Ayala Land, Inc. (ALI) Earnings Call Transcript & Summary

Okay. Good afternoon, everyone and welcome to Ayala Land's briefing on our first half results. Joining us on the line are 72 participants. And we'd like to remind everyone that the presentation and the press release is available -- are available on our website, ir.ayalaland.com.ph. And of course, allow me to introduce our panel led by our President and CEO, Mr. Bobby Dy; our Chief Operating Officer, Ms. [ Mian Dy ]; and unfortunately, Mr. Bengzon couldn't join us physically today, so please allow me to share the presentation on this behalf. And afterwards, we can proceed with the Q&A. So to start, Ayala now delivered solid operational results in the first half of 2023, fueled by the sustained resilience of the property market and consumer activity despite prevailing macroeconomic concerns. With consecutive growth in the first 2 quarters of the year, we posted total revenues of PHP 66 billion, 24% higher year-on-year. Our second quarter revenues reached PHP 35.1 billion, 14% better than the first quarter of 2023. Net income registered at PHP 11.4 billion, up 41% year-on-year. In the second quarter, net income amounted to PHP 6.9 billion, 52% more than the first quarter. Capital expenditures reached PHP 38.7 billion to bolster our residential and commercial projects. And we recorded a net gearing ratio of 0.75:1 as we managed our debt and liquidity prudently and kept our balance sheet strong. Turning to segment revenues. Our Property Development segment grew by 13% to PHP 38.7 billion from higher residential completion, bookings and sales of commercial and industrial lots and office units. Property development revenues totaled PHP 21.7 billion in the second quarter, a 27% uplift from the first quarter of 2023. Residential sales reservations in the first semester increased 18% year-on-year to PHP 58.3 billion as second quarter sales reached PHP 30.6 billion, 10% more than the previous quarter. Meanwhile, commercial leasing revenues improved by 39% year-on-year to PHP 20.2 billion due to higher occupancy and rents. Commercial leasing revenues totaled PHP 10.1 billion in the second quarter, similar to the first quarter of 2023. Moving to the income statement. Our real estate revenues reached PHP 64.5 billion, representing a 23% increase, fueled by the strong performance of the Residential and Commercial Leasing segments. Interest and other income reached PHP 1.5 billion, 46% higher than the previous period. This growth was attributable to higher equity earnings from unconsolidated associates and joint ventures and income from interest in investments and other sources. Our equity and net earnings from associates and joint ventures surged by 63% to PHP 871 million, driven by higher revenues of Ortigas Land, our joint venture with Royal Asia, FBDC Companies and Eaton Properties. Meanwhile, interest and investment income amounted to PHP 217 million, marking a 70% increase from the same period last year due to higher yields from short-term investments and cash deposits. Other income generated from marketing and management fees from our joint ventures amounting to PHP 400 million, reflecting an 11% improvement from last year. On expenses, the increase in line with our revenues. And for the period, this amounted to PHP 50.3 billion, 24% increase from last year. Real estate expenses reached PHP 39.2 billion, up 28%, while general and administrative costs increased by 24% to PHP 4.1 billion. Consequently, the GAE ratio settled at 6.3%, slightly higher than 6.2% last year. On the EBIT margin, it stood at 34.1%, better than the 30.6% we recorded in the first quarter of this year and exceeds our historical average of 33%. Interest expense, financing and other charges totaled PHP 6.9 billion, 6% more than last year as we collected -- as we reflected higher interest rates on our borrowings and a higher average daily loan balance. Deducting expenses from revenues, income before tax grew by 23% to PHP 15.8 billion. This increase translated to an income tax provision of PHP 2.7 billion, 2% higher year-on-year. And as a result, income before noncontrolling interest totaled PHP 13.1 billion, 29% more than last year. [indiscernible] of noncontrolling interest, which declined by 19% to PHP 1.7 billion, net income attributable to Ayala equity holders grew by 41% to PHP 11.4 billion. Our Residential and Commercial Leasing segments fueled our top line growth. Property development revenues increased by 13% to PHP 38.7 billion, driven by higher residential project completions, bookings and sales of commercial and industrial lots and office units. Residential revenues reached PHP 31.2 billion on higher completion and bookings. Office for sale revenues registered a 44% growth from last year, owing to sales from One Vertis Plaza in Quezon City. Revenues from commercial and industrial lots totaled PHP 5.4 billion, similar to last year, from sales generated at Arca South and Broadfield estates. In Commercial Leasing, revenues improved by 39% to PHP 20.2 billion from higher occupancy in rents. Shopping center revenues surged by 49% to PHP 10.2 billion. Office Leasing revenues increased by 8% to PHP 5.8 billion. And Hotel and Resorts revenues advanced by 79% to PHP 4.2 billion. Moving onto Services, composed of our construction company, Makati Development Corporation and property management company, power services and our airline AirSWIFT, total revenues amounted to PHP 5.6 billion, 55% higher than the previous period. MDC posted net construction revenues of PHP 2.7 billion, 64% higher than last year given the contribution of its external projects. Meanwhile, APMC, AirSWIFT and power service companies combined revenues grew by 48% to PHP 2.9 billion due to higher AirSWIFT patronage and parking usage. Summing up the top line, real estate revenues amounted to PHP 64.5 billion, a 23% growth from last year. And with interest and other income of PHP 1.5 billion, total revenues grew by 24% to PHP 66 billion. Moving on to our margins, starting with the Property Development business. The average gross profit margin of horizontal residential projects was 48%, 5 percentage points higher than last year due to more high-margin projects such as Ayala Land Premier's Ciela in Cavite, Avida's Greendale Settings in Alviera and Averdeen Estates in Nuvali. The gross profit margins for vertical projects increased to 37% and office for sale margin slightly increased by 43%. However, commercial and industrial lot margins declined to 52% during the period owing to sales mix with more sales coming from emerging estates such as Broadfield and Cresendo. Meanwhile, on Commercial Leasing, the shopping centers' EBITDA margin improved to 63% from 59% due to higher occupancy and rent. Offices EBITDA margin slightly declined to 91%. And the overall EBITDA margin of Hotels and Resorts reached 32% from higher occupancy and average room rates. Lastly, the overall EBITDA of service businesses is 11%. Turning over to the operating statistics of our businesses, starting with property development. Sales reservations in the first semester increased by 18% year-on-year to PHP 58.3 billion. Our second quarter sales reached PHP 30.6 billion, 10% more than the previous quarter. Our first half sales translates to a monthly average of PHP 9.7 billion, 38% are horizontal projects and 62% are vertical. Sales were driven by Alveo's Park East Place in BGC; Ayala Land Premier's Ciela in Carmona, Cavite; Arcilo in Nuvali, Laguna; and Parklinks South Tower in Quezon City; and Avida Towers Makati Southpoint. Now in terms of the sales breakdown by nationality, 67% were sales to local Filipinos, 19% higher than last year. Sales to overseas Filipinos were up 12%, while sales to other nationalities grew by 26%. They account for 20% and 30% of the total, respectively. On other nationalities, 57% were sales to Americans, 9% higher year-on-year. Meanwhile, sales to Chinese buyers continue to comprise 1% of total sales. Three new projects with a combined value of PHP 23.1 billion were launched to the market in the second quarter, namely Alveo's Park East Place in BGC, the second [indiscernible] of ALP's Arcilo in Nuvali and Amaia Scapes -- Amaia Steps The Junction Place, [indiscernible] in Quezon City. These developments bring Ayala Land's total launch value to PHP 31.9 billion in the first half of the year and 73% are composed of vertical projects and 27% are horizontal projects. We'd like to highlight that last June, we launched a flagship project in BGC, Alveo's Park East Place, offering 532 units with a launch value of PHP 18.1 billion. It's located at the corner of the 32nd Street and 9th Avenue and is positioned at the center of BGC and 28% of the project has already been sold since its launch. Moving on to our Leasing business, starting with the malls, higher occupancy and rents boosted shopping center revenues. Our total malls' GLA stands at 2.1 million square meters and the average occupancy rate for all malls is 83%. The lease out rate of our portfolio is 89%, while the total GLA under construction is 243,000 square meters. For this year, we will open 44,000 square meters of GLA at One Ayala Avenue and the first pace of Ayala Malls Vermosa at 5,000 square meters. On Office Leasing, higher tenancy and rental rates drove the steady growth of the segment. Our total GLA stands at 1.4 million meters and the occupancy rate for all offices is 89%. The total office pipeline stands at 215,000 square meters, as we launch new projects to capture the demand for new office space. And we look forward to the opening of One Ayala Avenue, the third tower of the mixed use development by next year. Regarding GLA tenancy, BPOs occupy 72% of our portfolio, 11% by headquarter-type tenants, 4% by co-working space plug in and only 2% by POGOs. On Hotels and Resorts, the travel resurgence in the country raised our occupancy and room rates. We have a total of 4,126 rooms in our portfolio. Occupancy has improved significantly, where the average for all hotels was 68% and 45% for our resorts, up 15 and 19 percentage points, respectively. Total Hotel and Resort rooms in the pipeline stands at 1,416. And during the quarter, we opened an additional 88 rooms at Seda Nuvali. For the year, we expect to open 444 rooms between Seda Nuvali, Seda Manila Bay and Hatch Hotel in Sicogon. Moving on to our CapEx. It totaled PHP 38.7 billion in the first half of the year. We spent 55% on residential projects and 11% on commercial Leasing projects. 5% on malls, 4% on offices and 2% on hotels and resorts, 17% on land acquisition, 14% on estate development and the remaining 3% on other general uses. We have a well-managed debt position with 86% locked in fixed rates and average borrowing cost of 4.9% and an average maturity of 4.6%. We contracted 95% into long-term tenors. And finally, our balance sheet stands strong with a net gearing ratio of 0.75:1. Cash and cash equivalents stood at PHP 14.6 billion as of June 2023. Total borrowings amounted to PHP 244.7 billion, an increase of PHP 8.6 billion or 4% from the end of December 2022. Stockholders' equity ended at PHP 307.5 billion, 5% higher than year-end 2022 and our current ratio is healthy at 1.94:1. Total debt-to-equity ratio stood at 0.80. Our interest coverage ratio is 4.4x and is within S&P's prescribed range, 4 to 6x. So to summarize the performance for the period. Ayala Land delivered solid operational results in the first half of 2023, fueled by the sustained resilience of the property market and consumer activity despite prevailing macroeconomic concerns. With consecutive growth in the first 2 quarters, we posted total revenues of PHP 66 billion, 24% higher year-on-year. The second quarter revenues reached PHP 35.1 billion, 14% better than the first quarter of 2023. Meanwhile, net income registered at PHP 11.4 billion, up 41% year-on-year. In the second quarter, net income amounted to PHP 6.9 billion, 52% more than the first quarter. Capital expenditures reached PHP 38.7 billion to bolster our Residential and Commercial Projects. And we recorded a net gearing of 0.75:1, as we manage our debt and liquidity prudently and kept our balance sheet strong. Thank you very much. And now let me open the floor for Q&A.

Maybe Mike, before the Q&A, maybe I'll just make a few comments. I think first, given the first half results were basically highly encourage in terms of the performance of the company. If you look at all business lines, I think all business lines basically grew at a fairly healthy clip when compared to the first half of last year. So moving forward, we're very, very hopeful, especially as some of the macro challenges are start getting -- getting addressed like inflation and hopefully, interest rates moving to the second half starts flattening, if not tapering off now. So we feel that moving to second half, we'll be introducing more projects. We're going to have more launches. We're also going to be opening new commercial assets in the next 6 months. So overall, we feel good about the results and we're very positive for the second half of the year.

Thank you, Bobby. Maybe we can open the floor for questions from our live audience.

Any questions from the floor? Yes, Carl, please go ahead.

I have a couple of questions. First, actually, it's about the tax rate. It looks like the taxes for the first half only went up 2%. Looks like tax rates is probably just in the teens. Is this something we should expect to increase in the second half?

No. Actually, when you look at what has happened because of the REIT structure, so the REIT still gets consolidated into our books but the REIT does not get -- that's a very different tax regime, as you know. And therefore, we now look at the overall average tax rate of Ayala Land because we have now the [indiscernible] vehicle. So the average has actually come down.

Okay. So you think teens tax rate is sustainable.

That will depend on the mix, on how we go moving forward. So obviously, if we're able to ramp up again on the development side and that will basically change the mix and also how fast we're able to inject assets into the REIT.

Got it. On the residential segment, this time, I'd like to get some feel for, let's say, how are cancellations now relative to -- yes.

Okay. Maybe I'll pass it on to Mian.

Cancellations to date have been -- I guess I'll answer that in terms of the impact on our revenues because that's, I suppose, really where it hits our P&L. So it has remained at around 10%. The revenue impact of cancellation has been at 10% of our property development revenue, it, obviously, because revenue has also increased then the impact in terms of absolute value has increased. And this quarter, we experienced, I guess, a little bit higher cancellations on the office for sale products, particularly of Alveo, I guess with the work from home and higher vacancies in the Office segment, that is something that can be expected. But on the other product lines, it's starting to moderate.

Understand. And to clarify what you meant was, if not for the cancellations, development revenue would be approximately 10% higher?

Correct, yes.

And what's the unsold inventory level now?

So basically, in the first quarter, we had reported about 24 months. So now we're at about 22 months.

And for the payment schemes this time? Have you started to tighten the payment schemes?

So you have to look at it on a per segment or per brand basis. So ALP we're basically back to pre-COVID; Alveo, we're basically back to pre-COVID and horizontal but slightly longer still on the vertical. Avida, as you know in the middle income segment, continues to be on a stretch payment term basis. And Amaia has been fairly the same as pre-COVID.

Got it. And for the second quarter, specifically, it looks like sales OFW picked up. I'm just wondering, first, do you credit that to anything? Also, can you tell us what products were popular with, let's say, the OFWs?

So -- and just to make a general comment. I think in general, we feel good about the market, both domestic and international. We put in quite a bit of focus in the international market over the last maybe 12 to 18 months. Mian and her team and Alicia had basically beefed up our international sales. So I think that now is resulting into, I guess, higher sales coming from international. But in general, I think both domestic and international are actually experiencing fairly good growth rates as compared to year ago.

Actually, the 2/3 -- roughly 2/3, 1/3 mix, 2/3 local Filipinos, 1/3 OFW and other nationalities, which is really mostly OFWs. That split hasn't really changed beginning maybe sometime end of last year to this year. But we are more aggressive, obviously, this year. As far as our international sales are concerned, we have -- I expect about -- little more than -- almost 40% more on international sales activities compared to last year.

And I believe previously, you mentioned that the product that was popular with -- at least of the international sales were Metro Manila condominiums, Alveo and Avida, would that still be the case?

That's still the same. Yes.

And for Office this time, you previously had a target of trying to get to mid-90s occupancy. Would that still be the case now?

So right now, we're at 89%. Actually, half of the vacant space is really in a site that was previously occupied by a POGO in Circuit. So we're still trying to look for the appropriate tenant for that location.

Any more questions? Mr. R. J. Aguirre go ahead.

I have several questions. One is a follow-up to Carl's question earlier. Mian, can you give us a context on the 10% cancellation, what it was back in pandemic or last year versus prepandemic, if you may? And yes, that's the first one.

So last year is about the same. You're looking at about 10%, so basically flat compared to a year ago. If you look at the prepandemic, we're looking at maybe around 5%, 6% to 7%. That was the range in prepandemic at that time.

My next question is on offices. You have a pipeline of 215,000 square meters. Can you give us a time line on which years the bulk of that be taken into the market?

We have one that will be completed early next year, which is the tower at One Ayala. We do have under BPOs under construction now in Iloilo. So expect that to be in place in about 18 to 24 months. And then we also have one under construction in Nuvali. So again, expect that within the next maybe 18 months or so.

So bulk is like in the next 18 months?

Yes, the bulk will be in the next year, expect it over the next couple of years, next 2 years. And then we have -- we'll be introducing new project. These are more fairly sizable ones in Quezon City, in the Vertis area, 2 towers in Vertis. So that will take a little bit of time. That would be maybe 4 years down the road.

My last question is on the funding costs. Now there's some bit of uptick like 50 bps. The current long-term borrowing costs, 4.9%. Is that expected to go down? Or is the trend going to be that case?

It depends on, I guess, what happens to interest rates moving forward. I think expect for this year, that is basically the level, if not slightly higher because we do have some more funding requirements for the balance of the year. But hopefully, as what everybody is expecting, what people are talking about that interest rates will start tapering off next year, then hopefully that again starts coming down. So my sense is, we will probably be a little bit over 5% at the end of the year. But hopefully, by next year, that again starts coming down.

Is it part of the reason why your floating is increasing as well -- floating cost is increasing as well? Expectation that...

Building construction costs?

No, the floating interest rates are increasing as a percentage?

That's quite the strategy, yes. So we want to make sure that we manage it given the expectations that rates will start coming down next year. So we want to make sure that we lock in at the most appropriate time for mid- to long-term loans.

We have a few questions on the line. Let's start with Wilson Ng. Are you seeing any increase in office demand from POGOs?

No.

Okay. The next questions. We have a few questions from [ Mr. Marvin Alberto of FAP Securities ]. The first one is, which we, I think, answered already earlier. He asks about the data on the breakdown of the -- he's asking about the date of the breakdown on the existing residential inventory per segment. I guess we gave the value already.

Since, as I said, it's 22 months across the board that came down from 24 to 22 months.

Thank you, Bobby. The next question is what are the factors that would explain, reservation sales continue to be robust despite rising interest rates? What segments drove this?

Well, this quarter, in particular, we had a very strong launch in the Alveo BGC project, Park East Place. So that's an PHP 18 billion valued project and we were able to sell close to 30% in 1 month.

Maybe I could just add also a general comment that I've been telling a lot of people that we're actually in a very good place here in the Philippines. When you look at the economic growth that we continue to experience when we compare it to other countries, we are growing at a very significant clip. I think probably one of the highest growth rates in the world. So does expect economic activity, does expect residential development or commercial sales or consumption to continue to be robust, just because of the way the economy is performing. And I think that accounts for why -- if you look at across all business lines, we continue to grow at a fairly good rate compared to a year ago.

And in line with that, Bobby, he has a question on residential outlook for the remainder of the year. What do you see going towards next year? And what segments are expected to perform well?

I think we remain very positive. I think we have a very good pipeline, particularly for the -- for our premium brands as well as Metro Manila or estate projects for our core brands. So we foresee that the growth will continue throughout the year. I guess on our launches, we remain confident that we will be able to launch the projects that we have initially planned for this year.

Thank you, Mian. We received an interesting question from Mr. Joseph [indiscernible]. Any feedback from BPO office tenants on risk of AI displacing employees?

The feedback we've gotten from the industry is, AI will augment human skills, right? But that also means that there's going to be -- there's a need for upscaling, which is, I think, what the industry and the government now through -- is trying to address, to make sure that the AI gets deployed in a much broader scale, that the skill set of our people are able to keep up. So the initial feedback that we got is, they don't expect any major disruption over the next 2, 3 or even the next 5 years. But it doesn't mean that the jobs won't change, the jobs will have to evolve. And the key now is for us to upscale the existing talent that we have. The challenge actually that we have in the Philippines according to IBPAP is we don't have enough people to fill up the jobs. That is the challenge right now. It's not a challenge of, are people going to be displaced? We cannot keep up with the kind of demand that companies are asking for. So again, job training, upskilling will be key.

Thank you, Bobby. We have Mr. -- we have JP on the line raising his hand. So I guess we can open the line. Go ahead.

Yes. Can you hear me?

Loud and clear.

Okay. First of all, congratulations on the numbers, strong recovery. It's related to the question earlier. Our channel checks also show that you had record breaking sales for Park East [indiscernible]. Are you seeing this across the other developments as well? And I guess I just wanted to get a firmer grip on the outlook. Are you seeing something different now as compared to when you look at the market and real estate demand at the start of the year or in December? And if so, to what would you attribute those? I understand it's economy-related and also perhaps expectations that rates are peaking or have peaked. Just curious as to what your strategic insight of that would be.

When -- I think talked about this during the -- when we presented our year-end results. If I recall, we had actually a very positive outlook for the year. So the results that we're seeing, I think, is basically in line what we had communicated and expected at the start of the year. I think the only minor change that I saw was that I think most people at that time they were expecting interest rates to start coming down by the second half of the year. I think that's now been pushed to next year. So it's got -- obviously, it's got a little bit of impact but from the results this -- from the results we presented, as you could see that we still continue to operate at a fairly good growth rate despite interest rates staying at this particular level.

One final question. Could you talk about that outlook in relation to CapEx and capital management for the next year or 2 years? And launches if you can.

It's a story for us to communicate anything next year but the CapEx number that we have provided when we did the year-end results presentation in February, which is about PHP 80 billion to PHP 85 billion, I think we're basically tracking that we'll be spending anywhere from PHP 80 billion to PHP 85 billion in CapEx in line with what we have communicated at the beginning of the year.

Okay. We can move on to Ms. Xuan Tan of Goldman Sachs.

I just have one question on cancellation. I do recall that earlier, you mentioned you expect cancellation to moderate. Does that still stand? And can you give your latest thoughts on cancellations, please?

Yes. As Mian had said, it's fairly flat but there's a little bit of a change because we see that there may be some slight moderation on the residential but what we saw was an uptick in the office for sale. So we've seen a little bit more cancellations in that. So when we now compare year-on-year, it's fairly flat. But the mix has changed on where the cancellations are coming from.

Got it. And when can we expect this 10% to moderate to prepandemic level?

Well, we're hoping, over time, maybe hopefully, by next year, it starts really coming down in a significant way. Again, that will not be dependent on interest rates, the economic environment and how people are viewing some of these investment assets, particularly on the office for sale, in particular.

If I can just follow up, what's driving this higher cancellation for office for sale?

Maybe I can take that. For office for sale, I suppose it's really driven by the availability of alternatives with the overall office market at close to 20% vacancy. It becomes, I guess, less of a compelling proposition as an investment property, so that may have changed, I guess, the perspectives of some of our office buyers. But I wanted to add also on the nonoffice segment. I think it's also driven, yes, by interest rates but it's also by how quickly the market can tighten payment terms. The tighter the payment terms, the less likely cancellations will happen. So I think we have to take that into account when we think of the likelihood of cancellations going forward.

The next question comes from [ Jose Rafael Vimendosa ]. Any guidance on residential project launches versus the previous target of PHP 110 billion as launches, as of the first half are at PHP 31.9 billion? What are some of the remaining projects for the rest of the year?

I think when we talked about that PHP 110 billion was basically on the property development segment, that's just residential. Now if you look at the total portfolio, I think what we had mentioned a while ago was, we're now seeing inventory levels come down from 24% to 22%. So we're also -- we want to tighten that further. So when we now look at our outlook, we're now projecting that it'll probably come in at about PHP 100 billion for the year.

I suppose for us, the launches, it really needs to follow what the inventory levels are. So it all depends on how quickly we can bring down the inventory as well as what mix of projects we will be launching. So now for example, I think we're going heavier on horizontal projects for the remainder of the year, just as we're waiting for the vertical inventory levels, to start coming down.

Maybe we can entertain again questions from our live audience. Mr. Thomas [indiscernible].

I have 2 questions. First question is, the elevated cancellations for office for sale aside, would it be fair to assume the 2Q levels for both office for sale and commercial and industrial lot sales, that will be now continued for the rest of the year, at least an outlook. That's my first question. For the commercial, for the office for sale and commercial and industrial lot sales revenues basically booked in 2Q, would it to be fair to assume that will continue for the rest of the year, at least outlook from what you're seeing?

No. The -- on the commercial lots -- industrial lots, we're not seeing any kind of elevated cancellation, so we're not seeing that. So the only thing that we saw this year that's different from last year was the office for sale. So we will see what happens in the second half. Hopefully, typically, when you see these cancellations, there's a wave and then it starts tapering off. As you know also, our office for sale is not a very big part of our portfolio. So it doesn't consist of a large part of the development business.

And demand is -- I mean, onto 3Q and what you're looking at, it's been maintained, demand?

The demand, we're seeing some movement but it's not for office for sale. Again, as Mian mentioned, given the vacancies that people are seeing in the market, so it's been a little bit slower on the office for sale segment.

Understood. All right. Second question, correct me if I am wrong, 2Q versus 1Q office revenues, there was a slight dip. Just wondering if, again the context on that versus 1Q?

It's not meaningful when you look at it at short term. But sometimes it's just renewal only, it's just a renewal. So it's nothing that I would read into at this time. I think the business continues to be quite solid. We've not seen any kind of major departure or reduction of space in any of our larger tenants. It's a more -- probably of renewal timing.

Got it. Yes.

Let's go back to Residential. We have a question from [ Mr. Hakim Baharuddin ]. Question is, when do you expect to tighten the payment scheme for the Avida project?

I think it's hard to -- again, the decision [indiscernible] so we can't also act [indiscernible]. Once we see, let's say, for example, significant demand or demand picks up in a significant way, I suspect that all the players, all the major players will start tightening up adherence but we basically track the industry. And I think with the industry outlook right now, at least the last 6 months and maybe -- they made it couple of months, it's still fairly the same payment terms, I think, at least for the next couple of months or so. Again, as we've said, if demand picks up, then there's an opportunity for us and also the industry to tighten up. We're also playing it a bit tactical depending on the project. If the project has a strong take-up, then maybe we'll take the opportunity to tighten in those particular projects.

Maybe just to add, we've been in this, I guess, extended payment term regime for a while now. And I think what we've also done is we've adjusted our own back-end processes, just in anticipation of this kind of payment terms. So for example, we're stricter in terms of making sure we got reservations, if it doesn't progress by a certain point, more aggressive in terms of, I guess, our collection processes because we've been at this for maybe more than 2 years now. So we've also adjusted our own processes, our own policies and our own back end, just to make sure that we avoid further cancellations as the process goes on.

Okay. We have Ms. [indiscernible] from JPMorgan.

I have -- we have 3 questions. First off, is on the [indiscernible] margins. We notice a considerable drop in terms of margins. Is this something that you think will be sustainable given your mix of things that you will launch to the market going forward? And will it -- if not, will it revert back to the 70-plus percent margin that you used to enjoy, in the commercial and industrial lots?

So maybe just to give you a flavor, those lots can go anywhere from let's say, PHP 40 million per lot to PHP 1 billion per lot, depending on what estate? Is it an industrial lot or a commercial lot in Metro Manila or a commercial lot in one of our provincial estates. So there really is a natural variability. But I think 50% is probably the lowest margin levels for projects like that.

Understand. Second question is on the outlook, on the pipeline of new launches. I understand you've been asked a lot of questions before this on the launches. But what we particularly want to understand is, what's the readiness of the market to absorb yet again, another PHP 15 million to PHP 20 million type of vertical condo similar to Park East or similar to Parkford Suites in the next, maybe second half or next year? Or do you think the market can absorb another project launch like that? And if yes, what's the outlook?

Yes. We feel that we -- in fact what we're seeing is strength at the higher end of the market. So if we do decide to launch, let's say, an ALP or an Alveo vertical, rest assured that we feel fairly good about the prospects as demonstrated by the recent launch we had in BGC.

Will it be second half of this year or will it be -- reserve it for next year?

Yes, no, no, yes, I hope so. Yes, third quarter. So we were paying another major premium launch in the third quarter.

Understand. And the next 2 questions are more just data. The first one is on the sales split. Can you expand how much of that came from NCR versus outside? And then secondly, on the unsold inventory. Understand that it declined but can you give us an idea about the split between vertical, the trend, as well as horizontal in the unsold inventory? So presales split between Metro Manila and outside, as well as unsold inventory trend.

The last number we saw was, maybe about, I think, 19 months on the horizontal. We're checking the numbers now about maybe 24, 25 months in the vertical, it's something like that.

On the sales pickup, 53% Metro Manila and 47% provincial.

We'll get back to you on the breakdown in horizontal and vertical.

Horizontal and vertical on sales, I think this year, we moved closer to vertical -- or this quarter more vertical because of Park East Place. 62% vertical, 38% horizontal for the first half.

And then in line with that question on inventory, we received a question from Joy Wang of HSBC. She's asking what would be a comfortable level for management?

I think the guidance we've been giving for the last years has not changed, 18 to 24 months is our target inventory level.

Thank you. And then we received a question from [indiscernible]. What is the book revenue as of the first half of 2023? And I guess I can take that. The total value right now is PHP 162 billion. And then one question from Angeline [indiscernible], can you provide updates on the deferment of the sale of the receivables in the first quarter? I think we were able to raise around PHP 4.8 billion in net proceeds as of the first half. Any final questions from our participants on the line and our live audience? Okay. I don't see any more questions. So I guess that's my cue to close our briefing this afternoon. Thank you very much. I hope you guys were very pleased with our results, as of the first half and thank you for joining us. We have some snacks in the back. So please enjoy the rest of the day. Thank you.