Robinsons Land Corporation (RLC) Earnings Call Transcript & Summary

Welcome to Robinsons Land Corporation's Investors Briefing for the First Quarter of Calendar Year 2023. Joining with us today from RLC are Mr. Frederick D. Go, President and Chief Executive Officer; Mr. Kerwin Tan, Chief Financial, Risk and Compliance Officer; Mr. Faraday D. Go, Executive Vice President and the rest of the IR team. We prepared a presentation on the unaudited results for the first quarter of CY 2023. At the end of the presentation, there will be a question-and-answer session. We will now proceed with the presentation. Mr. Kerwin Tan, will present the company's financial performance. While, Ms. Erica Lim will cover the operational highlights.

Thank you, and good afternoon to everyone. We are pleased to share with you RLC's performance for the first quarter of 2023. We will touch on the financials of the company and operational highlights for business that we own, including our CapEx spending, provide updates on our digital and other initiatives and future plans and strategy, updates on our ESG activity and journey during the period. And lastly, our cash dividend declaration. In the first quarter, RLC registered strong revenue growth of 39% year-on-year to PHP 9.28 billion, while net income attributable to parent surged by 90% to PHP 2.66 billion, surpassing the first quarter 2019 level. Our EPS for the period increased by 95% to PHP 0.53 per share, while net book value is now at PHP 26.36 per share. The residential business registered solid performance as revenues surged by 68% to PHP 2.38 billion on higher recognition of still reaching the equity threshold and higher percentage of completion for the quarter. RLC's net sales take up almost doubled year-on-year in the first quarter 2023, while joint ventures net sales take up ballooned by 166% with the launch of Haraya our second project with the Shang Properties. Earnings in joint ventures contributed PHP 293 million in our residential division. Our malls business also recorded higher revenue growth of 46% year-on-year to PHP 3.91 billion while mall rental revenues jumped 55% versus same period last year. The hotels revenue surged above last year and even above pre-pandemic levels. Our logistics revenue continues to be stable. We completed Calamba 2A, making into account of RLX 2 8th acre. Our office business posted steady growth in the first quarter of 2023 grew by 4%. Each business unit contributed positively, a strong testament to the company's recovery and growth story. Our asset portfolio as of the first quarter of 2023 is composed of 53 operational lifestyle centers, 88 residential buildings, 40 housing subdivisions, 31 office development, 29 mixed use development, 26 hotels, 9 work.able centers and 8 industrial facility. Turning now to the financial performance highlights. RLC's financial position continues to be solid and healthy with total assets at PHP 225 billion. This includes cash of about PHP 6.5 billion. Shareholders' equity landed at PHP 136 billion, net of PHP 4.26 billion of treasury shares from the company's buyback program, which commenced in November 2021. Interest-bearing debt for the period ended at PHP 51 billion, translating to 34% net debt-to-equity ratio. Meanwhile, earnings per share was at PHP 0.53 per share, 95% higher than the first quarter 2022 earnings per share. With this, book value is now at a PHP 26.36 per share, a happy discount from the currently paid in share price. For the first quarter of 2023, consolidated revenues climbed 39% year-on-year to PHP 9.28 billion. This is driven by the company's investment portfolio, coming primarily from our malls, offices and hotels, strong performances for the same period and with significant contribution from our residential business. Meanwhile, EBITDA increased by 35% to PHP 5.03 billion. The growth is slightly lower than our revenue. This is mainly because of higher consolidated OpEx registered during the first quarter of the year. EBIT surged by 55% year-on-year to PHP 3.72 billion due to slightly lower depreciation as a result of the Forum closer for redevelopment. For our bottom line, net income attributable to parent registered an outstanding 90% growth to PHP 2.66 billion. This is mainly because of 2 key factors: number 1, lower income tax and number 2, higher stake of RLC to RCR from 63.49% in the first quarter of 2022 to 66.14% this year. This slide highlights all businesses posting strong growth during the first quarter 2023, except for China, as revenues for this segment have substantially been realigned. Higher revenues came from all our domestic business units, especially the investment portfolio, which accounted for 73% of total revenue, while the residential division also experienced strong growth, including a significant contribution from our equity shares in joint venture. I will now turn over the presentation to Ms. Erica Lim, who will report the operational highlights of our business units.

Thank you, Mr. Kerwin. Good afternoon to our participants. Robinsons Malls continues to assert itself as the second largest mall operator in the country, highlighted by its 53 lifestyle centers, spanning 1.6 million square meters of leasable states, that is 91% leased out with over 8,000 retailers. Sustained consumer spending and retail sales lifted Robinsons Malls revenues to PHP 3.91 billion, up 46% year-on-year to account for the 42% of consolidated revenues. EBITDA grew by 53% to PHP 2.29 billion, while EBIT surged 160% to PHP 1.43 billion year-on-year. Meanwhile, rental revenue escalated by 55% to PHP 2.79 billion. Looking at sequential period, despite strong holiday season in the previous quarter, first quarter 2023 mall revenue grew by 3% and rental revenue by 5% quarter-on-quarter, proving the company's optimism that mall operating fundamentals will sustain a strong recovery. Meanwhile, offices ended the year with 741,000 square meters of leasable space with a total of 31 office buildings and an average of 89% leased percentage. Robinsons Offices delivered steady top line results with a 4% growth in revenues to PHP 1.85 billion in the first quarter of 2023. This stable performance is primarily driven by the sustained occupancy of majority of its portfolio, which consists of quality assets located in CBDs, key cities in Metro Manila and in provincial areas, all with a healthy tenant mix. EBITDA rose 3% to PHP 1.58 billion, while EBIT grew 2% to PHP 1.33 billion. In addition, RLC strengthened its presence in the growing flexible workspace segment with the opening of new build-to-suit work.able centers in Cyber Omega Pasig. Currently, there are a total of 9 work.able sites in our portfolio. With the easing of travel restrictions and the reopening of the country's tourist destinations, Robinsons Hotels and Resorts or RHR, exceeded the first quarter 2019 revenues by 70% to PHP 879 million. Year-on-year, RHR revenue increased by 162% while EBITDA and EBIT surged by 330% and 131% to PHP 167 million and PHP 23 million, respectively. To date, RHR is the largest hotel developer and operator in the Philippines with 26 hospitality developments. Last March, we opened RHR's newest 5-star hotel The Westin Manila, located in San Miguel Avenue, Mandauyong City, with 303 suite rooms. The Westin brand is known for its wellness offerings, empowering guests well-being and world-class service. New project launches in the first quarter 2023 raised the combined net sales take-up of RLC Residences and Robinsons Homes to PHP 5.62 billion, up by 94% versus the same period last year, represented by the red and blue bar graphs. The strong sales comes from the company's existing and newly launched projects. Meanwhile, net sales take-up from joint venture projects with Hongkong Land, Shangri-La and DMCI represented by the yellow bar graph, outperformed the previous year by 166% to PHP 4.99 billion. This came with the robust sales coming from Haraya, the second project with Shang Properties joint venture. On the other hand, realized revenues climbed by 68% year-on-year to PHP 2.38 billion for the quarter. The robust performance was driven by the faster completion of our residential projects, coupled with remarkable contribution from our joint venture equity earnings. EBITDA surged by 73% to PHP 519 million, while EBIT dropped by 79% to PHP 499 million versus the first quarter of 2022. Equity share in joint venture contributed PHP 293 million. In the first quarter of 2023, RLC Residences launched 2 projects worth approximately PHP 13.4 billion. The first one is Le Pont located in our Bridgetowne Estate Pasig City. Le Pont allows buyers to embrace the elevated lifestyle they deserve. Next, Sierra Valley Gardens building 4, the fourth residential tower tucked within Sierra Valley Cainta, Rizal. Seeing healthy demand from affluent buyers, a joint venture with Shang Properties launched Haraya, our second project with our JV. Haraya is in our Bridgetowne Destination Estate and is designed to be an iconic home address in the east of Metro Manila. Moreover, RLC continues to make significant strides with its existing JV projects, registering healthy sales take-up across all 3 projects. Just a little over 3 years from launch date, Aurelia is already 75% sold, Velaris at 67% and Sonora at 49%. Robinsons Logistics and Industrial Facilities or RLX, recorded revenues, which modestly increased to PHP 137 million in the first quarter of the year versus the same period last year. EBITDA increased by 18%, while EBIT accelerated by 25% to PHP 130 million and PHP 98 million, respectively. RLX has 8 industrial facilities located in Sucat, Muntinlupa, Sierra Valley in Cainta, San Fernando, Mexico in Pampanga and Calamba, Laguna, all with the total gross leasable space of 199,000 square meters. These industrial facilities are fully leased out. RLX completed its 8th logistics facilities, RLX Calamba 2A located in Calamba, Laguna, with a total gross leasable space of 33,000 square meters. In the first quarter of the year, Robinsons Integrated Developments recognized revenues of PHP 119 million from a portion of deferred gain on sale of land to joint venture entities. EBITDA and EBIT settled at PHP 46 million and PHP 45 million, respectively. For our China project, remaining revenues is for the car parks. In the first quarter of this year, revenue was at PHP 14 million, while EBITDA and EBIT were both at PHP 8 million. Pivoting to CapEx, RLC spent PHP 4.52 billion in capital expenditures for the expansive development of malls, offices, hotels, warehouse facilities, acquisition of land and the construction of residential projects for its local operations. To support our growth plans, our land bank now spans across more than 800 hectares with the crystallization of land bank values in Metro Manila, RLC's land bank value is estimated at about PHP 185.6 billion as of March 31, 2023, 47% of which or PHP 87.4 billion is attributable to the land bank value of our destination estates. We move now to the company's digitalization efforts, leveraging on the reach of our omnichannel platform, we have introduced innovative advertising campaigns for our business malls, as shown in this slide. We greatly look forward to the launch of RLC's Mall Dash mobile app lined up for launch in the first half of this year. The residential division, actively launched campaigns using its various media and digital platforms. During the first quarter of 2023, RLC Residences amplified its digital presence using it as a platform for the launch of Le Pont, Sierra Valley Garden 4 and Mantawi Cebu this April. For Robinsons Hotels and Resorts, we continue to improve end-to-end guest experience in our recently launched mobile app. Looking ahead, Robinsons Malls will unveil the Opus mall to the public this year, a premier life -- upscale lifestyle center in Bridgetowne Destination Estate. For next year, we will complete our new mall in Pagadian [indiscernible]. For Offices, slated to be completed this year is GBF Tower 1, which will increase office leasable space by 7% to 794,000 square meters. While for the next year, GBF Tower 2 is expected to be completed. Both GBF buildings are premium top-of-the-line developments, courtesy of Robinsons Offices. Both properties will rise in the Bridgetowne Destination Estate. Cybergate Iloilo 3 is also expected to be completed next year, which will increase office space by 12% to 886,000 square meters. Our Logistics and Industrial Facilities division completed our RLX Calamba 2A warehouse in the first quarter of 2023. We are targeting to complete additional 2 new warehouses for the year, namely RLX Calamba 2B as well as a second site in Sierra Valley. For the next year, RLX is expected to complete RLX Calamba 2C and RLX Montclair, bringing our logistics facilities above 300,000 square meters of leasable space. Our Residential division is actively launching various projects nationwide. This year, we've already launched a total of PHP 13.4 billion with Le Pont Residences and Mantawi Tower 1. We will continue to stand off to the market and respond accordingly with the pristine demand. Lastly, Robinsons Hotels and Resorts successfully opened The Westin Manila last March and has completed the remaining rooms of Go Hotels Plus Tuguegarao. Next year, we expect to complete NUSTAR Hotel, R4E in the ultra-luxury segment. This will be located in NUSTAR integrated resorts Cebu. With this, our room keys shall grow by 6% to 4,497 by 2024. Finally, we placed a spotlight on RLC's various ESG initiatives. RLC remains as a market leader in solar energy usage. With 24 Robinsons Malls harnessing solar power with a total capacity of 31 megawatts nationwide. This translates to 28 million kilowatt hours of clean energy and over 20,000 metric tons of carbon dioxide avoided, equivalent to more than 337,000 trees planted. 5 of our office developments have acquired LEED or EDGE certifications. We have tree planting activities in 8 different localities within the start of the year. All Robinsons Malls are designed with the system for waste water conservation and recovery. 29 of our malls have rain water collection systems and 15 malls used recycled water for non-portable use. Aside from this, Robinsons Malls and Offices, installed water-efficient fixtures in its restrooms to further reduce water consumption and establishments. We focus on giving back to communities with the Robinsons Land Foundation Inc. To date, RLC conducted relief operations in Imus and Tagum, last January and February. For community development, we are active in livelihood programs through RLove Livelihood Carts and Entrep Corner. Finally, we continue to support schools through our Brigada Eskwela program. We have a long-standing commitment to good corporate governance and stewardship. We have adopted an anti-bribery and anti-corruption policy to uphold appropriate, ethical and responsible business conduct. Moreover, RLC has duly complied with the registration process of the Anti-Money Laundering Council pursuant to the Anti-Money Laundering Act. Kindly allow us to briefly share pictures of our ESG efforts through the next 2 slides. As a center piece of our shareholder return policy, we are pleased to announce that the Board of Directors of RLC has approved last April '21, the declaration of PHP 2.6 billion regular cash dividends or PHP 0.52 per share to all shareholders of record as of May 31, 2023, with a target payment date on June 21, 2023. This translates to 27% dividend payout ratio, in line with RLC's dividend policy and a dividend yield of 3.74%. For the last 2 years, we have provided equivalent to 37% of 2021's NIAT and 48% of 2022 NIAT in terms of shareholder returns in the form of both cash dividend declaration and buyback program. As of March 31, 2023, the company has repurchased PHP 4.26 billion worth of shares, equivalent to 47% of its PHP 9 billion buyback program launched last November 2021. This ends our presentation. We are now open for questions. Thank you very much.

[Operator Instructions] Our first question comes from the line of Jeanette Yutan.

I just have 2 questions on the residential side. First question is actually on the reservation sales. Could you give us more color or information on what drove your strong reservation sales? Could you give us details like what's the buyer's profile in terms of what percentage is sold to OFW to locals or to international? And if you can give us information like what are the strong -- or what are the projects that drove the robust demand in 1Q? And then, of course, what's the outlook for the rest of the year in terms of reservation sales?

Jeanette, thank you for your question. I'll have somebody answer the first question, but we don't break down our sales according to OFW, but we do for international sales and domestic sales. And we also have a breakdown of foreigners versus Filipinos. Our outlook for the rest of the year remains to be extremely positive. The first 4 months of the year have been very encouraging and have been close to record levels, definitely much higher than last year, and we expect it to continue to be so for the next 3 quarters. Who would like to answer the first question? Zar, are you in line?

For the first question, Filipino buyers account for 75% and then foreigners is 25%.

Okay. Any indications like what projects drove the robust demand?

Go ahead, Zar.

The sales primarily came from our new launches. Same continues to be contributing to our launch -- to our sales for first quarter and also our newly launched Le Pont for the first quarter also.

Okay. And then my second set of questions relates to the level of unsold inventory. Just wondering if it's possible to ask what's the level of unsold inventory in terms of value as of end 2023. And if you could give us a profile of the inventory.

Yes, we can give you the available inventory for sale as of end of -- I think you mean first quarter 2023.

Yes, correct.

That's PHP 31 billion.

And then is it possible to know like the profile like how much is vertical versus horizontal, NCR versus non-NCR? And how much is RFO? And then last question is, what's your strategy to push the inventory out? Are you offering easier payment schemes, soft discounts, et cetera? And what would be the level of unsold inventory that you're comfortable with?

I think the answer to your question is that the overwhelming majority of our available inventory for sale is a vertical. And again, a significant majority of that inventory would be in NCR. And we are comfortable with our current level of inventory. Having said that, I think that the next launch of a new project for RLC will probably be in the late third quarter of this year. So we don't see any launches in the next, shall we say, 3 months or 3, 4 months. So we are comfortable with the current level, and there's nothing extraordinary that we are doing to, as you would say, push for the inventory to sell. That's in line with your first half of your questions, we're quite happy with our sales. Our sales are quite good, much better than last year. But as you can see from the slide in front, it's 94% up year-on-year. So we just continue to do all the same efforts and the same programs that we have been employing for the last few years, and we just continue to build on that.

Okay. Can you share how much is RFO for the unsold inventory?

Sure. Zar?

Less than 5% of the PHP 31 billion is RFO. Our second question comes from Carl Sy.

And I should mention that my organization is Regis Partners. Let me check first by the way, if you can hear me.

Yes. Carl, we can hear you.

Great. So just proceeding -- yes, just continuing Jeanette's mostly residential questions. Regarding the JV project sales this time, did most of them in the first quarter come from Haraya?

Zar, you may want to answer the question?

Yes, primarily from Haraya.

Primarily from Haraya. Okay. Next question from me is actually on -- so as mentioned by Kerwin, the tax rate was very low in the first quarter. What was the reason for this? And should this pick up in the coming quarters?

Kerwin?

Thank you, Carl. The result of the low tax rate was because of our inclusion of our office assets -- one of our office asset got merged into RCR. We increased this in the second half of 2022 as we see the effect of the lower tax rate in the first quarter of 2023.

Okay. So that means should -- is it fair to say tax rate will remain pretty low or not too far from these levels in the next quarter maybe, 2 quarters?

Yes, the projection is potentially be low.

Okay, I guess, I'll ask regarding the other segments this time. Regarding the office segment, the vacancy rate just inched up 1 percentage point quarter-on-quarter. So I'd like to ask, what was the profile of the tenants that vacated and did they give a reason, let's say, in POGO closing or was it a BPO doing more work from home or anything really?

Yes, I think it was just the expiration of a lease of a BPO tenant.

Got it. And again, if I may ask if there was any mention of Korea operations were shrinking in general or work from home or transferring...

In this particular case, I do not know the specific reason. But in general, we have not been very bullish on the office sector. We would like to characterize it as being steady. It's not also just dropping or anything like that. But I think the confusion on the -- the start of war between PEZA and BOI had not been good for the industry. So I think a lot of the BPOs adopted a wait and see attitude. Our office business organization, however, meaning our office business unit executives, however, are quite optimistic about the second half of this year. They think that the uncertainty between PEZA and BOI is getting fleshed out and a lot of this uncertainty because of trade also, I don't want to go into a litany of this, but there were some ill effects also create on the BPO industry. But I think all of these are being threshed out now as we speak. So I do believe that we're quite optimistic about the second half this year. So perhaps in the next call for the second quarter, we will probably still not have very good news. And those reasons that you mentioned, Carl, such as consolidation of office space or more work from home is having some negative effects on the industry. I will not sugarcoat that.