PHINMA Corporation (PHN) Q3 FY2025 Earnings Call Transcript & Summary

Good afternoon to everyone. We're glad to see that we have a good mix of participants joining us for this briefing. Thank you for taking the time this afternoon to hear some updates on PHINMA Corp. So we have a great lineup of speakers joining me today. So here in the conference room, I have with me Mr. EJ Qua Hiansen, our CFO. Then we also have our Treasurer, Ms. Nanette Villalobos. And joining us for the first time in the briefing is our Investment Portfolio Manager, Mr. Andre Ramirez. And of course, [indiscernible] to yours truly. I'm Kara Albert, I'm the Investor Relations Officer. So before we go into the briefing proper, allow me to quickly remind everyone a few items so that we will have a smooth presentation. [Operator Instructions] Lastly, I'd like to advise everyone that we will be recording this briefing for uploading to our official website. So without further ado, let me give the floor to EJ.

Good afternoon, again, everyone. I'd like to begin this session by -- with a moment of silence for our dearly departed Chairman Emeritus, Mr. Oscar J. Hilado, if you can just join us in a brief moment. This is, I guess, a big development for PHINMA, but -- and we do want to acknowledge this to everyone, but it does highlight the importance of the Board succession and succession planning that we do across the group. We have recently appointed replacements for Mr. Hilado at all of our boards, and we've ensured that we do have ready now and ready next people for each of our key positions group-wide. So it's something that's very important. The memories that he's had, the way he's guided us are things that we continue to do, and we will continue to honor him through our service to the company. Go to the next slide, please, Kara. We initially intended to talk about our expansion initiatives for the PHINMA Group. But I think I'd like to take a bigger step back and maybe talk about who we are as a company. If you watch the earlier slides, we were talking about how -- or not the earlier slides, but the earlier videos. We discussed the concept of One PHINMA and how we believe that one business and one company can make a difference. That's something that's been at the heart of PHINMA from our very beginning from the time of Ambassador Ramon V. del Rosario Sr., of course, the time of Mr. Hilado and now to the time of Mr. Ramon del Rosario Jr. We really believe that we play a critical role in nation building. And I think at this time of political turmoil, more than ever, there's a role for business. The business community yesterday came out with a statement saying that despite everything that's going on, the economic fundamentals of the country remains strong. We have a strong financial system. And the business community continues to commit to investing, to expanding, to improving our productivity and to continue to create jobs and employment. I think this is the role that the business sector can continue to play because the impact that we make goes beyond politics and goes beyond administrations. It's something that's lifelong. I think that's really how we structured our portfolio. So taking a bigger step back, as a company, we've increasingly focused on uplifting the port. We've increasingly focused on providing what we call the essentials of dignified lives to the underserved markets. And that's how we've structured our company. In PHINMA Education, we really focus on low-cost education because if the Philippines is to truly reap the benefits of the demographic dividend, we need a well-educated population. We now have the largest network of tertiary -- private tertiary education schools in Southeast Asia with more than 177,000 students. But that's just a drop in the bucket of the number of people who truly need to get a good education. As our population continues to grow, we will continue to raise and increase our capacity so that we can provide that education to those that need it. In our Construction Materials Group, again, especially in light of everything that's happening, we understand the need for real infrastructure, for good quality infrastructure. And so we're doing that going back to our roots of construction materials, providing these in a timely manner nationwide. And you can see that with our various expansion activities for CMG. We do this in cement, steel sheets, insulated panels and also now in our rooftop solar installations. In PHINMA Properties, again, if you look nationwide, yes, there is an overhang of supply in Metro Manila. But nationwide, we still have so many without homes. I think the number is about 6.5 million backlog. And that's something that we want to address through our properties and community housing businesses. We're continuing to expand outside of Metro Manila. These are areas where there's a need. And really one of the most essential requirements of Filipinos is to have homes -- safe homes for their families. And even in hospitality, as business continues to expand as our nation continues to grow, it's really desire Filipinos to be able to travel, and we want to provide safe and comfortable space. So again, if we look at who we're focusing on as a market segment, the underserved market, the estimates are anywhere from 16.5 million to about 25 million Filipinos live at or near the poverty line. That is the market that PHINMA is addressing. That is the market that we're trying to serve through all of these expansion initiatives. I think as we go through our [ SB ] presentations, we can tell you a little bit more in detail about this. But this is a snapshot of how we envision PHINMA looking in the next 2 to 3 years. And most of these expansion projects will be coming online in the next 1 to 2 years actually. So with that, I think I'll turn it over to Andre, who will tell us a little bit more about the portfolio and how we're structured at the moment and what we're looking at. Go ahead, Andre.

Thank you, EJ, for the introduction. I guess to build off of what EJ was saying, we really are looking forward to a lot of expansions and really setting up our presence for the future. And I think if we look at this year, it's been quite a challenging year. There have been many macro headwinds as well as political issues, which have kind of created some setbacks. I mean, if you take a look around, there have been oversupply that EJ alluded to in the housing market, but also in construction materials, that we continue to see some difficulties there. We had lower foreign visitor arrivals this year. And these have really affected the sectors that we are looking at and weigh on demand. So this has really contributed to our portfolio, realizing some results which were below plan. And these revealed pressure points that needed to be addressed. Now it also showed us though that we have a quite resilient portfolio, especially taking a look at our education unit, which continues to provide us with a stable base given the strong enrollment numbers that they posted. As we see these gaps, and thankfully, we saw these gaps early, we continue to pivot quickly, sharpen our execution and reinforce the areas that need more attention. That way, we continue to build the resilience in our portfolio and prepare ourselves for the future. So despite the setbacks we saw, we continue to see room for us to contribute to society, especially as you can see these key critical societal issues remain and they remain to be unaddressed. So we can really focus on these in pursuing our mission of making lives better, especially for our clients. So as we move to the next slide, we can't do this alone. And in filling the gap of these critical needs, we really need to have the right partners because serving the underserved is really a large task. So we are -- we continue to look for partners that want to work with us in achieving our goals. And thankfully, we have found many partners who have pledged their support, and this really has provided us with the financial flexibility and confidence that we need to continue to push our mission forward. These commitments signal we're on the right track, both in terms of the strength of our businesses and the long-term direction of the overall group. So with these partnerships, we look at it on a per strategic business unit basis, but also take a look at how -- what synergies are around and how can we drive collaboration. So we really want partnerships that span multiple business units. And we're seeing this in the partners we're choosing, and this really helps create stronger portfolio synergies for us. So we continue to deepen these relationships, and we're confident that we can turn the challenges of today into the building blocks for tomorrow so that we can continue to strengthen the group for the years ahead. So I guess, just to reiterate, we have some very crucial partnerships, which you can see on screen. And these are really what we're driving forward to really address what we want to address as we move forward in what we're doing. So with that, I'll turn it back to EJ.

Okay. Thank you, Andre. If I can just go back a slide and build a little bit more on what Andre mentioned. I think one of the things that PHINMA has been successful at is finding the right partners, but also in becoming a partner of choice for other investors. And there's 2 examples -- 3 examples actually on the screen that I'll mention. First on the education part with KKR were the first investment they've made in the Philippines with their social impact investment fund. And I think so far, they're pretty happy with the results of their education investment. On the CMG side, there's actually two things that I want to highlight here. One is our partnership with ANFLOCOR to put up the cement manufacturing plant in Davao. ANFLOCOR actually first partnered with the group in hospitality. They have 2 full franchise hotels in Mindanao. They're now putting up that third condotel in Samal Island. But with that first exposure to the group, seeing how we operate, seeing the professionalism we have and the way we take care of our partners and live up to our commitments, I think that gave them confidence to have a much higher level of involvement with us in the cement manufacturing plant in Davao. The third thing partnership that I do want to highlight is that recent share subscription agreement between Philcement and Sumitomo Osaka Cement Company. Actually, this is our second partnership with the Sumitomo Group. Initially, they were invested in PHINMA in cement also in Davao in our initial entry into the cement business. So them coming back in, again, it's a sign that through the years, we've managed to cultivate these relationships and become a partner of choice for investors like Sumitomo. So if we go ahead now to slides, something that we've really been focusing on, yes, admittedly, our financial results for the first 3 quarters of this year have been softer than we've expected, largely due to those macroeconomic headwinds that Andre mentioned, but we have been able to continue to build value towards these expansion projects that we have. You can see here the education business, as Andre mentioned, remains resilient. In fact, it's growing and it's growing well because of its enrollment growth. We are challenged still in construction materials, property and hospitality, but we are preparing them for the years ahead. Especially as we've done those expansion efforts, we have had to accumulate a little bit more debt as well as a little bit more in terms of building up our organizations to be ready to take advantage of those projects. Next slide, please. We are seeing some turnaround though, in our previous session for the first half results, we did promise that the third quarter would likely be stronger, again, largely on the back of our education business, which would benefit from its increased enrollment. And you can see the results that for the 3-month period, our net income was about PHP 603 million on a consolidated level and attributable to equity holders of the parent of PHP 239 million. This is also on strong revenue growth of 30% for the period. So we are seeing that increased momentum. We are hoping for further momentum continuing into the fourth quarter and in the succeeding periods. Of course, again, despite or within the challenging environment that we're operating in. Next slide, please. But I think when we look at what we want to do and how we're doing it, given those challenges, we're not just saying there's a challenge. We have been looking at it and we said, okay, let's focus on cash generation. And you can see on the right-hand side that, yes, we are seeing an increase in financing activities, but largely, the increase in our cash flow from finance activities has gone towards our investing activities. In fact, based on operations only, our cash flow went up by more than PHP 560 million, so we ended the period at a comfortable PHP 4.4 billion in cash. Looking at our balance sheet for the 9-month period, our debt-to-equity ratio is 1.77. And again, we continue to have strong cash generation with a DSCR of 1.56 on a consolidated basis. Next slide, please. So with that, we'll go towards our strategic business units and discuss them a little bit more in detail. Starting with our Construction Materials Group. Our Construction Materials Group is one that we've been very excited about. It's one of our more dynamic companies, but it has faced its share of challenges. Over the last few years, we've been pointing towards, hey, there's increased government spending in construction. We think that construction is going to go up. That's why we're positioned here, yet prices have remained soft. It's the recent revelations that have kind of said, okay, there has been money going towards construction companies, but not necessarily towards the end use. And so we're hoping once real demand returns and once real projects are implemented that, that should drive, again, real demand and subsequently, prices have come up. However, despite that, even with public construction activities declining significantly in the third quarter, private construction has remained a consistent source of demand. So we're continuing to build our projects. We're continuing to build market share so that when these prices improve and again, when our projects come online improving margins, we should really see an uptick in performance of our construction materials business moving forward. Next slide, please. So just to give you a little bit of a flavor of those projects that we've done. On the upper left-hand side, this is the insulated panel plant in Clark, Pampanga. It's been one of the key anchors of our growth project -- of our growth and our fundraising initiatives over the past 2 years. This will be online by middle of 2026. This is really our solution towards the agricultural needs of our country. We have such a need for food, in fact, healthy food. But it's so cyclical and so dependent on the weather. So what we're hoping to do is really be a key component of cold storage facilities, but insulated panels have other uses, including the data centers or homes, where it will improve energy efficiency by at least 15% to 20% versus other panels of this kind. So it's something that's looking good. In fact, it's one of the larger drivers of growth for UGC this year. And next year, once this insulated panel comes online, again, we should see an improvement of margins of at least 10% for those products. The materials that we're using here are imported from Italy, and this will be a local manufacturing where we think that will be very, very cost competitive with higher quality products that are available currently here in the Philippines. This will be the first of its kind. The other 4 projects that you see here are really part of the Philcement expansion. And you can see that these are largely centered in the Mindanao area because we see such a shortage of supply in Mindanao, in fact, in certain areas, specifically Northwest Mindanao, the source of cement is imported from Cebu. We think being able to manufacturing cement locally will help the infrastructure growth of the Mindanao market, which it needs it, and there's such a strong demand. So we acquired last year, the Petra Cement plant in Zamboanga. We're adding a silo there. We've also been able to successfully acquire the Tibungco facility. And as I mentioned, our largest project there is the Davao terminal, which will be a mirror facility for existing Mariveles plant, which I want to point out, has actually been copied by other similar cement companies in Australia and the United States, really demonstrating our ability to manage and be innovative in this space. Next slide, please. Despite that, though margins admittedly have been very difficult, there has been softer demand. As I mentioned, it was low in the third quarter and prices have remained soft. We expect this to pick up, and we have also borrowed in advance to finance these expansion projects. Our capital structure will be strengthened when we close the investment of Sumitomo of more than PHP 1.1 billion in the fourth quarter of this year. So we're still very bullish on our Construction Materials Group. We think it's an important input to the country really needs and it's a core competency of the PHINMA Group. Next slide, please.

Maybe just to add on that for the Construction Materials Group, having done a site visit recently to our Mariveles plant, I think the demand, at least from a volume perspective, continues to be there. There was a quite substantial number of trucks waiting to be loaded. So I think that overall, the demand for the product, at least from a volume perspective remains to be there. And I think what we're really banking on is this demand should pick up, especially as real projects continue to push forward. We also provide a very high-quality product, which I think should have more demand now, especially as the scrutiny on the strength of our projects continues to become a critical part of infrastructure moving forward. So I think these should contribute to that bounce back that EJ has been talking about. And I really think that it really puts us in a good position having these facilities come online soon. So I just wanted to add that for everybody's knowledge.

Yes. That's a very good point. I mean something that we've been working on, and I did forget to mention here is also optimizing our operating expenses and our logistics costs to be as close to the customers as we can. And I think your story supports that, Andre. Thank you. Okay. So with that, I'll turn it over to Nanette to discuss PHINMA Education.

Thank you so much, EJ. Good afternoon, everyone. So PHINMA Education opens the new school year with another strong performance. Our enrollment figures reached 177,851 number of students. This is 13% higher from the previous school year. And we are very proud to share also with everyone the recent board exam results where several of our schools achieved 100% passing rate for first-time takers especially in the competitive fields like CPA, electrical engineering, medical technology, optometry, criminology. In fact, our oldest school around University made it to the top one in the most recent criminology licensure exams. I would like to highlight also that our Horizon University Indonesia recently won Best Passing Rate Award in Indonesia for Indonesian Professional Nursing competency exam in West Java with a passing rate of 100% in midwife and nursing courses. So that reaffirms that our growth is not only all about scale, but it is really about the quality of the learning that our students get from study in our schools. So speaking of Indonesia, PHINMA Education continued to expand its footprint in Indonesia. We recently inaugurated a new 10-story building Horizon East Building in Karawang West Java. So this could serve additional 7,000 students, and this increases the capacity of our university to about 10,000 students. And the university is also planning to launch new programs in education and social sciences in addition to the existing programs in IT, health and business programs. If you can move to the next slide. So our strong enrollment base translates into solid financial performance. As you can see here, the first 9 months of this year, total revenue recorded for PHINMA Education is at PHP 5.3 billion. This is a 12% increase from the same period last year. And our net income attributable to PHN is at PHP 1.2 billion. This is 75% year-on-year growth. So our expansion plan remains on track, and we are back by the investments from PKR and Kaizenvest. So we will focus all our initiatives in completion and retention and success in the journey of our students in our schools. So that's my last slide. I shall turn over the floor now to -- back to you, EJ.

Which is perfect because I did also want to add in on the education space and Andre talked about the importance of partnerships. When we talk about the Indonesia investment, we actually have a very strong local partner, the Jayapura Group to really help us navigate that market. So as PHINMA continues to expand on a regional basis, it's crucial for us to find the right partners. And they really know the market well. In fact, they're still encouraging us to continue to grow in the market. So our recent expansion is a good sign in that market. So moving on now to our property development business. I think this is another one of the industries that has a lot of press about it. And we do see that there is an overhang of supply in Metro Manila, and it's estimated to be anywhere from about 4 to 6 years. We have pivoted towards prioritizing key regional projects, especially our township project in Saludad or Bacolod. And this is something that we did mention at the last few investor briefings. We see Saludad as really being a big driver for us in the future. In the last few months, we were able to see increase or start sales efforts for the mid-rise buildings there. We're also putting in a branch of our Southwestern University, the first branch outside of Cebu. You see it in the yellow bit on the screen. And we're also putting up a TRYP hotel in that same location. These are activations that make us very proud and really start the progress of Saludad. It's a project that's near and dear to our hearts and something that the whole PHINMA Group is getting involved in. Our other strong project is our Maayo Tugbok in Davao. You see that the first batch of unit turnovers for the [indiscernible] phase have already commenced. And part of the strength of this project, it's also given us a lot of confidence in putting up our community housing development next door actually because we do know that market space, and we do see that there's strong demand. So if we go to the next slide. Again, the financial results, if you just look at the bottom line of PPHC, have been down year-on-year. We have made a strategic pivot, as I've mentioned. We have been able to strengthen the cash generation of this business. And I think it was prudent of PHINMA Property management and the Board to really say, okay, we're going to focus on cash generation because of the situation. We are pivoting towards the provinces. It will take a little bit more time for this growth to accurately be reflected in our financial statements, but these are large sources of growth in the future, and we're very confident in the success of Saludad. To that effect, PHINMA Corp decided to invest an additional PHP 300 million in PPHC, specifically for the development of the Bacolod project. So as mentioned, strategic adjustments have been made. We've also been looking at our operating expenses on a year-on-year basis once this has been fully actualized, we expect to save about PHP 100 million per year as we go forward. I think the other key thing, if we move to the next slide, is the synergy that we see between PPHC and PHINMA CoHo. In fact, our community housing group really started out as a plan in PHINMA Properties. PHINMA Properties as any other developer has a requirement to put up a certain amount of socialized housing. This is a compliance amount, and we see many developers either not put up the -- either put up the socialized housing, but not really aim for significant profits or put the funds into escrow earning minimal returns. Beyond the compliance, we saw the need. Again, 6.5 million families without homes. So we said, okay, let's go beyond compliance. This is a business of vital importance to the group. There's already existing synergy with PPHC and of course, our Construction Materials Group. Let's find a way to make this business viable and feasible. And so Kara will tell us a little bit more about that.

Thanks for the introduction on CoHo, EJ. So the goal of CoHo really is to help transition minimum wage earners from a rental housing setup to having their actual own home. And like EJ said, this really has strategic importance to the group, especially with a strong alignment to our overall mission, which is why PHINMA Corp. is directly investing PHP 250 million into PHINMA CoHo. And EJ also touched on the huge demand for this. This really is a deficit in housing, which will only grow in the years to come. Now we really want to take a different approach when it comes to socialized housing. We want to make sure that it's more than just a home that's decent for the families that will be living there. We want to make sure that it's a place where these families will have an opportunity to upskill and uplift themselves. So the projects will have features like a day care center, skills training facilities and spaces where our community-based enterprises can be nurtured. So where are we now in terms of the PHINMA CoHo space? On the upper left, during the 2025 PHINMA Policy Forum, the main topic really was centered on addressing the housing gap in the country. And the PHINMA CoHo team really spearheaded this event. And I think that was really a great stepping stone ahead of this week's major event, which is the ceremonial groundbreaking and the blessing of the first project in Davao. On the lower left, that's a picture of the actual model units in Davao, promise that's not on AI. So later this week, actually, EJ and [indiscernible] will be going there in person for the ground breaking.

So in our next briefing, we can show a picture of us in front of the model unit.

So I'll slide now into the PHINMA hospitality space. So first, I do have to acknowledge that the hospitality sector is facing some headwinds given the decline in arrivals this year compared to the levels that we saw last year. And that resulted to lower occupancy rates in our hotel chain. However, for the Microtel Mall of Asia or Microtel MOA branch in particular, we did anticipate the softness in occupancy, and that's because there is ongoing expansion-related construction work in the hotel. We are adding an additional 100 units to the existing 150 and that is in anticipation of an increase in demand once the reclamation project in the area is complete. We are seeing some bright spots in the near term. As you might expect, we do see a seasonal increase in bookings in the fourth quarter, especially as we near the peak holiday period. Second thing, again, the softness in the occupancy in Microtel MOA should only be temporary, especially once the construction activity is done by next year. The third thing that we want to highlight, especially for any attendees joining us for the first time is PHINMA Hospitality Group actually has 3 different revenue streams. One is through PHINMA Microtel Hotels Inc., which is the master franchise for the Microtel by Wyndham and TRYP by Wyndham brands. Then we have PHINMA Hospitality Inc., which is the one that manages the operations. And then the third is Coraway City Hotel Corp, which is the joint venture owner in Microtel Mall of Asia and TRYP Mall of Asia. And if I may build also on what Andre discussed in the earlier part of the presentation, in the hospitality space, we are exploring ways to leverage more on these asset type models. Speaking of franchises, we are also glad to hear that TRYP by Wyndham Samal got the SEC approval for the rental pool program. I believe they are the first to get the approval under the new SEC rent framework. The TRYP in Samal is expected to come online around 2028, around the same time as TRYP Bacolod. So given the context mentioned earlier, while PHINMA Hospitality did see revenues at PHP 374 million, it did recognize a net loss of PHP 21 million. But to address this, the hotels are boosting their marketing efforts, especially this quarter, where we do expect that seasonal pickup. And again, the softness we're seeing in Microtel MOA is temporary because of the ongoing expansion-related construction works, which we do believe should pay off in the long run, given the additional capacity that it will provide in the later years. Also in the long term, the newer franchises, the TRYP Samal and TRYP Bacolod should eventually add value to the chain once they come on stream in about 3 years. So I'll give the floor back to EJ.

Thank you, Kara. I guess you could see or hear a lot of us building on one another. But well, it's really how we're looking at our businesses, right? How can we build on one another, how can we have the synergy. Admittedly, the macroeconomic environment has not been as strong as we expected. I think we were all very bullish entering 2025. And of course, recently, things have taken a turn for the worst with third quarter GDP being only 4% and I think fourth quarter GDP likely to also be softer than initially expected. But we are taking a long view. We acknowledge that there have been some things that we've missed along the way. We are willing to pivot and see where or how we adjust our business plans. As I mentioned, we are looking at our operating expenses and seeing how we can optimize OpEx. To the extent that it makes sense, we're reviewing our different CapEx plans, and we are trying to raise cash across the group, and we have been able to successfully do that for the first 9 months of this year. We are, again, taking the long view, though, because these are fundamental needs of the Philippines. Housing, education, construction materials and hospitality. So we continue to focus on these growth initiatives of ours, making sure that while we're focused on today, we don't lose sight of the future, right? We're strengthening the balance sheet where we can, finding the right-minded partners to not just finance our projects, but bring in strategic learnings that we can take advantage of. Synergies we can pick up across the group and remaining optimistic because, again, this is the need. This is why we're here, and we want to be one company that can make a difference in the lives of Filipinos. So that's what we're going to continue to do. And we continue to thank our investors, our lenders, our partners for your support and also for seeing again the need for a company like PHINMA to operate in this environment. So with that, I think we turn it over to Q&A.

[Operator Instructions] I did see a question come in earlier through the chat. So for the first question, are there any plans to list PHINMA Education at the PSE? Ms. Nanette?

Actually, we get that question a lot. So [indiscernible] sees IPO as one way of raising the needed capital. But I think at this point, as we all know, the market is really soft. So it may not be a conducive time for us to raise the money. Secondly, we still receive interest from private investors. So that for us tells us that we can get better valuations from private equity investors. Thirdly, we have yet to fully deploy the funds that we received from KKR. So we're focusing our efforts in deploying and putting that investment into good use. And we are scheduled to receive the balance of the investments of KKR, I think, next year. So we still have funds at this point. So we don't see the need to really go IPO at this point.

Yes. I think just to add to that, there is also a large strategic benefit that KKR brought. As I mentioned, we do like bringing in partners for other reasons beyond just the financial because they can really help us grow the business. And maybe I can ask Andre to speak because he does talk to the KKR team fairly frequently.

Yes. So I think that's one of the key strengths from -- with that partnership with KKR. We have a lot of open dialogue with them. And they have been crucial in actually a lot of the things we've been doing in terms of building up our capabilities, especially since they've come in. So this initiative on completion, which is really there to improve our student experience, maybe to talk a bit about that just in case anybody is new. Basically, what we want to do is we really want to improve the survival rate of our students because right now, for every batch that comes in, only about 30% to 40% of them actually graduate. So we're losing about 60% of our students through the time. And we're really focusing on fixing that and then trying to raise that number so that we can get more students through the door, to their diplomas, to the jobs that are out there and really create that social mobility. And I think that they've been crucial in figuring out how to tackle these things, how to take a look at it from different angles and giving us strategic support to do what we need to do in terms of that.

Thanks, Andre. Ms. Nanette and EJ. We received some additional few questions through the Q&A. So multipart question. So we'll take it one by one. So the first...

Actually, Kara, I can take the education one since we were just talking about it.

I'll read out the question first. So on the PHINMA education space, the question is, are there any updates on the Vietnam expansion? When will the expansion on East Java start? And are there any other expansion plans on the pipeline?

So I guess to tackle this, I think we're being very strategic with how we look at things. When we look at the Philippines, we're not anywhere near a saturation level. So I think that will continue to be the primary focus, especially for the education unit. When we look at Vietnam and East Java, we see these as crucial markets that we continue to look at, but we have to make sure we have the right partners in place for this. And so I think that these will come, I guess, at the right time when we have the right partners in place. And -- but we are looking at it sometime in the near term. So these would be areas for us that are definitely in the pipeline. And in terms of expansion plans, I think we'll continue to see a lot of organic growth out of our schools, but also taking a look at maybe some inorganic opportunities as they come.

If I may add to what Andre said, particularly on expansion in the East Java, and the negotiation is underway. In fact, it's already in the advanced stage. So we are looking to close, finalize this expansion, if not end of this year, perhaps early next year. So we're very excited with this new investments in Indonesia. So we're going to be with the same partner, [indiscernible] and still under the Horizon University Foundation.

I guess we can move on to the other parts of that first question. They also asked about PHINMA Properties, if there are any more housing projects we'll be launching this year and on to next year.

Okay. Sure. Let me take that. We're not planning on launching any more housing projects this year because we already see such a large opportunity in Saludad. This is our first township project. We want to focus our efforts on making that as successful as possible, again, because of the synergy we see across the group. So that will be the project that we're launching. Right now, we've already started selling for 2 of our MRBs, but we're planning to put up 11 medium-rise buildings as well as the lots only of the [ Likha ] brand and the commercial units that we're selling there. So there's a lot of expansion already embedded into the Saludad project.

And for the third part of that first question was on PHINMA Hospitality, questions on the target number of rooms to add in the next few years. And the weak consumption in GDP, how will this affect [indiscernible] expansion plans in growth?

Sure. I can take that some more, Kara, unless you want to chime in.

I can touch on a bit I can add. So with regards to the number of rooms, as mentioned earlier, in Mall of Asia, we're adding 100. Then in terms of the franchises that we have, I think Samal will be about another 100 rooms. TRYP Bacolod will be about 150. Then I think the group is also working on other potential franchises in the country. With regards to the weak consumption in GDP, you might notice a lot of these projects are outside Metro Manila, and we believe these are in high-growth areas. So we think that it would still -- there's still strong potential on these locations despite the consumption in GDP.

I think also the asset-light model that we're trying to move to in hospitality is part of our response to that. And what do we mean by asset-light? In terms of the growth projects that we have, the hotel that we're really putting significant capital into is our TRYP Bacolod hotel. And the reason for that is, again, and I don't want to overemphasize it, the synergy with Saludad. Having a hotel there is an anchor tenant that was further development. We've seen that in other property developers that putting up a hotel results in an uplift of about 10% to 15% in the real estate value around that. So it makes sense for us to put capital into TRYP Bacolod. But for some of the other projects such as TRYP Samal that Kara mentioned, these are full franchise projects. So in terms of the revenue streams that are coming up to our hospitality business, it's really from the management fees and the franchising of those locations, in which case, it's really more on a variable basis. But with that, I think we're still looking at growing in key areas. There's a lot of need here in the Philippines. Our tourism sector is such a large potential driver of economic growth. So even more with the GDP. Our government should be finding ways that we can improve tourism, bringing tourists into the Philippines, and that doesn't just mean we need more hotels. We need the infrastructure in place, the airports, the roads, the bridges so that these tourists when they come to the Philippines have a safe, comfortable place to stay, and they can easily travel around.

So for the next one, it's also on education with regards to how do we handle on our collection strategies?

You want to read it out?

Yes. So on the PHINMA Education, it is more on the collection strategies with regards to the receivables, how is it handled?

Okay. We actually have a very strong collection program in our education business. We provide financing to students who need it. But really in terms of how we collect, we don't have significant ECL at that level. With that though, I do want to make a qualification that there are certain locations where depending on the situation, such as Cebu at the moment, we are a little bit more flexible because it's our mission to uplift the lives of our students, and we do want to provide them with that opportunity. They're rebuilding their lives, right? And then if we take that away, they really won't go back to school anyway. So we have to balance the financial perspective, which is important with the even more important human element.

Thanks, EJ. We do have another question. It's another two-part question. So first part is what is the 2026 CapEx plan by segment? And second part of it is, are you considering parent level funding raising via bonds or preferred shares?

We're undergoing our annual planning process this month. So we're reviewing for next year. But a lot of the projects that we're looking at for 2026 are the projects that have already been approved, right? These are projects that are already funded, either we've already put in the equity or we've reached agreements for the debt. And really, our focus there is execution, making sure that, one, the markets are ready; and two, the projects come online on time and on budget. So I think that's really the key element that we want to prioritize right now. And then answering the second question on parent level fundraising via bonds or preferred shares. We're always looking at how we can optimize our capital structure. But I think at this point in time, given the market, -- we're probably looking more at equity if we can find the right valuations, but we're comfortable with our existing levels of availability of funds today. However, that's not precluding that if there's a good opportunity, we will raise. We're ready at any time, and we do keep our options open.

Just maybe to add on to that, you can see also in the partnerships we've done over the past year, that's really how we've structured a lot of our capital needs for the CapEx plans for next year. And the investments that are coming in from KKR, from Kaizen, from Sumitomo, these are all there to really fund these expansion projects that we want to do for the next few years. So we're really looking at it from an SBU strategic business unit perspective and finding ways to optimize at that level first and then also considering the group level optimizations.

Thanks, Andre. We is another question through the chat, with Philcement to buying back the cement operations of both in Philippines?

Again, we do have significant expansion projects already on the -- in motion at the Philcement level. I think we want to see more execution of these existing plants before we look at other opportunities. But as I said, we never close our minds to anything.

Thanks, EJ. Just checking if there are any other questions. Last call for any additional questions. Looks like there's no more. Any last comments?

Sure, yes. I think when we look at our portfolio, we are very confident that we're in the areas we need to be. These are areas, again, as I said in the past, that someone needs to be. We think we bring in the right competitive advantages. And by that, I mean we have experienced leadership across our company, across our group, industry-specific leadership that have seen us go through multiple economic cycles. And we have a deep bench that's growing deeper. So we have areas of need. We have the right people. We're fine-tuning constantly our structures and our operating models. But we will grow, and we're well positioned for that recovery. And so as I said earlier, thank you, everyone, for your continued support, and we look forward to seeing you at our future briefings.

Yes. Thank you, everyone.

Thank you, everyone.

Thank you.