Strong rentals, real-estate sales boost Robinsons Land profits
An
article published in BusinessWorld, February 15, 2006
By: Ruby Anne M. Rubio
Robinsons Land Corp. profits grew 27.75% in
the first quarter ending December to P418.96 million from P327.96 million on
strong rental income and real-estate sales.
Gross revenues rose 37.6% to P1.72 billion from P1.25 billion due to
improvement in the real-estate business and hotel operations.
Real-estate revenues churned in P1.5 billion, up from P1.13 billion.
Frederick D. Go, executive vice-president and group general manager, said
"the strategic initiative we made across four business units has translated
to improved profitability."
"The company flagship malls, Robinsons Galleria and Robinsons Place Manila,
continue to enjoy excellent rental income, while newer malls Robinsons Place
Pioneer and Robinsons Place Angeles and the redeveloped Robinsons Place
Novaliches are also contributing significantly to the rental growth,"
Robinsons Land said.
Its high-rise buildings division saw an 83.97% growth in revenues to P526.7
million from P286.3 million due to realized revenues from residential
condominium projects, particularly the One Gateway Place, a middle-cost
residential condominium building in Pioneer Street, Mandaluyong, and the One
Adriatico Place along Adriatico Street in Malate. Its office buildings
including the newly opened Cybergate Center in the Pioneer Complex, are
enjoying almost full occupancy. Rental income from these buildings grew
38.84% to P79 million from P56.9 million.
Strong reception to the opening of the Crown Plaza Hotel led to an 87.76%
increase in gross revenues from the hotel division to P219.3 million from
P116.8 million.
Robinsons Land said "Holiday-Inn Galleria Manila remained steady, while the
Cebu Midtown Hotel and Robinsons Apartelle in Mandaluyong registered revenue
growth of 24% and 50%, respectively. The company continues to renovate the
hotel rooms and facilities on a regular basis.
The company's housing and land development division, through its two housing
subsidiaries, Robinsons Homes, Inc. and Trion Homes Development Corp.,
posted realized revenues amounting to P101.3 million, 57% higher from P64.5
million."
New projects such as Bloom-fields Tagaytay, Bloomfields Davao, and Robinsons
Residenza Milano in Batangas are also well-received. The division is seeking
several joint ventures in key provinces to further expand its growth.
Cost and expenses climbed 32.53% to P1.1 billion from P828.82 million.
As a result of higher marketing and selling expenses of its high-rise
division, general and administrative expenses rose 30.66% to P289.77 million
from P221.77 million.
While interest income fell 58.94% to P25.39 million this year from P61.83
million last year, since the initial adoption of new accounting rules
entails higher level of interest-bearing principal compared to previous
years.
After the successful primary and secondary share sale of sister firm
Universal Robina Corp., Robinsons Land is mulling to increase its free float
to 40% from the current 7% within the year.
This was disclosed by Lance Y. Gokongwei, JG Summit Holdings, Inc. president
and chief operating officer. JG Summit is the parent of both Universal
Robina and Robinsons Land.
Yesterday, the one-week trading suspension on Universal Robina shares was
lifted. It closed 2.7% lower to P18 from P18.50 on Feb. 6. It opened at
P17.75 and hit a high of P18.25.
"I am happy with the reception, but I will be happier if five years from now
it is higher than this. We are considering increasing the free float of
Robinsons Land enough to generate the substantial free float and be part of
the index again," Mr. Gokongwei told reporters.
Universal Robina set the final offer price of its primary and secondary
share sale at P17. Out of the 730 million shares on offer, 603.04 million
shares and 31.74 million shares are allocated for international and domestic
offers.
Mr. Gokongwei said JG Summit will likely increase its free float "a few
years from now but not immediately."
"The main reason we took the re-offering for Universal Robina and Robinsons
Land is to increase the free float. Because of limited free float, the share
price is undervalued [and does not] reflect the growth prospects for either
Robinsons Land and Universal Robina. It does not reflect share prices of JG
Summit. With the successful re-offering of both Universal Robina and
Robinsons Land, we will likewise experience a re-rating of JG Summit shares.
We hope the two major subsidiaries will be re-rated by the market.
Hopefully, it will give a boost to JG Summit," he said.
Philippine Stock Exchange President Francis Ed. Lim lauded Universal
Robina's move to increase its free float.
"Since its initial public offering in 1994, Universal Robina has grown and
expanded to become one of the region's biggest manufacturers of branded food
products. Its growth, therefore, should serve as a beacon to closed
corporations out there to follow the example of Universal Robina because
there is no doubt the capital it pooled from its first offering helped the
company build the financial muscle to compete in the region," he said.
Universal Robina yesterday listed P10.8 billion of stocks of which P4.8
billion will represent fresh capital to replenish the company's war chest
for expansion.
Leo Venezuela, an analyst from ATR-Kim Eng Securities, Inc., earlier said
there is no further impact on the firm's earnings per share and ownership
dilution with the exercise of greenshoe option as it all consists of
secondary shares. He recommended a buy on Universal Robina shares.
"Universal Robina's post-offer free float will increase further to around
40% from the original 36% foreseen. In our view, a further 12% increase in
free float will make Universal Robina more liquid and hence make its
intrinsic value more realizable. Our price target remains unchanged at
P29.55 based on our DCF [discounted cash flow] calculation, suggesting a 60%
upside. Even at its target price, Universal Robina will be trading at 18.7x
2006 earnings, comfortably within the range of its regional peers. Total
shareholder return for the year is seen at 63.4% inclusive of the 3.4%
dividend yield on an expected P0.62 cash dividend for the year. Going
forward, we see Universal Robina's growth drivers to be higher-margin
branded consumer foods like candies, snacks, non-carbonated beverages as
well as a turnaround in its China business this year due to rapid growth
built around the Jack 'n Jill brand."
2tradeasia.com analyst Martin L. Espanol said Universal Robina is expected
to reap fruits from regional operations within its branded consumer food
products division and operations in Thailand, Malaysia, Indonesia, China,
Hong Kong, Singapore, and Vietnam.