Cebu Landmasters, Inc. (CLI) Earnings Call Transcript & Summary

[Audio Gap] 2024. And of course, I'm here with our CFO, Grant Cheng, the hardest worker here aside from me. So we're very pleased to be reporting strong results to you, our shareholders and to our analysts viewing. We are reporting double-digit growth in earnings to parent. Parent [indiscernible] at surge 24%, soaring to PHP 1.7 billion from the adjusted PHP 1.37 billion in the first half of 2023, reflecting alignment with the updated IFRS. Secondly, robust top line growth across all segments. Consolidated revenue surged PHP 11.31 billion from PHP 9.15 billion in the first half of 2023, marking a 24% growth. Thirdly, strong sales take-up backed by sustained solid housing demand in VisMin, sustainable housing demand in VisMin indicated by 94% sell-out status across different stages of development and 10% increase in reservation sales for the period. When we say 94% sold, this 94% sold of newly launched under construction and completed projects. So a very, very strong indicator and I would believe, industry-leading growth. Fourth, consistent asset growth and improved debt-to-equity ratio. Asset growth was driven by progress in construction from sold units, while the debt-to-equity ratio improved significantly from 1.83x to 1.49x due to the successful issuance of preferred shares. So we're very happy with this outcome. Lastly, continued expansion of recurring revenue projects, strong pipeline of leasing projects and expanding hotel portfolio with 3 new openings, including Citadines Bacolod City, In VisMin, poised to drive future hospitality revenue growth. So we've been very busy wearing our hospitality caps the last few months, and it was cities Bacolod that open most recently with much success. So at this stage, I'd like to turn the stage over to my very good friend, Mr. Grant Cheng to talk more about our results.

Yes. Good morning, everyone, and thank you for Franco. So allow me to walk you through our financial statements and our financial results. And before I begin going through the details of our financial results, can I -- I'd like to first emphasize that what you're seeing is a comparative number between the first half of this year and the adjusted numbers from 2023. And the reason why we're showing adjusted numbers is because it is this year in 2024 when new PFRS standards were implemented and, therefore, what we wanted to do was to properly compare -- the results of our first half 2024 using the same consistent standards as that -- that we are applying now with our results from last year. So this is an apples-to-apples comparison. And the other note I would like to give is that these results that we're showing you will lead up to a year-end 2024 FS that will include restated 2023 numbers. So just to recap the key difference for the key aspect of what changed, it is essentially separating the interest component, both on our revenues as well as our cost of goods sold. And I will elaborate that as I go down by financial statements. So first, we're pleased to report that our revenues grew by 24% year-on-year versus the adjusted number, and that includes growth across our real estate sales as well as significant growth in our hotel and rental business. So while our recurring income business is still relatively compared to our residential business, relatively small. It has been growing leaps and bounds, and we are beginning to see -- we are in early stages of what should be quite an explosive growth in the financial results from our operating income assets as we bring them online. But as always, we do not let go of our core business, which is we're a housing developer. We build and deliver residential units to address the internal -- almost what feels like an eternal backlog in our housing demand. So there is never any shortage of demand for affordable well-built master plan housing and later as we show you our project launches, these things will bear out. So total revenues for the first half of this year is PHP 11.3 billion. This is a 24% growth year-on-year from last year. And what we did this year is we separated the revenues attributable to actual sales and attributable to what they call an interest component from the financing scheme that we give during the sale of our projects. You will see these -- these numbers that you see here, they're not present on last year, but we took the liberty of also applying the same treatment to our numbers last year. So you could see an apples-to-apples comparison. Our cost of sales also went up, and you could see our gross profit also went up accordingly. So we actually maintained our gross profit margin here compared to last year, but most of the interest expense that last year was embedded in cost of sales. So again, for the analysts and those looking at our financial statements, you will notice that the restated interest expense here from last year was not present in our filings. It was embedded here in cost of sales or a lot of it was embedded in cost of sales in our official filings last year. But because of the new standards this year, we separated them so that you could compare our cost of sales and interest expense this year as well. Happy to elaborate on this, if you have any questions later. So this all translates to the similar growth rate down the line. It's a profit before tax of -- sorry, it's the profit before tax of 2.9 -- PHP 2.97 billion and a consolidated net income of PHP 2.2 billion, resulting in a parent net income after tax of PHP 1.7 billion, which is a 24% growth year-on-year. And again, this was achieved while maintaining steady margins both on the gross profit, EBITDA and net income. This was mostly driven by the key factors of recognizing revenues, which is a continued delivery of progress completion of our construction projects that are, by and large, fully sold out, it is the continued collection of equity amortization payments, the monthly payments that our buyers are giving us so that they qualify actually for revenue recognition as well as a significant one-off lot sale with from one of our joint ventures to another joint venture, and this is the new joint venture that we announced with the Japanese conglomerate NTT. So here we highlight the trend of how our revenues are growing. So there was -- this was the small dip from COVID that was a result of some catching up with construction. And we've, by and large, a product with construction progress, but we are constantly reviewing, again, standards of progress completion that will factor into how aggressively or conservatively and how much revenues we should be capturing. But these are all, again, accounting and completion judgment calls. It doesn't change the fact of how much sales we actually have reserved in our bank pocket. So realized revenues, again, it's a lagging indicator because it's simply a belated recognition of contract sales that we signed up 2 to 3 years ago. And as we wait for them to qualify for revenue recognition through collections, as we wait for our buildings to be completed -- we presented for completion, you will see this gradually increase. Where are the markets contributing to these revenues -- for the first half, you can see it's quite a well-balanced mix of revenues with this onetime -- one-off gain from the lot sale, but it's coming from our mid-market as well as our affordable housing segments, okay, with a significant contribution as well from our premium masters, or our high-end offerings. And most of our revenue recognitions are coming from Cebu and Mindanao now as well as Visayas and Cebu. If the previous slide of recognized revenues are a lagging indicator, reservation sales are leading indicator of where our revenues, our cash flow and net income will be in the next couple of years. And this, for me, is quite -- it's still a very encouraging trend. So you could see how much new revenues or new sales we are generating from not only our new project launches, but even our existing inventory. And this year, we have already signed up PHP 11.6 billion worth of new reservations and contracts. That will be poised to be recognizing the revenues over the next couple of years. So this is a 10% growth from the same period last year of PHP 10.5 billion. And so you could see that demand is there, and this is how we will -- we plan to deliver growth and value to the shareholders and our investors. -- for many years to come. There is simply so much housing backlog that we can sell into that. We see this reservation sales trend continuing. You could see that most of the sales, in fact, are coming from our mid-market garden series. So this is a product also of timing that is so happened. The land bank that we have and that we deployed, where we got our license to sell called for a mid-market product, and that's what we sold out. So as Franco said, we're very proud of this achievement, but it also points to a sign that there's still so much more room to develop, and we see no signs of this demand abating. Next slide, please. Now I would like to pause and take a moment to emphasize a very important aspect of our finances and how to interpret CLI's results. It is true and while it is true, that a lot of the numbers we are resulting are a result of accruals. That's not necessarily a bad thing. In fact, I would say it's simply a natural product of the business that we're in. The fact is that we are mostly in the residential segment. Our core business is developing, buying and selling land -- buying a land, developing it and selling houses to our consumers based on a payment scheme that makes it affordable for them, which means that the collection of that contract, the majority of that collection comes at the end during turnovers. This is not just CLI's business model. It is the business model of the residential market all over the Philippines. So to any one of you who bought from a developer, you know usually the payment scheme is a partial payment of the contract while the project is being built and a bulk payment of the contract upon delivery. So the question really is, as a developer, how can we demonstrate and actually report auditable numbers to our investors and the banks and the public that shows the strength of our business. If you will not allow us to accrue, we will not be able to show how sold out we are. We will not be able to show our market impacts, and we are actually underselling our performance and we're not able to demonstrate where we're using our capital. And I really want to emphasize this because when we raise capital, as we did with our preferred shares, when we do bilateral loans with the banks, when banks look at consider our projects for project financing, even when banks consider giving us -- giving our buyers home loans, we need to find a way, and PFRS dictates those standards to be able to report those results according to standards that are, of course, audited by third-party auditors and checked by our -- prepared by our accountants. And that is by way of accrual. In other words, yes, accrual is there. But in the first place, if you didn't have contract sales from your buyers, you wouldn't have those accruals. If you didn't have good collections from your buyers, you wouldn't have those accruals. So I would, in fact, offer this point of view, that the best and most reliable way, especially for a business like CLI whose business is more than 90% in the residential segment where we get our collection towards the end of the project, it behooves us, it is only fair that we show our investors, again, both on the equity and the debt side, show investors where the capital is going and how well their capital is being deployed. May I ask you to move one slide before. I do want to highlight and wrap up this point with one -- a couple of interesting statistics that I think complements and should add more context to the view that I'm saying. In these accruals, you might ask. So how do -- what assurance or can you provide more context on -- to contextualize the quality of these earnings, the quality of these accruals? Can you provide more details? And this is something that we're extremely proud of. Our delinquency rate, meaning those buyers who are late in payments stand at less than 3.25% -- 3.24%. So take note, these -- when you say delinquent, these are buyers who are paying us their down payments already, but the inventory is still with us. We're holding back those inventory. And we only deliver inventory once they fully pay us and a cancellation rate of 4.84%. I do believe this is something that not all developers might voluntarily give. But for us, we would like to -- we want to show this because I do believe this is industry-leading cancellation rates with an 83% a sellout -- recovery rate as of the period. What does that mean? It means that even if one of my contracts get canceled, 83% those contracts that get canceled gets sold out or resold usually at a much higher price within the next 12 months. And later on, if Franco would mind, there's a slide we'll show you this translates to the sellout rate that we have. That's why our sellout rates or the rate at which we're selling out inventory doesn't go down below 95%. There's usually a wait list of people who want to get into our projects, we want to buy our products. And this, for me, demonstrates the quality of the earnings that we are reporting, the [ reliability ], the predictability of not only revenues but also cash flow. So next slide, please. So we've been showing this next slide a little bit for a few periods now, but it does -- it shows a very important aspect of CLI in that we still have PHP 82.4 billion worth of collections from contracts that we have. So again, these are not projections. These are actual signed contracts from our buyers, of which PHP 13.65 billion is due for collection or we call it takeout is due for the buyers have to pay us the balance for 2024, which goes to show that the majority of these collectibles, I'm not yet calling them a receivable because they're not yet due and demandable, but the majority of these collectibles PHP 68.75 billion will be collected over the next 2 to 5 years depending on where they are in the construction cycle. And I know -- or there's a strong confidence about the reliability of these collections because of the delinquency rate, because of the cancellation rate that we monitor on a week-to-week basis. So they still have upside because we're not even talking about the inventory that we will still release to the market plus the new launches that we plan to execute from our existing land bank. Now having said that, of course, so this is about maintaining a strong balance sheet, managing our cash flow and finishing your projects on time and on budget so that we can collect this PHP 82 billion of collectibles. Next. So that segues very nicely into the balance sheet that we are showing. So of that PHP 82 billion of collectibles only these are the contract assets and receivables. Only about PHP 53 billion is recognized. Again, a lot of them are the PHP 82 billion, that's a leading indicator. It comes from our sales, but this one is already a product of not only collection thresholds, but also percentage of completion. Then compare that against our interest-bearing liabilities, not to mention the fact that we have over PHP 18.8 billion of investment properties that will soon generate recurring income for us, and we've been saying this for a few periods now. We want -- we're putting together a road map to eventually put this asset into [ arrear ] as these projects mature. This is where our very solid, very strong balance sheet. This is where the strength of our balance sheet is the right front. So our total assets tank at PHP 107.54 billion with total liabilities of PHP 75 billion and total equity of PHP 31 billion. Yes, our preferred shares really helped us with our debt equity ratio. It will allow us to show a much improved one. But again, for our investors there, we do treat our preferred shares as a hard and fast obligation when we pay out those dividends. Next slide. So finally, I just wanted to brief you on our debt maturity towers. So again, compare this to the PHP 82 billion of receivables that we have as well as when they are maturing and the aging of those collectibles from our contracts. And we are -- we sleep very soundly at night. We know that -- we know that we have the financial strength. We have the signed contract assets -- again, not the projections, the signed contracts by which to be able to pay these obligations twice over [indiscernible]. And while, yes, cost of money has gone up because of interest rates. I think CLI as well as most industries out -- a lot of business out there are eagerly awaiting our -- not only our BSP but the world economy -- the world's central banks, to finally ease and cut interest rates. But then again, this is simply for us, cost of doing business. We're a high capital business, cash flow is going on later. But we do make good money even at these interest rates. The fact is our business model is strong. It's resilient. We are profitable even at these levels. We'll make money even -- cost of money of 6.86%. Of course, they're going up because a lot of the money that we secured pre-pandemic in fact, they're starting to cycle out. So now our marginal cost of money is a little bit higher. But again, we are managing quite well. And it allows us to have captured so much market share in the last 3 to 4 years. Okay. So with that, I hope that provided some useful context and information as you assess CLI, and I'll contextualize more and perhaps provide more details as I pass the screen back to Franco.

Yes. Thank you, Grant. Excellently done. Thank you for stressing the confidence you have in our results and as always, you always eloquently explain it to our analysts. Thank you very much. So for the business updates, I'll tackle this, and I'll finish it off with the milestones for the first half. You can see our quality land bank worth PHP 10.3 billion. We are in the process of building it up to -- with acquisitions that we're working on right now. One is in the Visayas and 2 are in Luzon. So we'll report to you once these deals materialize or actualize. So you can see how well spread out our land bank is. Majority now is in Mindanao, where we're practically sold out. And we're excited to position more launches in Mindanao. It's really, I would say, an untapped region where players are in a wait and see, while CLI is in a go and proceed. So we've also announced at the early part of the year that we are expanding to Luzon. Our office is being fitted out now in Makati. We hope to invite you and have our next briefing there. So that should be the third quarter briefing to be held at our Makati office in Arnaiz Avenue. And of course, we will keep you up to date on our 2 projects in Luzon once they materialize. So next slide. As for CapEx, we are on track for the year. We've spent close to half of what we are programmed to spend this year. Of the PHP 6.7 billion, majority, of course, is in residential development at 67% or PHP 4.5 billion, PHP 1.2 billion or 19% is in lot acquisition and 13.9% is in our investment property. As Grant pointed out, we have PHP 18 billion of investment properties reflected in our books. And definitely, we are looking at this investment property to create a very strong track record and eventually position this as a very good VisMin [indiscernible]...

Yes. Franco, I'll just add.

Yes.

Of course, that PHP 18 billion is at cost value. So that's just to demonstrate that as these assets start contributing their recurring income. That's just to contact -- There's some -- the upside that we can have. And we're -- we're not reappraising them. We're not doing any revaluation reserves to inflate our equity. They're at cost. But eventually, when we -- when we're able to recognize the real value, especially as they contribute to our recurring income. I look forward to that day when we can recognize the asset.

Yes. Same here, Grant. These are 9 hotel properties, 8 with international brands, over 200,000 square meters of retail and office space. So yes, we are definitely in agreement there. And we are working on completing these for those that operating, we're working on filling them up and making sure that it perform with the best track record. So next slide, Clar. Yes. This is our humble portfolio that we are very proud of with 95 residential development, 6 offices, 10 hotels, 10 mixed-use and 3 estates. So as Grant has been pointing out, we're looking at this -- is reflected as PHP 18 billion at cost, and the real value is really for us to realize and position further in the coming years. Next slide. For real estate sales are [indiscernible]. Of course, this is our bread and butter. You can see here, 23% growth in real estate revenue. 94% sold across all stages. And I can confidently say this is top of industry in VisMin or among the top 3 in the country in terms of sold-out status across the board. And we've launched PHP 8.33 billion in new projects for the first half. Next slide. So this is our batting average. With our 99 residential projects having developed over 40,000 units. This has generated PHP 137 billion, and we've sold 94% of that PHP 137 billion. So you can see how healthy this is. This gives us the fuel to launch more projects to professionalize the team further to establish stronger presence in our current sites. For the last 2 weeks, I was in Davao and Iloilo. And I can see the team there just asking me, do we have more projects to launch? Because the problem we have is we need to launch more because the market is always looking forward to our launches there. Next slide. So I'll quickly run through. You can see our -- these are actual projects now, our completed projects, 97% sold of all these, our famous baseline premier project here, MesaVerte in Cagayan de Oro, Casa Mira in Iloilo. I just saw the clubhouse there. It's very nice. Our Mesavirre condo offering in Bacolod, our 38 Park Avenue, which is really our showcase, and we hope to build on further from this, continue to improve, perfect our premium segment. We have our Casa Mira coast in Sibulan -- it's not Sibulan Masters -- sorry, just a small joke, but Sibulan is a town in Dumaguete, near -- beside Dumaguete. Velmiro Greens Bohol and Mesavirre Garden Residences in Davao. Look at these projects and how we're able to contribute to our nation building through these projects. Next slide. Ongoing construction is really a, I would say, our Chairman and CEO Joe Soberano, this is where our battleground is. We need to deliver. We need to be faster than our peers. We need to not just in terms of giving better pricing and value, but in our delivery. So we have Astra Place, our upper mid offering that will be turned over starting this last quarter. Casa Mira Homes Dumaguete also will start turning over the next quarter. Casa Mira Ormoc also in the next 2 quarters. Velmiro Heights CDO now our overlooking the bay will start turning over also before the end of the year and 1 Paragon Bay. So these actual projects are -- imagine Grant was talking about receivables and our takeout. So this will now move from a receivable to take out not to accelerate the cash flow that we are [ beating ] out. Next slide. And of course, in the recent launches, so in the last 12 months, already 81% sold. This includes our Velmiro Heights Consolacion, 99% sold; Velmiro Heights Davao, sold out; Mindara, 99%; Butuan, which is really, I would say, a Tier 2 city with a lot of promise, a lot of potential, and we're so happy to be reaching 70% sold in just 6 months in Mirani Steps Danao, a new product. So you can see here how I would say agile we are, and it's a core value we have. Expansion area doing well. New product line, selling out. It shows really the, I would say, agility of the company. I give a lot of credit to the team, our SBO approach from the visionary CEO that we have, a strong operational management team and through a very responsive team down the line. So this is CLI. Next slide. So retail projects, as we -- as Grant has mentioned that we're building up. It's not just about the quantity, it's also about the quality of these office and retail projects. Next slide. So you can see a very steady growth in our leasing portfolio. What's important is these complementarily are residential and mixed-use offerings. And we're going to see this jump up further with our mall offering opening in Astra and DGT in the Davao Global. So you can see our great selection or great array of retail tenants. Next, please. Okay. So this is where we've been very busy. You can see the strong hospitality growth, and we now have 460 completed hotel rooms from 180 just a year ago. So basically, we added almost 300 in less than a year. And this next slide will show you our hotel portfolio. So you can see here that we opened The Pad, our co-living brand, very exciting product, and we hope to do more of this, some land owners are knocking on our doors. We can do more of The Pad for them. Lyf Cebu City is the second lyf by Ascott in the Philippines and it's picking up steam. It's getting busier and busier. Of course, our -- I would say, fully developed. And then I would say the best hotel, where you can find in Bacolod City, with Citadines Bacolod, which opened just last quarter. So in the coming months, we are basically completing Radisson RED in Mandaue, Citadines Paragon Davao. I was just there and Mercure in the downtown area of Cebu to be the biggest hotel in the downtown area. So please, be our guests, just choose. Where you'd like to stay here. So the next slide. First, talking about our townships that is starting to really contribute to our bottom line. So we do have 121 hectares of land for development, 3 existing ones, you can see our DGT here, [ 4 of our DGT ], the next slide. So we're busy completing our retail offering here called the City Center. This was inspired really by California, walkable retail offering, full of fresh air, well ventilated, well shaded and with a very generous 1 hectare park. It's -- we call it the BGC of Davao, actually, there's a 10 million-liter detention tank under that park, so flood-free in this area. And of course, our very famous East Village is now rising up to the sixth floor. This also practically sold out in its first and second phase. Next, please. Of course, I'll now finish off with significant milestones and Grant and I will lead the Q&A and hope to get some questions from you. This was very refreshing. Velmiro Heights Davao selling out in 2 days. These are record so far. We generated PHP 2.75 billion in 2 days. If only we can bring more. I'm sure we could have sold PHP 10 billion of this. If we just had really more inventory there, and we're working on that. The middle market and affordable segments of the Philippines are still where the bulk of the demand is. This reflects that. It's just very important to offer affordability, but the same time, really screen our buyers well, meaning CLI has the best asset best in performing asset ratio among all banks -- in most banks, not because we know the right affordability. We give the right screening process for buyers. So we want to say that when we're 2.75% sold out, just a 5% delinquency ratio and an 81% sales retention. Those are the numbers we look at, and I urge our analysts to compare how well we track it versus our peers. And please let us know.

I'll Just provide one important context to what Franco said. And I think a lot of you know that our business model is a little unique in the sense that we do not offer in-house financing to our buyers. So the receivables and collections that we've been having -- and we presented continuously, those have a finite life span to be converted into cash, to be liquidated and monetized precisely because we don't use our balance sheet to still squeeze more profit out of that. That's not our business model. We're not a financing house. We are a real estate developer. So all of those contracts to sell, we push them out or we work with our financing partners, primarily with commercial back and with Pag-IBIG in order to give home loans to our buyers. So the result of this very disciplined buyer who from the very start of their sales process knows that they have to qualify for bank financing that they cannot rely in-house financing means a pool of buyers that are already season and preseason and for the most part, will be bankable. So when Franco said, we have the best performing loans, it means that we actually check in with our banks about the delinquency or the NPL ratio of the cohort of CLI buyers. So I checked with BPI, with RBC, with China Bank, with BDO. And we checked with Pag-IBIG, we checked with them. If you isolate the CLI cohort of buyers, what is the delinquency or the nonperforming loans ratio. And we usually, if not always, end up being at the top of the developers that have buyers with the best-performing accounts. So that says something not only of the quality of buyers while they are with us. So it gives me another data point to know the predictability and again, how the quality of those contracts and therefore, our accruals in connection -- and you add that, it complements the internal data we are seeing on our own delinquency and cancelation features.

And I just wanted to be exact. My team here has informed me: So our delinquency, as of June, rate is 3.24%; cancellation rate of 4.84%. So thank you, ladies. You're sharper than me at times. So next slide. Next please, yes. And we're very proud to announce that we recently signed a new joint venture with Martinez Agricultural Corporation, one of the most well-respected families here in Cebu. This is to develop a residential condo in the mid-town Cebu area, one of the primest, safest neighborhoods in Cebu. Soberano family and Martinez family go way back. This partnership is about trust, about family, about friendship. So while we are investing just over PHP 380 million [ in position ], this can generate over PHP 3 billion in sales for us and our joint venture partner. So very excited. And we continue to be very selective with our partners, working with the best partners with the same values and ambition. So thank you to Martinez family of Cebu. Next slide. And yes, I was like a hotelier in the past few months with our hospitality lead, Mr. Bergundthal. So we opened our first hotel outside Cebu. And our first hotel outside Cebu is our biggest hotel, so far, with 200 rooms, 5 F&B outlets and 1,000-square-meter ballroom. We held our annual "swing with the masters" golf tournament, hosting over 600 guests in our first day of the ballroom, so that's how fun we can be. You can see the beautiful interiors inspired by the MassKara colors of Bacolod. The Pad is really addressing a need to have decent accommodations in prime areas for dormers, students and out-of-towners. And lyf Cebu City is Cebu's version of Ascott's newest brand that targets the millennials and those with ageless mindsets. So next slide. So Grant, maybe you want to talk about this and how much this meant to you. I give all credit to Grant and our corporate finance team on this. Maybe you want to highlight this...

Yes. So earlier in April, we listed our maiden preferred shares. Again this is simply us making sure we have an expansive source of capital, so it's hybrid, of course. It's equity that -- it is equity on our balance sheet, but we do treat it as debt. But it all points to the same thing, which is we continue to enjoy very strong confidence from institutional investors. It's also a testament to our governance and our ability to be able to comply with regulatory requirements as a company based -- as a still relatively small-cap company. It demonstrates our way to keep going back to the capital markets and earn that trust. And so I always say that this is just always the beginning, that we got our investors to say yes. It's always incumbent upon us to deliver and to keep proving and demonstrating that we are worthy of that trust and that we are responsible stewards of that capital entrusted to us. So incredibly proud of the team for having accomplished this, but at the same time, I know that, that capital -- we'll be working very hard to provide homes, to provide real -- excellent real estate developments addressing our housing backlog, developing the countryside and really contributing to nation building, so no better use of capital, for me, than where our investors put it in.

Of course. And lastly, we'll end with how much we care about our shareholders. Of course, we have a very strong customer-first attitude in CLI. Our customers are really our bosses, our partners, our homeowners. I don't mind personally replying to homeowners because I want them to be happy. I just replied to an e-mail the day -- a day ago to a unit owner in one of our condos, but for shareholders, I think we want to assure you that we've been taking good care of our shareholders. We've declared over PHP 3.1 billion in dividends from 2018 to 2024. And Grant was just pointing out to me earlier we raised PHP 2.2 billion from IPO. So we've given back more than funds we raised from IPO. And we are going to do our best to keep it that way, where not only our customers but our shareholders feel the upside, feel the benefit of the trust and confidence in this company. And we're -- this year, we're beefing up our investor relations team. There will be renewed focus on really promoting CLI, showing what we've done in the last 7 years as a publicly listed company. That's why we're setting up an office in Manila to be closer to the market. And we hope that you continue to support us, continue to trust us, trust that we will reciprocate that trust as well. So we'd like to end on that note. And we are now going to open the floor, the virtual floor, to your questions. So thank you very much.

Thank you, Sir Franco and Sir Grant.

[Operator Instructions] So let me read a couple, sir, that I have received. So this one is for Sir Franco. "Congratulations to the new joint venture with the Japanese group NTT UD. So can you give us more details on what stage of development is the new project right now?"

Yes. Great question. We're very proud to be the first partner in the Philippines of NTT UD and actually the second partner in the entire Southeast Asia. NTT UD has a great presence in North America, in Europe and the U.K. I just saw their offices in the U.K. and Australia, but we're actually the second partner in the entire Southeast Asia. And it means a lot. And it also means we have a lot to prove, so -- and Japanese are very efficient partners. So right now we're actually moving into design development stage or construction drawings already, and you can expect us to launch the project before the year ends. So this is a 2-tower premium residential offering in the heart of Cebu I.T. Park. I think there are no new offerings in the business district of Cebu. Cebu Business Park and Cebu I.T. Park command the highest land values, thanks to the -- giving due credit to the good estate management of Ayala. They are the original developers of these estates. As the land owners, they're -- also chip in, contribute to our ideas in managing the estate. So please expect that, in 3 to 4 months time, you will be seeing the visuals and the announcements about our residential tower with NTT UD.

Thank you so much for that, sir. Actually I have a follow-up question to that. They are asking if CLI has plans to develop also a property in Japan.

Well, if we can, why not? But as you know, of course, our partner is looking at the greater returns you can enjoy here in the Philippines. And that's why they look at partner like CLI that knows the ground game very well. I believe, just like any -- whether NTT or other partners, they of course research about the partner, the developer. And I believe what we have is a very strong ground game and strong governance, but to develop in Japan would be a great dream. I mean, just like Olympics, we are shining and for real estate development of Filipino real estate developers to go abroad. Some have already gone that path, but we -- it's not in the immediate horizon but a nice to have in a more medium term but no plans [ for now ].

[ Thank you ], Sir Franco. Now for the next question. This is from Rastine Mercado from China Bank Securities. So his -- he has 3 questions here. So his first question is gross margins appear to have dipped quarter-on-quarter. "So is this a function of timing? Appreciate if you can provide some color on [indiscernible]."

Yes. Rastine, thank you for the question. And the answer is yes. It's absolutely a -- mostly it's a question of timing simply because it's a function of what projects drove or had the most percentage of completion in a certain period as well as which projects have collections that have matured and went to revenues or became qualified for revenues. So I wouldn't be too concerned about the quarter-on-quarter movement on gross profit margins, but rather we're looking at overall several-period trends of gross profit margin. And to be completely open and provide the proper details and background on this, it is one of the more important metrics you will see. It's been -- I've said this a couple of periods before. We expect that this caused -- our gross profit margin is under pressure from inflationary pressures the -- especially as Philippines is a very import-dependent country on steel, for example, and fuel and oil and general prices of goods, but so far, we've been able to maintain margins because we've also been able to slowly and very deliberately, in a very controlled manner, pass on those inflationary measures to our sales. In other words, we have increased our prices accordingly to try and maintain those margins, but always -- this transmission mechanism of inflation is never perfect. And it's always the costs that rise up faster than the prices of our units and rightfully so, because what we want to do is we will -- again, we will slowly raise prices to make sure that the -- our market can absorb it, which going back [ for a circle ], it means that, if there's inflationary pressure, labor wages should also catch up, again from a broader [ economic ] standpoint. And we will see this as we calibrate and carefully raise prices that still achieves the sell-out rate that we're [ aiming for ].

Thank you, Sir Grant. Let me read the second question. "Can I ask what -- the value of the land sales booked in the first half of 2024? And are you expecting further lot sales in your other estate projects in the second half [ as well ]?"

Yes, I'll take that. So the lot sale is PHP 1.9 billion that we achieved, and this is a one-off. There are other potential lot sales that we are entertaining, but to be clear: That's a bonus for us. It's more of a one-off basis. If the right deal comes along and the right locator comes along, we are very much open to it. In fact, we are in discussions with some institutions who want to take on some of that, especially in our townships, but the vast majority of our land bank are meant to be developed for housing.

Thank you, Sir Grant. For his last question: Do you have any updated launch guidance for the rest of the year given the robust sales take-up that we continue...

Yes. I think Franco will have these numbers. Go ahead.

Yes, yes, sure. Interestingly, yes, we do have a lot of launch -- to launch. I think we've only launched 1/3 of what we've, I would say, programmed to launch, but the good thing is we've sold a lot from our existing inventory. That's why it's now 94% sold across the board. So we are still positioning to launch. I'll just spell it out for our analysts and those following: We are still preparing to launch our first residential offering in our Manresa township. You can see a lot of -- Xavier University just [ posted ] a nice walk-through of the new campus. It's a dream that -- it's realized now. And we are doing our residential component adjacent to it, so expect that. That's 3 towers in our Manresa township. We're launching additional house-and-lots in our Casa Mira South. That's already nearing more than 4,000 houses built in our largest Casa Mira offering in Cebu or basically in the Philippines. We're also preparing to launch a new offering in Bohol City the North of Cebu. Due to Davao Global Township's popularity, we're preparing a new residential offering there. After East Village, we're now preparing [ The West Village ]. And lastly is our NTT UD or CLI NUD partnership, which will have 2 towers, but we're launching our first tower before the year ends. And you'll be very excited to see it once we announce it. It's going to be a great project. So yes, very busy. And imagine: We've already breached our reservation sales even without those projects. I mean we're confident to finish the year hitting our reservation sales target.

Thank you, Sir Franc. For the next question, this will be addressed to Sir Grant, from [ James Gujito ]. Is CLI considering [ any ] capital-raising initiatives in quarter 4 2024 or first quarter 2025, potentially for [ a bond issuance ] or [ A ] preferred shares offering, to fund the capital expenditures [ and pending finance ] [indiscernible]?

The answer is yes. This is a function -- and again what we're waiting for is -- we're biding our time to maximize and optimize that effort. So I want to provide some details on that and provide our -- some insight into our thinking. So we're expecting interest rates to go down. And that provides us with a prime opportunity to refinance some of the existing debt at lower rates. We're very conscious and a little bit sensitive now about the cost of money. Again we said, I did mention this. We're a high-capital business. And part of the game and the name of the game to be able to preserve profitability and cash is managing our cost of money as well and having a good blend of our capital, so if we do come out with a bond issuance, which is probably our intent, it is #1 because we already have an approved shelf registration with SEC that will expire in the middle of 2025. So we can use it and we intend to use that. It's going -- probably going to be a much better environment, i.e., lower interest rates, when we do it late this year or early next year, more likely early next year. And the intention is not to add more indebtedness to our balance sheet but really to look -- to be on opportunistic refinancing maneuver to save the company some basis points here and there in terms of our financing and to be able to fix longer-term rates at more competitive prices. That should allow us -- and it will open up our capital expenditures as well. Money is fungible at the corporate level, but then what that will do is it will allow us to allocate more of our internally generated cash, those collection and receivables that I was showing. Instead of paying down principal, we could then deploy that to capital expenditures -- puts us in great position to capture more market share. If you were -- if you noted that slide a while ago on how many houses we built: We built less than 40,000 houses. So contextualize that and compare that against the 6.5 million housing backlogs that we have. And so this is consistent with our plans to just grow our core business where we're best at as we go into new markets in Luzon as well as expand our existing markets here in Visayas and Mindanao.

Thank you, Sir Grant. Maybe I can read 2 more questions before we end.

Sure.

So this next question is for Sir Franco. Can you give updates on the Luzon acquisition?

Yes. Since we are still in the middle of our due diligence, I can only disclose high-level information. So we are looking at a vertical project in Metro Manila and a horizontal project in Cavite, and we are very excited. Of course, while you can see our land bank and our presence, VisMin will remain to be our focus, but I believe it's very important for awareness in Metro Manila; and for Metro Manila to see what made us successful in VisMin, our approach, our value for money, our servicing. And we're very excited for the challenge in Manila, so we're going to bring -- supposedly a horizontal, but Chairman Joe and I, with Grant, felt that we can also do verticals sooner. Because we do the high, mid and affordable segments. So we're looking at a middle-market vertical and a affordable horizontal project. And we'll keep you up to date.

I'll tease the [indiscernible] a little bit more and just say that these are -- when we say Metro Manila, it is not greater Metro Manila. We're talking about a very nice piece of land in Metro Manila right beside a very bustling commercial -- it's within a bustling commercial center, high density, with great infrastructure. I myself, Franco, I'm born and raised in Manila. I know that neighborhood. It's going to sell. It's going to sell well. I already know it because of the product that we can offer. I've always felt that we can offer a compelling product at a very attractive price point and -- for the product that we're able to deliver. If we'll just execute our product the same way that we're executing here in Cebu, that's going to do really well. And that's on the vertical in Metro Manila. The horizontal is in a place in Luzon that is, again, one of the fastest-growing economic regions. So to those of you who might know the regions and how -- their economic performances, you probably can guess already, but this is in a very high-growth region. It's already surrounded by other subdivisions. And so we are fortunate that we are already essentially in the closing stages of acquiring this land. And we will be able to develop and have a good partnership with the community there and to bring our signature Casa Mira brand to the housing market in Luzon. So I'm really excited to launch that. it's one that will -- I'm sure, will turn heads. And people from Luzon will say, wow, that's a -- will get to know CLI like people in Visayas and Mindanao already know CLI.

So thank you. For the last question this morning: After the completion of the new hotels [ and leasing ] projects, does CLI have a target date when to do a REIT [ explore ]? And do you have a target value?

Okay, I'll take that question, [ yes ]. So it's too early to have a target date or a target value -- that's the question...

Yes.

Okay. It's too early to tell, precisely because we want to go out and offer a REIT that has compelling value, that has a unique selling proposition, that has assets that have proven [ track records ]. And so in terms of the date, first, we know our priorities. We want to deliver and open the operations of these investment properties, of these recurring-income assets. We want to establish and sign up long-term quality tenants with a good mix so that we can show a strong track record, so when we finally go out into the market, hopefully, it's in an environment that attracts a good valuation. So a lot of that has to do with interest rates as well as the overall real estate market. What I can say is that none of our investment properties has or will have exposure to POGOs. That's -- again, fortunately, that's just not a business that we were in. So that's what we want to establish. So as Franco mentioned earlier, we have a hospitality portfolio. That's going to be a key anchor to our REIT. We also have retail and office spaces that complement our mixed-use townships and our mixed-use developments that we will put into that. So no specific date, but I can tell you that we are planning to do this sometime in 2026 or 2027 at the earliest. So there is a ramp-up to that activity. There's a road map and some legal structuring that has to be done in order to lead up to that; and organizational preparedness as well, as we need to look for ways to hire and add to the organization that is required under the REIT structure. So there's work to be done, but what's important is we have the assets. We're building them. And they're very close to become operational that can serve as the foundational REIT assets that we can infuse into a REIT vehicle within the road map that we're crafting.

Okay, all right.

[ So yes ], that's all the questions, sir.

Yes. And yes, just to close, yes: Chairman Joe was saying, "Is this report exciting enough?" He was asking us. I mean, what's not exciting about these good results? I mean we do hope that these results are pleasing to our shareholders. We just had our town hall with our 900-strong employee base. We're very motivated. We're going to have our strategic planning session next month, and we really want to continue this. We're going to continue this; improve the quality in our results as well, not just a quantity result but the quality in our results. And when we come back to you in November for our third quarter results, we hope to share more good news. I mean -- and that's what -- we're always going to work hard on it. So thank you so much to all of you joining here on this busy Tuesday. And see you in Manila for our next briefing. It should be in our office in Manila.

Well, it's we want to spiff it up a little. It's under -- I know we're fitting...

November [Foreign Language] [indiscernible].

November [Foreign Language]. Thanks. All right.

All right, you very much.

Thanks, guys. See you.

Bye-bye.