Commercial & Industrial Property News Update

Philippines - Listed Property Companies Driving Force Behind Real Estate Growth

October 22, 2012

CBRE Philippines said that with a 15% share by market capitalisation, listed property companies are the main driving force behind the growth of the Philippines' real estate sector.

Listed property companies in the Philippines provide an investment window to local and foreign investors, acting as the main factor driving the growth of the country's real estate sector, said CBRE Philippines.

The property consultancy said that listed property companies represent approximately 15% of the sector by market capitalisation.

"The Property Sector Index (PSI) as of March 2012 registered the highest record since 2008 at 1,881.71 and is equivalent to a P/E (price to earnings) ratio of 23.15 times, still within tolerable levels," said CBRE, adding that the three largest contributors to the industry were: Ayala Land Inc.; SM Prime Holdings; and Robinsons Land Corp.

"The aggressive development thrust of Ayala Land provides large and sustainable income generating projects that supports a share price upside to investors," it said.

"In the property sector, SM Development Corp. (SMDC), the mid-income residential development arm of SM Land, is aggressively developing condominiums across Metro Manila including Tagaytay City. This, coupled with determined land banking strategy, shows promise of unprecedented growth for SMDC," CBRE added.

On the other hand, Robinsons Land continued to see advances in revenue across all business segments, led by its commercial and residential divisions. This runs contrary to its undervalued share price of a low P/E ratio of 10.3x as of end 2011 and rising to 15.3x by the first quarter of 2012.

CBRE said that the second quarter was an encouraging period for the real estate industry, with the local real estate sector remaining among the best performing markets in the region.

"Developers are actively pursuing projects and more big ticket developments are being lined up in the sectors of residential, office, hospitality and retail. Consistent with their expansion plans, developers are aggressively working on the acquisition of land which would be included in the ranks of active projects," said the firm.

The timing is also very suitable for developers to utilise their existing land banks due to favourable market conditions, noted CBRE.

The main business districts of Makati City and Bonifaco Global City in Taguig City are still drawing the bulk of new investments, although there is an increase of activity in the fringe areas. Developers remain highly interested in Bonifacio Global City with its stock of vacant ready-to-develop land and favourable location.

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