
LT Debts 150,169 149,447 175,813 184,087 189,087 194,087
Lease Liability - net of current portion - 16,739 17,289 17,289 17,289
Other Non-Current Liabilities 46,937 58,368 52,082 60,210 50,708 55,962
opping centersShopping
Offices Hotels
centers Real estate development Others
Total Liabilities 381,729 448,599 471,218 461,315 461,032 476,738
Offices
Total Equity 192,263 220,221 242,706 260,179 265,922 276,941
Hotels
Total Liabilities & Equity 573,992 668,820 713,923 721,494 726,954 753,679
Real estate development
BVPS 11.3 12.7 14.3 15.1 15.4 16.0
Construction, Property management, and others

CASHFLOW STATEMENT (IN PHPMIL)

2017 2018 2019 2020 2021E 2022E
Pretax Income 37,991 45,201 50,830 15,053 18,856 26,758
Depreciation & Amortization 5,180 6,319 9,059 9,573 7,985 8,295
Other Non-Cash Exp (Gains) 358 (284) 93 1,279 (448) (504)
Interest Expense (Income) 1,927 1,641 3,419 3,774 3,827 3,811
Decrease (Increase) in Working Cap -7,691 -26,407 -13,464 -34,020 9,336 7,745
Operating Cash Flow 24,234 11,768 36,012 -12,507 31,531 37,102
Capex -33,173 -35,646 -39,735 -8,643 -12,000 -17,000
Other Investments -734 32,668 -2,837 5,428 -4,602 -5,062
Investing Cash Flow -33,906 -2,978 -42,572 -3,215 -16,602 -22,062
Proceeds (Payment) Debts 14,584 9,025 24,726 1,181 5,000 5,000
Payment of Cash Dividends -7,193 -7,181 -7,754 -4,397 -8,386 -8,680
Others -2,808 -2,523 -5,798 11,519 -1,334 -1,440
Financing Cash Flow 9,801 -6,264 3,753 12,674 -14,221 134
Change in Cash 128 2,525 -2,807 -3,049 708 15,174

COL Financial Group, Inc. 5

 EARNINGS ANALYSIS I ALI: 9M21 PROFIT IN LINE WITH ESTIMATES, OUTLOOK IMPROVES

THU 04 NOV 2021

INVESTMENT THESIS: KEY RATIOS

2017 2018 2019 2020 2021E 2022E
Most diversified property company
EBITDA Margin (%) 35.6% 36.7% 43.2% 42.3% 37.8% 37.7%
We believe ALI is the most diversified OPM (%) 31.9% 32.9% 37.8% 32.2% 29.0% 30.5%
property company as it has a wide range of NPM (%) 18.3% 17.9% 20.0% 9.2% 11.2% 13.2%
product offerings - residential, office, resorts, Times Interest Earned (X) 5.58 5.58 5.13 2.39 2.36 2.85
hotels, retail, commercial lots, catering to all Current Ratio (X) 1.30 1.26 1.30 1.62 1.57 1.59
segments of the market, with a very wide Net D/E Ratio (X) 0.89 0.85 0.90 0.87 0.87 0.80
Days Receivable 200.1 283.8 231.3 390.4 305.4 223.2
geographical footprint. This makes ALI the
Days Inventory 359.0 369.4 298.7 127.6 166.7 208.3
most complete property developer and its Asset T/O (%) 24.1% 24.4% 23.2% 13.1% 15.0% 17.8%
diversifcation across product segments and ROAE (%) 16.1% 16.5% 16.7% 4.0% 5.4% 7.6%
geographical presence makes it one of the
more defensive ones. MAJOR CORPORATE DEVELOPMENTS (5-YEARS)

Strong track record on execution Acquires 40% stake in El Nido Resorts, ganing full control of the resort 12/31/2013
ALI has a very good track record of being
able to successfully execute its plans. This
Acquires 47% stake in OCLP Holdings 11/07/2014
was clear when they were able to achieve its
five-year plan one year ahead of schedule.
This give us confidence that ALI will be able Acquires 9.16% stake in MCT Bhd 04/06/2015
to push through with its planned launches
and deliver products well suited to the
Acquires 23.79% stake in MCT Bhd 10/15/2015
needs of consumers. Successful and timely
execution of plans is keeps ALI growing at
a higher-than-industry rate despite its size. Acquires 51.06% stake in Prime Orion Philippines Inc. (POPI) 02/26/2016

Aggressive 2020 targets

After achieving its previous five-year plan
one year ahead of schedule, ALI is now
working towards its 2020 net income target
of Php40 Bil. This implies a 17.8% CAGR
from its 2015 net income of Php17.6 Bil.
They plan to achieve this by aggressively
growing its recurring income business,
which include malls, offices, and hotels and
resorts. They plan to triple their capacity by
2020 form its 2013 base. So far based on
the projects under construction and those
to be launched, ALI is on track to reach its
capacity targets.

COL Financial Group, Inc. 6

 EARNINGS ANALYSIS I ALI: 9M21 PROFIT IN LINE WITH ESTIMATES, OUTLOOK IMPROVES

THU 04 NOV 2021

Valuation NAV COMPUTATION

Methodology Retail
Value (PhpMil)
125,843
Value (Php/sh) % of GAV
8.5 13.9%
% of NAV
17.8%
Valuation Methodology
EBITDA cap rate
Offices 112,505 7.6 12.4% 15.9% EBITDA cap rate
Hotels 4,629 0.3 0.5% 0.7% EBITDA cap rate
Residential development 85,308 5.8 9.4% 12.1% DCF
Estate projects 263,780 17.9 29.1% 37.3% DCF
Land bank 315,358 21.4 34.8% 44.6% Market value
Net Debt -199,948 -13.6 -28.3%
Net Asset Value 707,474 48.0 100.0%
Less: 10% Discount to NAV 70,747 4.80
FV estimate 636,727 43.2
source: COL estimates

RELATIVE VALUATION
P/E EPS Growth
2021E 2022E 2021E 2022E
RLC 14.78 12.05 16.7% 22.6%
ALI 43.70 30.27 40.0% 44.4%
MEG 9.99 8.01 6.5% 24.7%
SMPH 41.87 29.05 19.2% 44.1%
VLL 5.67 5.14 44.8% 10.5%
FLI 7.48 5.59 -0.1% 33.8%
Industry Ave 20.58 15.02 21.2% 30.0%
Industry Median 12.38 10.03 18.0% 29.2%

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 EARNINGS ANALYSIS I ALI: 9M21 PROFIT IN LINE WITH ESTIMATES, OUTLOOK IMPROVES

THU 04 NOV 2021

I MP OR TA NT R AT ING 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.

I MP OR TA NT DISC L AIM ER
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.

C O L R E S EAR C H T EAM

APRIL LYNN TAN, CFA

CHIEF EQUITY STRATEGIST
april.tan@colfinancial.com

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA

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

JOHN MARTIN LUCIANO, CFA FRANCES ROLFA NICOLAS JUSTIN RICHMOND CHENG, CFA
SENIOR RESEARCH ANALYST RESEARCH ANALYST SENIOR RESEARCH ANALYST
john.luciano@colfinancial.com rolfa.nicolas@colfinancial.com justin.cheng@colfinancial.com

ADRIAN ALEXANDER YU KERWIN MALCOLM CHAN

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

C O L F INANC IAL G R O UP, I NC.

24/F EAST TOWER, TEKTITE TOWERS,
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