1、Asia Pacific Equity Research06 May 2022Philippine PropertyFaced with multiple headwinds; downgrade ALI, RLC and MEG to N, keep SMPH at OWPhilippinesPropertyJeanette Yutan AC(63-2) 8878-Bloomberg JPMA YUTAN J.P. Morgan Securities Philippines, Inc.Jelline Gaza, CFA AC(63-2) 8878-J.P. Morgan Securities
2、 Philippines, Inc.Cusson Leung, CFA(852) 2800-J.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedSee page 50 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered i
3、n 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.We turn incrementally negative on the PH pr
4、operty sector. We prefer malls over the residential and office leasing segments on the back of a strong consumption rebound and variable-rent inflation protections. A broad macroeconomic recovery trend remains intact, but the structural pivot toward a hybrid work model poses the risk of a protracted
5、 recovery in office vacancy and investment-related residential demand. This somber outlook is exacerbated by margin risk from rising construction cost and higher debt cost. We cut our FY22E/23E EPS by 6%/18%,reflecting such risks. We reiterate SMPH as our top pick (OW), downgrade ALI, MEG and RLC to
6、 N, and keep FLI at N. SMPH: Discretionary spending rebound proxy, offers inflation shelter. We think SMPH is best positioned to benefit from the strong discretionary consumption rebound and offers shelter against rising inflation. We narrow our 2022E mall rental discount to 15% from 20% vs. 30-50%
7、in 2021, as foot traffic and tenant sales are now back to 75% and 70-80% of pre-pandemic levels, respectively. Rising inflation is also not an issue, given SMPHs variable rent structure and portfolio of market-leader tenants with strong pricing power. ALI: Slower pre-sales growth + resi margin risk
8、mar slow earnings recovery outlook. We downgrade ALI to N. We expect the slow earnings growth to be amplified by headwinds from weaker investment-related housing demand (reverse migration out of NCR), residential margin compression on construction cost and higher financing charges. We cut our 2022E
9、pre-sales gr. from 27% to 15% and our FY22E/23E EPS by 1%/17%. Valuations at a 17x 2023E P/E (-1.3SD vs. mean) cushion downside risk to the stock. MEG: Hybrid work model casts shadow on office proxy. We downgradeMEG to N. The BPO sectors shift to a hybrid work setup is structural, in our view, and w
10、ill cap long-term office demand absorption. We believe this is a bane to the de facto office proxy, MEG (44% of FY22E EBIT), despite its agile response of delaying new GLA to 2024E and raising its provincial exposure, i.e.,Iloilo. Resi (21% of FY22E EBIT) also faces cost headwinds and a muted growth
11、 outlook. We struggle with the dearth of upside catalysts, even with its appealing valuation (5x FY23E P/E). RLC: Defensive positioning in the price, downgrade to N. We like RLCs defensive position, with its superior office pre-lease commitment (70% for FY21-22E new GLA), relatively higher provincia
12、l exposure and robust balance sheet. However, RLC has outperformed PSEi by 12% in the last six months. We see profit downward revision risk this year (JPMe -5% below the Street) due to elevated resi back-outs until 1H22 (slower pre-sales gr., lower resi revenues)due to a slower return of renters to
13、NCR. FLI: Office vacancy overhang remains. We retain FLI at N. FLI derives 87%of its profit from the office and resi segments, which are embattled by respective high vacancies post-POGO-exodus (30%/24% for FY22E/23E) and margin risk. These could keep valuations depressed for FLI (5x FY23E P/E).PH pr
14、operty preference orderSMPH RLC MEG ALI FLI JPM PTDec-22Pot.#SD23E(Php)upsideRtgP/EALI34.05%N-1.3FLI 1.053%N-0.6MEG3.2013%N-1.6RLC21.08%N-1.1SMPH44.025%OW-2.4Source: J.P. Morgan estimates.Stock price performance Source: Bloomberg Financial L.P. As of 6 May 2022.-13%-10%-10%-2%4%1%-8%-8%-7%-6%-3%-7%-
15、4%-5%-7%-5%-20%-10%0%10%ALIMEGFLISMPHRLCBanksPropertyPSEi1M6M每日免费获取报告1、每日微信群内分享7+最新重磅报告；2、每日分享当日华尔街日报、金融时报；3、每周分享经济学人4、行研报告均为公开版，权利归原作者所有，起点财经仅分发做内部学习。扫一扫二维码关注公号回复：研究报告加入“起点财经”微信群。 2Asia Pacific Equity Research06 May 2022Jeanette Yutan(63-2) 8878-Equity Ratings and Price TargetsMkt CapPriceRatingPri
16、ce TargetCompanyTicker($ mn)CCYPriceCurPrevCurEnd DatePrev End DateSM Prime HoldingsSMPH PM19,402PHP35.20OWn/c44.00Dec-2243.00n/cAyala LandALI PM8,792PHP32.50NOW34.00Dec-2245.00n/cRobinsons Land CorpRLC PM1,882PHP19.50NOW21.00Dec-2224.00n/cMegaworld CorpMEG PM1,432PHP2.83NOW3.20Dec-224.40n/cFilinves
17、t Land, Inc.FLI PM472PHP1.02Nn/c1.05Dec-221.25n/cSource: Company data, Bloomberg Finance L.P., J.P. Morgan estimates. n/c = no change. All prices as of 06 May 22.Key focus charts Figure 1: Strong discretionary spending rebound to drive mall rental normalization by year-end (Php bn)Source: Company da
18、ta, J.P. Morgan estimates.Figure 2: Supports faster profit reversion to pre-COVID-19 levels for mall-heavy developers SMPH and RLCSource: Company data, J.P. Morgan estimates.Figure 3: Weaker BPO office demand absorption due to pivot toward hybrid work + new supply to keep vacancies elevated Source:
19、Colliers International Philippines. Metro Manila office completions in 000 sqm.Figure 4: Reverse migration to provinces led to lagging workplace mobility in NCR + slow recovery in resi rentals / investment demandAs a % of pre-pandemic level (7D average) Source: Google Mobility data.Figure 5: Higher
20、steel, cement prices to drag on resi margins; ALImost vulnerable, with high resi mix, integrated contractor Source: Company data, J.P. Morgan estimates.Figure 6: Slower profit recovery for ALI and FLI amplifies interest rate profit risk despite lower % of debt subject to refinancing riskSource: Comp
21、any data, J.P. Morgan estimates.37%61%78%92%58%57%56%79%90%75%86%80%99%122%116%0%50%100%150%ALIFLIMEGRLCSMPHFY21AFY22EFY23E327 481 518 1,329 1,363 786 883 434 632 898 589 4%9%16%19% 19%0%5%10%15%20% - 300 600 900 1,200 1,500201320142015201620172018201920202021 2022E 2023EMCBDOCBDBGCEWALAOthersVacanc
22、y rates %-80-60-40-20020NCRCalabarzonCentral Luzon36%43%46%46%59%33%41%44%44%56%58%56%39%21%37%0%15%30%45%60%20%30%40%50%60%ALIFLIMEGRLCSMPH19A21A22E23EResi profit mix 22E9%2%37%0%14%8%7%14%0%2%12%10%15%23%17%29%19%65%23%33%0.90 0.67 0.25 0.23 0.82 0%20%40%60%80%100%ALIFLIMEGRLCSMPH% floating% short
23、-term% maturing 2022ENet D/E3Asia Pacific Equity Research06 May 2022Jeanette Yutan(63-2) 8878-Figure 7: Earnings breakdown by segment (2022E)Source: J.P. Morgan estimates. SMPH/ALI on EBITDA, RLC/MEG on EBIT, FLI on GP.Table 1: Profit sensitivity to key factorsImpact to 2022E base-case net income100
24、bps chg. in interest rate of floating, ST and new debt1% pt.chg. inresi margin5% chg. in mall rental disc.5% chg. in office vacancyALI4.9%3.8%3.6%2.2%FLI6.0%3.0%2.1%6.2%MEG3.0%1.9%1.5%3.3%RLC1.0%1.8%6.2%3.5%SMPH2.9%1.4%6.2%0.8%Source: J.P. Morgan estimates.Table 2: Interest rate, PHP weakness and co
25、mmodity price risk vulnerability rankingRisk Ranking5 = Higher relative riskCommodity price impacton resi marginsProfit risk fromdebt refinancingFX debt exposureRelative Risk Score5 = Higher relative riskSMPH2Longer firm commitments (1.5-2Y) for centralized steel, cement procurement; 3rd party contr
26、actors237% of existing debt are ST or maturing in 2022E but profit impact tempered by faster profit recovery426% of debt in USD, 60% of which is hedged8ALI53M rolling contracts for steel (12% of COGS); fully-integrated construction arm; highest resi mix430% of debt at risk*, relatively high D/E and
27、lagging profit normalization3Negligible FX denominated debt (3% of total)12RLC1Lowest resi mix, uses 3rd party contractors + owner-supplied materials1No ST and floating debt, 23% maturing in 2022E, lowest D/E1No FX denominated debt3MEG3Delayed pass on due to 3rdparty contractors365% of debt in float
28、ing rate, ST or maturing in 2022E, but low D/E537% of debt in USD, 14% of which is hedged11FLI4Higher resi exposure, uses mix of internal and 3rdparty contractors520% of debt at risk* and lagging profit recovery1No FX denominated debt10Source: J.P. Morgan. *Sum of floating interest-rate debt, ST deb
29、t and maturing debt in 2022E based on existing debt.Figure 8: PH Property stocks trade sub mean P/E, NAV disc.Based on five-year means and SDsSource: Bloomberg Financial L.P., J.P. Morgan estimates. Prices as of 6 May 2022.Figure 9: 6M stock performance (Rebased at 100 on mid-Oct21)Source: Bloomberg
30、 Financial L.P. Prices as of 6 May 2022Table 3: Philippine Property Valuation CompsJPM PTPriceMkt CapJPM NAVMkt Disc5Y AvgP/E (x)5Y AvgEPS vs. 2019AEPS gr.PhpUpsideRtgPhpUS$mnDec-22to NAVNAV Disc22E23EP/E22E23E22E23EALI34.05%N32.59,160 75.9-57%-48%27.817.120.657%86%42%63%FLI 1.053%N1.02471 3.6-72%-6
31、7%7.14.95.656%80%30%44%MEG3.2013%N2.831,716 12.9-78%-65%6.55.38.679%99%0%24%RLC21.08%N19.51,897 59.1-67%-60%13.09.411.690%122%-1%38%SMPH44.025%OW35.219,364 53.9-35%-18%35.722.930.475%116%29%56%Sector-46%-32%30.219.325.170%107%29%55%Source: Bloomberg Finance L.P., J.P. Morgan estimates. Prices as of
32、6 May 2022.56%56%39%21%37%23%34%45%44%8%18%9%14%18%46%0%20%40%60%80%100%ALIFLIMEGRLCSMPHResidentialOfficeRetailHotelOthers-1.2-1.3-0.9-1.4-0.6-2.4-1.6-1.1-1.3-0.6-3.0-2.5-2.0-1.5-1.0-0.50.0SMPHMEGRLCALIFLI#SDs NAV discount#SDs 23E P/E8595105115125Oct-21Nov-21Dec-21Jan-22Feb-22 Mar-22Apr-22ALISMPHPCO
33、MPMEGRLCFLI4Asia Pacific Equity Research06 May 2022Jeanette Yutan(63-2) 8878-Stock views and sector preferencesWe turn incrementally negative on the PH property sector. We prefer malls over residential and office leasing segments, on the back of strong consumption rebound and variable-rent inflation
34、 protection. Broad macroeconomic recovery trend remains intact but the structural pivot towards hybrid work model poses risk of a protracted recovery in office vacancy and investment-related residential demand. This somber outlook is exacerbated by margin risk from rising construction cost and highe
35、r debt cost. We cut our FY22E/FY23E EPS by 6%/18% reflecting lower residential sales take-up growth, lower resi margins, slower office vacancy recovery and higher interest rates. We reiterate SMPH as our top pick (OW), downgrade ALI, MEG & RLC to N, and keep FLI at N.Table 4: Philippine Property PTs
36、 and Valuation CompsPTDec-22Mkt ImpliedNAV5YP/E (x)5Y AvgPTImplied P/ERel. perf(vs. PSEi)PhpUpsideRtgDisc NAV Disc22E23EP/E23E1M6MALI34.05%N-57%-48%27.817.120.617.9-2%-5%FLI 1.053%N-72%-67%7.14.95.65.12%-2%MEG3.2013%N-78%-65%6.55.38.65.9-1%-3%RLC21.08%N-67%-60%13.09.411.610.21%12%SMPH44.025%OW-35%-1
37、8%35.722.930.428.7-2%6%Sector-46%-32%30.219.325.123.0-2%0%Source: Bloomberg Finance L.P., J.P. Morgan estimates. Prices as of May 6, 2022.Table 5: Changes in estimates, EPS vs. StreetRtg.Price Target (Php)NAVPS (Php)Assumed NAV Disc.EPS 2022EEPS 2023EEPS Versus StreetOldNewOld NewChg.Old NewChg.Old
38、NewNewVs. OldNewVs. Old2022E2023EALIOWN4534-24%75761%-43%-55%1.17-1%1.90-17%-17%3%FLI NN1.251.05-16%3.893.58-8%-68%-71%0.14-4%0.21-20%-15%6%MEGOWN4.403.20-27%14.6012.87-12%-70%-75%0.430%0.54-18%1%-4%RLCOWN2421-13%6259-4%-61%-64%1.50-16%2.06-23%-7%8%SMPHOWOW43442%51546%-16%-18%0.99-10%1.53-16%-9%6%Se
39、ctor-30%-35%-6%-18%-11%5%Source: Bloomberg Finance L.P., J.P. Morgan estimates. Prices as of May 6, 2022.Figure 10: Earnings breakdown by segment (2022E)Source: J.P. Morgan estimates. SMPH/ALI on EBITDA, RLC/MEG on EBIT, FLI on GP.Figure 11: Earnings breakdown by segment (2023E)Source: J.P. Morgan e
40、stimates. SMPH/ALI on EBITDA, RLC/MEG on EBIT, FLI on GP.56%56%39%21%37%23%34%45%44%8%18%9%14%18%46%0%20%40%60%80%100%ALIFLIMEGRLCSMPHResidentialOfficeRetailHotelOthers53%55%35%29%37%18%32%41%35%7%26%13%21%27%49%0%20%40%60%80%100%ALIFLIMEGRLCSMPHResidentialOfficeRetailHotelOthersPH Property Pecking
41、order: SMPH RLC MEG ALI FLI SMPH (better mall rental clarity, inflation shelter with higher mall exposure, faster profit recovery) RLC (defensive play within the sector, stock outperformer, resi cancellations until 1H22) MEG (soft growth outlook on office, bargain valuation) ALI (higher resi mix, sl
42、ow profit recovery, with valuation support) FLI (office vacancy overhang, highest resi mix)5Asia Pacific Equity Research06 May 2022Jeanette Yutan(63-2) 8878-Segment outlook Malls segment offers the most upbeat outlookThe positive outlook is driven by robust recovery in consumption spending and histo
43、rical safe shelter during high inflation. Nationwide retail recovery has breached pre-pandemic level since mid-February with landlords more sanguinely guiding for reversion to normal rates by year-end. We narrow our mall rental discount to 15%/8% for SMPH/RLC from 20%/15% this year and retain the re
44、latively wider 25% for ALI. Mall discounts hovered around 40-50% in 2021.We note that provincial malls retail mobility recovery still outpaces NCR (boon for RLC/SMPH, bane for ALI/MEG), with the slow return of workers back to Metro Manila. Malls benefit from tenants ASP hikes through % of sales port
45、ion of rental revenues, a cushion against a high inflation backdrop. Office vacancy normalization could delay on IT-BPOs structural shift to hybrid work set-upWe think the sectors office supply absorption will weaken with the transition of the IT-BPO industry to a hybrid work set-up. The industry se
46、es strong value from the new set-up in managing the rising attrition cost amid talent scarcity. The hybrid set-up allows the locators access to a bigger talent pool in provincial areas, and limits attrition cost. We also note that the industry has successfully navigated the challenges of a hybrid wo
47、rk environment, i.e. data security, weak telco infra during the pandemic. Salaries is one of the two biggest cost components for IT-BPO.We believe this will weigh on overall sentiment for the office segment. Within office, MEG and ALI are better positioned with higher prime Makati/BGC GLA footprint
48、(lower vacancies, lower new supply), proven track record of developing provincial hubs, and rationalized GLA expansion. New GLA for SMPH/RLC will weigh on overall occupancy (-3-5% pts), while high vacancy at FLI offices could linger.Residential faces headwinds from weaker investment-related demand,
49、higher construction cost, and higher debt costWe revised down our pre-sales growth estimate to 10%/18% in 2022E/23E from 27%/17%, and expect sustained elevated cancellations in 2022 for SMPH/RLC. This is driven by the growing shift towards hybrid work set-up, which inadvertently prolongs the recover
50、y of resi rentals. The latter is a key incentive for investor-driven residential demand. There is no data slicing pre-sales between end-user and investment-related demand but we estimate that 50-65% of the JPM real estate universe pre-sales is driven by investors. The confluence of headwinds from hi
