Asia Pacific Equity Research

17 February 2014

Overweight

Ayala Land

ALI.PS, ALI PM
Price: Php26.35

Record 2013, upbeat 2014 outlook

Price Target: Php36.00

ALI sustained its earnings trajectory in 2013, delivering a record recurring

profit of Php11.2B. All business segments posted strong growth, with
property development revenues growing by 50% y/y. ALI exceeded its net
profit target a year ahead of its plan. ALI aims to sustain its record, with
project launches of Php140B in 2014. Maintain OW.
2013: banner year. ALI reported 4Q13 recurring earnings of Php2.6B
(+37% y/y), bringing 2013 profit to Php11.2B (+32% y/y). This is 2-3%
lower than our and consensus and full-year expectations. Just the same,
this is a record profit which is one year ahead of its 5-10-15 plan. The
growth was driven by a 36% y/y rise in real estate revenue, underpinned
by strong residential bookings and a huge jump in commercial lot sales.
Record take-up and launches. Residential sales take-up rose by 18%
y/y to Php91.9B as the company launched a record Php108B (+20% y/y)
or 28,500 units in 2013. Alveo made the biggest contribution to the takeup growth at 25% y/y. The back-out rate of 15% vs the historical range
of 13-20% shows firm buyer confidence. Unbooked revenues stood at
Php99B (+52% y/y), representing 74% of our 2014-2015 residential
revenue estimates.
New growth centers to drive future growth. ALI aims to increase the
number of new large-scale, mixed-use projects in new areas across the
country to drive medium-to-long-term growth, e.g. Vertis North in
Quezon City, Atria in Iloilo. It managed to grow new growth centers
profit contribution from below 20% in 2009 to above 30% in 2013.
Balance sheet still has room for debt capacity. ALI ended 2013 with a
net DER of 62%, still below its target of 1:1 level; we estimate the
company still has Php35B of debt capacity amid aggressive project
launches.
Upbeat 2014 outlook. Management provided an upbeat outlook for
2014. ALI aims to launch 78 projects worth Php142B (Php107B of
which is for residential) across the business segments, and has earmarked
Php70B in capex; these are slightly higher than the 2013 figures.
Ayala Land, Inc. (Reuters: ALI.PS, Bloomberg: ALI PM)
Php in mn, year-end Dec
FY11A
FY12A
Revenue (Php mn)
41,231
49,904
Net Profit (Php mn)
7,139
9,038
EPS (Php)
0.55
0.66
DPS (Php)
0.22
0.30
Revenue growth (%)
16.4%
21.0%
EPS growth (%)
32.1%
20.1%
ROCE
8.5%
7.6%
ROE
12.0%
12.5%
P/E (x)
48.1
40.1
P/BV (x)
5.5
4.4
EV/EBITDA (x)
36.1
33.1
Dividend Yield
0.8%
1.1%

FY13E
68,719
11,560
0.82
0.41
37.7%
24.1%
8.8%
12.7%
32.3
3.8
23.5
1.5%

FY14E
92,316
15,394
1.09
0.54
34.3%
33.2%
10.6%
14.8%
24.3
3.4
18.2
2.1%

FY15E
113,429
19,021
1.34
0.67
22.9%
23.6%
12.1%
16.6%
19.6
3.1
14.7
2.5%

Philippines
Property
Jeanette Yutan

AC

(63-2) 878-1188
jeanette.g.yutan@jpmorgan.com
Bloomberg JPMA YUTAN <GO>
J.P. Morgan Securities Philippines, Inc.

Joy Wang
(65) 6882-2312
joy.qq.wang@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

James R. Sullivan, CFA

(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance
34
Php

30
26
22
Feb-13

May-13

Aug-13

Nov-13

Feb-14

ALI.PS share price (Php)

PSE (rebased)

Abs
Rel

YTD
3.3%
0.2%

1m
-0.4%
-3.4%

Company Data
Shares O/S (mn)
Market Cap (Php mn)
Market Cap ($ mn)
Price (Php)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (Php mn)
3M - Avg daily val ($ mn)
PSE
Exchange Rate
Price Target End Date

3m
-8.2%
-5.4%

12m
-14.7%
-8.6%

14,171
373,406
8,348
26.35
17 Feb 14
10.85
284.54
6.4
6167.82
44.73
31-Dec-14

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 7 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com

Asia Pacific Equity Research

17 February 2014

Jeanette Yutan
(63-2) 878-1188
jeanette.g.yutan@jpmorgan.com

Key catalysts for the stock price:

Upward EPS revisions to FY14E/FY15E
consensus figures
Significant property acquisitions
Positive feedback on 5-Year Plan

Key financial metrics

Upside risks to our view:

Stronger-than-expected sales take-up
Significant commitments for retail and office GLA
expansion programs
Positive developments on new initiatives, forged
partnerships or PPP bids

FY13E

FY14E

FY15E

FY16E

Revenues (Php mn)

Revenue growth (%)

68,719
37.7%

92,316
34.3%

113,429
22.9%

130,838
15.3%

EBITDA (Php mn)

EBITDA margin (%)
Tax rate (%)

20,177
29.4%
21.6%

25,980
28.1%
21.9%

31,166
27.5%
22.0%

35,694
27.3%
22.1%

Net profit (Php mn)

EPS (Php)
EPS growth (%)
DPS (Php)
BVPS (Php)

11,560
0.82
24.1%
0.41
7.02

15,394
1.09
33.2%
0.54
7.71

19,021
1.34
23.6%
0.67
8.51

22,492
1.59
18.2%
0.79
9.43

Operating cash flow (Php mn)

25,225

45,829

60,229

70,319

Free cash flow (Php mn)

Interest cover (X)
Net margin (%)
Sales/assets (X)
Debt/equity (%)
Net debt/equity (%)
ROE (%)
Key model assumptions
Sales take-up growth
ASP increase
Retaill GLA growth
Office GLA growth

21,483
9.00
16.8%
0.27
62.7%
43.0%
12.7%
FY13E
+9%
+2%
+10%
+20%

42,043
11.84
16.7%
0.32
56.3%
36.6%
14.8%
FY14E
+6%
+2%
+5%
+10%

56,152
17.07
16.8%
0.35
49.7%
21.4%
16.6%
FY15E
+6%
+2%
+5%
+10%

65,610
35.12
17.2%
0.36
43.7%
3.0%
17.7%
FY16E
+6%
+2%
+5%
+10%

Source: Company and J.P. Morgan estimates.

Downside risks to our view:

Sharp rise in interest rates
Lower-than-expected residential take-up
Meaningful slowdown in economic growth
Increased competition

Valuation and price target basis

Our Dec-14 PT of Php36 is based on a 10% discount to our

NAV estimate of Php41/share. This reflects the NAV discount
that is near the +1SD above its historical average. We think
this is justified given the company's superior return profile,
established execution track record, robust long-term structural
drivers, and high growth trajectory. Our NAV estimate values
the investment properties based on an 8% cap rate, and
residential properties based on the residual value of land bank
based on market prices.
Revenue by customer

Services,
7%
Residential
, 37%

Commercia
l Lots, 26%

Retail, 19%

Office,
11%

Source: Bloomberg, Company and J.P. Morgan estimates.

Sensitivity analysis
Sensitivity to
5% chg in real estate sales growth
1% chg in gross margin
1% chg in SG&A % of sales

EPS
impact (%)
+/-3%
+/-2.5%
+/-0.1%

Source: J.P. Morgan estimates.

JPMe vs. consensus, change in estimates

EPS
FY13E
JPMe old
0.82
JPMe new
0.82
% chg
0%
Consensus
0.82

FY14E
1.09
1.09
0%
0.99

Source: Bloomberg, J.P. Morgan.

Comparative metrics

Ayala Land
Megaworld
Robinsons Land*
SM Prime*
Filinvest Land*
Vista Land*

CMP
Php
25.8
3.89
19.6
15.04
1.36
5.09

Mkt Cap
$MM
8,177
2,782
1,794
9,356
737
972

P/E (x)
FY14E
FY15E
24.25
20.05
12.55
11.11
12.15
11.60
20.63
17.78
8.10
6.87
7.17
6.22

EV/EBITDA (x)
FY14E
FY15E
19.67
15.90
11.43
10.09
8.33
8.60
15.47
13.92
11.49
9.90
8.15
6.82

Source: Bloomberg, Company and J.P. Morgan estimates. Prices are as of 17 February 2014; Consensus estimates for RLC, SMPH, FLI, VLL.

P/BV (x)
FY14E
3.39
1.31
1.41
2.75
0.65
0.82

FY15E
3.08
1.19
1.29
2.46
0.56
0.75

YTD
Stock perf.
6.46
20.06
-2.00
1.77
-4.26
-1.92

Asia Pacific Equity Research

17 February 2014

Jeanette Yutan
(63-2) 878-1188
jeanette.g.yutan@jpmorgan.com

Table 1: Ayala Land: 2013 Interim Income Statement

Php in millions
1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

Total real estate revenues

Real estate costs
Real estate gross profit
Hotel gross profit
Total gross profit

12,243
(7,923)
4,320
283
4,603

12,511
(7,738)
4,773
266
5,039

13,483
(9,031)
4,452
50
4,502

14,016
(11,127)
2,889
646
3,535

16,716
(10,867)
5,849
364
6,213

17,234
(10,712)
6,522
(4)
6,518

18,896
(12,203)
6,692
(213)
6,479

19,475
(15,272)
4,203
1,085
5,288

Interest and other income

Total operating revenues

491
13,384

482
13,614

845
14,863

3,409
18,071

588
18,516

235
18,119

1,111
21,077

General and admin

expenses
Total operating expense

(1,007)

(1,124)

(928)

(1,667)

(1,309)

(1,220)

(1,374)

(1,479)

(1,413)

(1,667)

(2,157)

Operating income
Depreciation and
amortization
EBITDA

3,596
659

3,915
401

3,574
1,058

1,868
597

4,255

4,316

4,632

Interest and other charges

Income before tax

(538)
3,549

(738)
3,659

Tax
- effective tax rate
Minority interest

(908)
-26%
(511)

Net profit
One-off items
Recurring Net profit

2,130
2,130

y/y%

FY12

FY13

y/y%

39%
37%
45%
68%
50%

52,253
(35,819)
16,435
1,245
17,680

72,320
(49,054)
23,266
1,232
24,498

38%
37%
42%
-1%
39%

3,252
23,811

-5%
32%

5,227
59,932

5,186
81,523

-1%
36%

(1,558)

(1,843)

11%

(4,727)

(5,929)

25%

(1,874)

(2,841)

(1,843)

11%

(5,934)

(8,714)

47%

4,904
809

5,298
882

4,922
1,036

3,445
1,171

84%
96%

12,953
2,715

18,569
3,898

43%
44%

2,465

5,713

6,180

5,958

4,617

87%

15,668

22,467

43%

(661)
3,758

(1,695)
3,582

(1,032)
4,460

(872)
4,661

(1,198)
4,835

(1,693)
5,004

0%
40%

(3,632)
14,548

(4,794)
18,960

32%
30%

(936)
-26%
(529)

(1,042)
-28%
(424)

(585)
-16%
(574)

(1,272)
-29%
(424)

(1,233)
-26%
(567)

(1,115)
-23%
(741)

(1,036)
-21%
(831)

77%
27%
45%

(3,471)
-24%
(2,038)

(4,655)
-25%
(2,563)

34%

2,194
2,194

2,292
2,292

2,422
500
1,922

2,764
2,764

2,861
2,861

2,979
2,979

3,138
500
2,638

30%
0%
37%

9,038
500
8,538

11,742
500
11,242

30%
0%
32%

26%

Source: Company Report, J.P. Morgan estimates

Table 2: Ayala Land: JPM NAV estimate

Office
Retail
Hotels
Property Investments
Property development
Land bank
Gross Asset Value
Net debt
Net Asset Value
Disc to NAV
Dec-14 PT

Mkt value
Php m
43,845
111,532
23,285
178,662
147,085
289,847
615,594
44,803
570,791
(57,079)
513,712

Mkt value
Php/share
3.1
7.9
1.6
12.6
10.4
20.5
43.4
3.2
40.3

% of
RNAV
8%
20%
4%
31%
26%
51%
108%
8%
100%

(4.0)
36.3

Source: Bloomberg, J.P. Morgan estimates.

Jeanette Yutan
(63-2) 878-1188
jeanette.g.yutan@jpmorgan.com

Asia Pacific Equity Research

17 February 2014

Investment Thesis, Valuation and Risks

Ayala Land (Overweight; Price Target: Php36.00)
Investment Thesis
We believe that ALI is the best exposure to the Philippines' robust macro story. ALI
is well positioned to benefit from the strong economic growth and favorable credit
environment which should underpin the sustained robust growth in real estate
demand. We expect ALI to deliver a faster-than-peers 20% EPS CAGR in FY14EFY15E as the company sustains its aggressive project launches and commercial lease
expansion.
Valuation
Our Dec-14 PT of Php36 is based on a 10% discount to our NAV estimate of
Php41/share. This reflects the NAV discount that is near the +1 SD above its
historical average. We think this is justified given the company's superior return
profile, established execution track record, robust long-term structural drivers, and
the company's higher growth trajectory.
Risks to Rating and Price Target
Sharp rise in interest rates, lower-than-expected residential take-up, meaningful
slowdown in economic growth.

Asia Pacific Equity Research

17 February 2014

Jeanette Yutan
(63-2) 878-1188
jeanette.g.yutan@jpmorgan.com

JPM Q-Profile
Ayala Land Inc. (PHILIPPINES / Financials)
As Of: 14-Feb-2014

Quant_Strategy@jpmorgan.com

Local Share Price

Current:

25.80

12 Mth Forward EPS

40.00

1.20

35.00

1.00

30.00

0.80

25.00

0.60

20.00

Current:

1.04

0.40

15.00

0.20

10.00

0.00

5.00

-0.20

Earnings Yield (& local bond Yield)

25%

12Mth fwd EY

Current:

Philippines BY

4%

Implied Value Of Growth*

Jan/13

Current:

Aug/13

Jun/12

Apr/11

Nov/11

Sep/10

Jul/09

Feb/10

Dec/08

Oct/07

May/08

Mar/07

Jan/06

Aug/06

Jun/05

Apr/04

Nov/04

Sep/03

Jul/02

Feb/03

Dec/01

Oct/00

May/01

Mar/00

Jan/99

-0.40
Aug/99

Jan/13

Aug/13

Jun/12

Apr/11

Nov/11

Sep/10

Jul/09

Feb/10

Dec/08

Oct/07

May/08

Mar/07

Jan/06

Aug/06

Jun/05

Apr/04

Nov/04

Sep/03

Jul/02

Feb/03

Dec/01

Oct/00

May/01

Mar/00

Jan/99

Aug/99

0.00

62.56%

1.00

Proxy

0.90
20%

0.80
0.70

15%

0.60
0.50

10%

0.40
0.30

5%

0.20
0.10

PE (1Yr Forward)

Current:

24.8x

45.0x

Aug/13

Jan/13

Jun/12

Nov/11

Apr/11

Sep/10

Jul/09

Feb/10

Dec/08

Oct/07

May/08

Mar/07

Jan/06

Aug/06

Jun/05

Apr/04

Price/Book Value

Current:

6.0x

40.0x

Nov/04

Sep/03

Jul/02

Feb/03

Dec/01

Oct/00

May/01

Mar/00

Jan/99

0.00
Aug/99

Aug/13

Jan/13

Jun/12

Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Aug/06

Jan/06

Jun/05

Nov/04

Apr/04

Sep/03

Feb/03

Jul/02

Dec/01

May/01

Oct/00

Mar/00

Jan/99

Aug/99

0%

PBV hist

3.8x

PBV Forward

5.0x

35.0x
30.0x

4.0x

25.0x

3.0x

20.0x
15.0x

2.0x

10.0x

1.0x

Aug/13

0.80

Jan/13

Jun/12

Aug/13

Jan/13

Jun/12

Nov/11
Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

Oct/07

May/08

Mar/07

Jan/06

Aug/06

Jun/05

Apr/04

Nov/04

Sep/03

Jul/02

Current:

Feb/03

Dec/01

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Aug/06

Jan/06

Jun/05

Apr/04

Nov/04

Sep/03

Jul/02

Feb/03

Dec/01

May/01

Oct/00
Oct/00

Jan/99

Aug/13

Jan/13

Jun/12

Nov/11

Apr/11

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Aug/06

Jan/06

Jun/05

Apr/04

Nov/04

0.0
Sep/03

1.0

0.00
Jul/02

2.0

2.00

Feb/03

3.0

4.00

Dec/01

4.0

6.00

Oct/00

5.0

8.00

May/01

6.0

10.00

Mar/00

12.00

Jan/99

7.0

Aug/99

Mar/00

Jan/99

Dividend Yield (Trailing)

14.00

May/01

12.43

Aug/99

Aug/13

Jan/13

Jun/12

Nov/11

Apr/11

Current:

0.0x

Mar/00

ROE (Trailing)

Sep/10

Feb/10

Jul/09

Dec/08

May/08

Oct/07

Mar/07

Aug/06

Jan/06

Jun/05

Nov/04

Apr/04

Sep/03

Feb/03

Jul/02

Dec/01

May/01

Oct/00

Mar/00

Jan/99

Aug/99

0.0x

Aug/99

5.0x

Summary
Ayala Land Inc.
PHILIPPINES
Financials
12mth Forward PE
P/BV (Trailing)
Dividend Yield (Trailing)
ROE (Trailing)
Implied Value of Growth

8340.06
5.890877 SEDOL
6055112
Real Estate Management & Devel
Latest
Min
Max
14.72
41.67
24.81x
1.10
5.39
3.81x
0.17
6.04
0.80
5.60
12.81
12.43
0.41
0.86
62.6%

Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs

Median
27.98
2.69
0.93
9.26
0.76

Average
27.80
2.81
1.49
9.15
0.76

2 S.D.+
40.91
4.99
4.43
13.12
0.89

2 S.D. 14.69
0.63
-1.46
5.17
0.62

% to Min
-41%
-71%
-79%
-55%
-35%

14-Feb-14
As Of:
25.80
Local Price:
1.04
EPS:
% to Max % to Med % to Avg
68%
13%
12%
42%
-29%
-26%
653%
16%
85%
3%
-26%
-26%
38%
22%
21%

* Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)

Asia Pacific Equity Research

17 February 2014

Jeanette Yutan
(63-2) 878-1188
jeanette.g.yutan@jpmorgan.com

Ayala Land: Summary of Financials

Income Statement
Php in millions, year end Dec
Revenues
% change Y/Y
EBITDA
% change Y/Y
EBIT
% change Y/Y
EBIT Margin
Net Interest
Earnings before tax
% change Y/Y
Tax
as % of EBT
Net income (reported)
% change Y/Y
Shares outstanding
EPS (reported)
% change Y/Y

FY11
41,231
16.4%
12,120
33.5%
9,810
34.9%
23.8%
(221)
10,709
36.2%
(2,620)
24.5%
7,139
30.8%
13,043
0.55
32.1%

FY12
49,904
21.0%
14,112
16.4%
12,022
22.5%
24.1%
(326)
13,226
23.5%
(2,892)
21.9%
9,038
26.6%
13,752
0.66
20.1%

Balance sheet
Php in millions, year end Dec
FY11
FY12
Cash and cash equivalents
24,603 28,596
Accounts receivable
21,578 34,086
Inventories
21,909 24,070
Others
7,035 14,514
Current assets
75,317 101,284
.
LT investments
Net fixed assets
5,395 16,559
Total Assets
154,542 231,232
.
Liabilities
Short-term loans
6,196 15,670
Payables
38,129 51,729
Others
1,304
4,855
Total current liabilities
45,629 72,253
.
Long-term debt
28,258 53,781
Other liabilities
8,612 13,653
Total Liabilities
82,499 139,687
Shareholder's equity
72,043 91,545
BVPS (Php)
4.78
5.99
Source: Company reports and J.P. Morgan estimates.

FY13E
68,719
37.7%
20,177
43.0%
17,886
48.8%
26.0%
(2,241)
16,937
28.1%
(3,650)
21.6%
11,560
27.9%
14,171
0.82
24.1%

FY13E
21,825
46,937
37,954
14,514
121,247
20,888
270,471

Cash flow statement

FY14E FY15E Php in millions, year end Dec
92,316 113,429 EBIT
34.3% 22.9% Depr. & amortization
25,980 31,166 Change in working capital
28.8% 20.0% Taxes
23,460 28,393 Cash flow from operations
31.2% 21.0%
25.4% 25.0% Capex
(2,194) (1,826) Disposal/(purchase)
22,645 28,042 Net Interest
33.7% 23.8% Other
(4,951) (6,179) Free cash flow
21.9% 22.0%
15,394 19,021 Equity raised/(repaid)
33.2% 23.6% Debt raised/(repaid)
14,171 14,171 Other
1.09
1.34 Dividends paid
33.2% 23.6% Beginning cash
Ending cash
DPS
Ratio Analysis
FY14E FY15E Php in millions, year end Dec
24,103 38,669 EBITDA margin
63,055 77,475 Operating margin
38,673 27,853 Net margin
14,514 14,514
140,361 158,528
Sales per share growth
- Sales growth
25,100 29,183 Net profit growth
308,686 345,757 EPS growth

Interest coverage (x)

16,913
9,681 10,283
72,161 98,797 122,639 Net debt to equity
4,855
4,855
4,855 Sales/assets
93,930 113,332 137,777 Assets/equity
ROE
52,406 59,242 57,639 ROCE
13,653 13,653 13,653
159,989 186,227 209,070
110,482 122,459 136,687
7.02
7.71
8.51

FY11
FY12 FY13E
9,810 12,022 17,886
2,310 2,090 2,291
(1,851)
(856) 8,698
(2,240) (3,116) (3,650)
8,912 11,352 25,225

FY14E
23,460
2,521
24,799
(4,951)
45,829

FY15E
28,393
2,773
35,242
(6,179)
60,229

(2,309) (8,585) (5,500) (5,500) (5,500)

66
15
0
0
0
(221)
(326) (2,241) (2,194) (1,826)
2,349
630 1,434 1,378 1,754
6,836 3,036 21,483 42,043 56,152
130
13,560
(1,615)
(2,604)
18,019
24,603
0.22

13,588
31,403
(3,815)
(2,901)
24,603
28,596
0.30

9,655
(131)
(3,450)
(4,005)
28,596
21,825
0.41

0
(398)
(3,312)
(5,718)
21,825
24,103
0.54

0
(1,000)
(3,281)
(7,635)
24,103
38,669
0.67

FY11
29.4%
23.8%
17.3%

FY12 FY13E FY14E FY15E

28.3% 29.4% 28.1% 27.5%
24.1% 26.0% 25.4% 25.0%
18.1% 16.8% 16.7% 16.8%

16.3%
16.4%
30.8%
32.1%

14.8%
21.0%
26.6%
20.1%

33.6%
37.7%
27.9%
24.1%

34.3%
34.3%
33.2%
33.2%

22.9%
22.9%
23.6%
23.6%

54.8

43.3

9.0

11.8

17.1

13.7% 44.6% 43.0% 36.6% 21.4%

0.3
0.3
0.3
0.3
0.3
231.7% 266.7% 275.9% 277.5% 284.8%
12.0% 12.5% 12.7% 14.8% 16.6%
8.5%
7.6%
8.8% 10.6% 12.1%