D.M. Wenceslao & Associates, Incorporated ($DMW)

Good afternoon, everyone. Welcome to D.M. Wenceslao's First Quarter 2026 Analyst Briefing. I'm joined today by Mr. Buds Wenceslao, our Chief Executive Officer; and Mr. Benigno Tatunay, our Chief Financial Officer. Let's start with an overview of the Metro Manila property market. In the first quarter of 2026, Metro Manila office take-up has declined a bit, largely due to the BPO take-up decline, but the traditional take-up has held steady. There will be limited completions, at least in the Bay Area up until 2029. On the residential side, launches have been subdued in the first quarter of 2026. We even saw pre-selling projects that were either paused or canceled altogether due to the Middle East crisis. These conditions are negative for the property sector as a whole, but it provides silver lining for projects that are already ready for occupancy and will not be impacted by the steep inflation brought about by the Middle East crisis. On the valuation of assets in Aseana City, as of first quarter of 2026, we have 62 hectares land bank in Aseana. More than half of our land bank is reserves, allowing us decades worth of runway for growth. In December 2025, Colliers valued the Mona assets in Aseana City at PHP 253 billion. So if you add our net cash as of the first quarter as well as the value of our assets outside of Aseana, our net asset value would stand at PHP 256 billion. That's an over 90% discount to our current market cap of around PHP 18 billion. To put that into perspective, our current share price hovers at around PHP 5 per share versus a NAV per share of PHP 75. On our developments from 2020 to the first quarter of 2026, we've grown our commercial portfolio almost threefold to 236,000 square meters. And in 2028, this will receive another significant boost with the completion of the 70,000 square meters Aseana Plaza Phase 1. [ MidPark ] continued to host and take part in big events, adding to BT's schedule of recurring lifestyle events, bringing in massive foot traffic. MidPark is also still ongoing turnover, welcoming hundreds of new residents into Aseana City. On our 5-year development pipeline, you're already very familiar with this, Aseana Plaza Phase 1 will be completed in 2028. Aseana Plaza Phase 2 is similar size as Aseana Plaza Phase 1. Modaio Flats is our 200-unit co-living development that's set to commence construction within the year. And One Parq Suites, this will be our third residential development further down the road. Aseana Plaza will have a total of 130,000 square meters GLA. The Phase 1, which is already under construction, the 70,000 square meters of GLA. We're already at around 10% of POC as of first quarter of 2026. Our very own LRT station inside Aseana City is bringing in critical mass into Aseana as this directly connects us to a total population of 9 million across all the cities by LRT Line 1 and to wider Mega Manila population of 19 million. And we have our [ Parqal ] bringing in foot traffic from the LRT Aseana Station and from PITX all the way to [indiscernible] . Let me now turn the floor over to Mr. Benigno Tatunay, our Chief Financial Officer, for financial and operational highlights for the first quarter.

Thank you, Jeff. For the first quarter of 2026, net income reached PHP 550 million, supported by the continued resilience of its integrated estate platform. Recurring revenues comprising rentals from land, commercial buildings and other ancillary leasing sources totaled PHP 823 million, representing 87% of revenues for the quarter. Residential revenue stood at PHP 115 million. MII'dPark Towers has begun transitioning to a live-in community, adding a growing residential base of Aseana City and further supporting the state's live-work-play ecosystem, including foot traffic and patronage at [ Parqal ]. 89% of our gross profit is recurring, allowing a stable earnings base and a consumption-driven upside from percentage of sales collection. Of total leasing revenues, PHP 332 million is from land leasing, another PHP 344 million from building leasing and PHP 146 million from ancillary rental revenues. Our building rental margin stands at 71%. Weighted average lease expiry of our commercial buildings remained high at 5 years. Our period ending occupancy of 72% is well above real estate consultancy firms Manila Bay Area office occupancy estimates. Residential revenue stood at PHP 115 million. MidPark Towers has begun transitioning to a live in community, adding a growing residential base of Aseana City and further supporting the state's live work-play ecosystem. Average collection rate is already substantial at 61%, mitigating cancellation risk. Our margins remain the highest in the industry, gross profit margin at 80%, EBITDA margin at 80% and net profit margin at almost 60%. We have a prudently managed balance sheet with debt-to-equity ratio of only 7% and a net cash position of over PHP 1.6 billion, providing ample financial flexibility to support expansion pipeline. To summarize, consolidated revenues for the first quarter reached PHP 945 million and net income totaled to PHP 550 million. Leasing revenues reached PHP 823 million, representing 87% of total revenues. Commercial building and other rental revenues stood at PHP 491 million. Residential revenues, on the other hand, reached PHP 115 million. Net cash position reached PHP 1.7 billion, providing DMW flexibility amidst a volatile macro environment. As for the outlook for the remainder of the year, maintained strong tenant interest across our portfolio will enhance office occupancy rates. MidPark's new residents will augment foot traffic and patronage at Parqal and Aseana City as a whole. Construction of our Aseana Plaza Phase 1 will continue to progress and DMW is set to break ground on Modaio Flats. Elevated inflation and a tighter monetary backdrop could weigh on consumption, borrowing demand and the broader pace of property sector recovery. With this, DMW will remain anchored on recurring income, low leverage with a net cash position and integrated structure of Aseana City, which provides a stronger platform to navigate market cycles with discipline. Back to you, Jeff.

Thank you, [ Ben ]. These are 5 pillars of sustainability. Further details of this are in our sustainability report. As you know, sustainability is at the core of our operations. As of February 2026, we're among the top 14% of real estate companies assessed by the S&P Corporate Sustainability Assessment globally. So in the Philippines, we're among top 2 real estate companies in the S&P CSA. And the Philippines were also included in ATRAM's SDG Fund, which is an ESG-based UF that only invest in the top 20 Philippine companies integrating the UN SDGs, and this is the fourth consecutive year being included in ATRAM SDG fund. 100% of our electricity consumption at is powered by renewable energy. With that, let me now open the floor for questions. [Operator Instructions]

Everyone? Questions? Hi, Carl. Go ahead.

Let me just confirm that you can hear me.

Loud and clear.

I want to ask first about the decline in revenue for the leasing or the building lease -- building rents. It fell about 15% year-on-year. And I wanted to check if that was due to lower occupancy year-on-year or if that was due to lower rental rates year-on-year or both?

The reduction -- I'll get this, Jeff. The reduction is mainly a timing difference. So as you can see, our occupancy rate is stable at 75%. So we can see an improvement in the next quarters.

Understand. And to clarify, did the rental rates decline or did they not?

No. So far, they have not. They're consistent with our closed deals in early 2025.

Got it. And then I'll just ask if you've experienced any issues in any of your segments from the conflict in the Middle East, at least -- well, to be quite frank, there was a developer that canceled the project, and we've heard of supposedly price increases for construction materials. And no, I have not heard of supply chain disruptions like receiving the ability to receive raw materials, but I'm interested in any disruptions of any sort in any of your business, including on the demand side.

So let's talk about takeup. On the leasing side, we've had -- we had some leases that were supposed to close around April or end of March that got delayed either to next quarter or later in the year because of what happened. On the construction side, we awarded Aseana Plaza, March of 2025. So I think what we will see an effect on are the owner supplied materials, which we have not awarded and that's going to be affected by the foreign currency appreciation, specifically on the imported items elevators, aircons, generator sets and whatnot. On the residential side, obviously, that has an effect just because of the negative sentiment that people are seeing the increases in fuel costs. So yes, we definitely saw a decrease in sales.

Understood. Regarding the owner-supplied materials you're referring to, is there any indication on what the price increase is year-on-year? Or also perhaps if you can tell us if the indications are -- it's within your budget, right? It's normal to have some buffers in place. I don't know if it's within your budget or perhaps it will be higher than that.

So to be candid, for office buildings, you see our contracts are designed. So the bulk of that has already been awarded. The only major items that I have not awarded are elevators, aircons and generator sets. But those are not substantial in terms of the percentage of construction costs, maybe less than 10% of the construction cost, thereabouts. So that's where I think the question mark is because we haven't bid them out because right now, we're sitting the ground for [ Parqal ]. But that being said, I think it's impossible that there won't -- because right now, we're in the process of finalizing our plans for our co-living. And when you talk to the contractors, just because of this uncertainty, I think, they're going to add buffers to their costs. And even they themselves, they don't know how to those buffers. They're just going to put more. That's the reality.

I think this is very insightful.

Thank you, Carl. Paul, you're raising your hand.

First of all, I would like to check if I'm audible...

Yes, you are.

I have 2 questions now. So first, I have a question on the Ayala Malls Manila Bay. I understand that you have this partnership with Ayala Land about the leasing -- land lease for the Ayala Malls Manila Bay. I would like to check or to have a feel on the current footfall or same mall sales of the Manila Bay Mall.

So our lease it's a minimum guarantee. So we don't have up-to-date visibility, what we see our year-end results. because that's how we compute our percentage of growth. But for Parqal, we have not seen any decline at all in terms of foot traffic. Actually, because it's summer right now and people want to be out, we are actually seeing even increased numbers in terms of foot traffic.

For my next question is on your current pipeline or schedule of projects. I guess in relation to what Carl mentioned earlier, will there be any changes on the current pipeline or schedule or time line?

So based on our existing pipeline, our -- our next big project is Aseana Plaza that's been ongoing, but that will come online, I think, in 2.5, 3 years. That's 2 towers that's about 150,000 square meters. So that's -- so more or less that's what's in our immediate pipeline. And the co-living, but that's going to be faster. That's going to be about 2 years. But all of these are recurring income. We're not selling that co-living.

Okay. Thank you for the questions. I think there's no more questions on the floor. So with that, thank you for attending our briefing and keep safe, everyone. Bye.

Thank you.