Vista Land & Lifescapes, Inc. (VLL) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to Vista Land & Lifescapes Full Year 2024 Analyst Briefing. We hope that you and your families are all safe. Thank you for joining us this afternoon. [Operator Instructions] Please note that this conference call is being recorded. I will now turn you over to Mr. Brian Edang, CFO and Head of IR for the presentation.

Good afternoon, everyone, and we are delighted that you're able to join us today. The presentation will cover the audited financial results and the business update for the year-ended December 31, 2024. Here are some highlights of our performance in 2024. We recorded total revenues of PHP 37 billion. Gross profit was at PHP 11.8 billion with a gross profit margin of 71%. EBITDA is at PHP 22.8 billion with an EBITDA margin of 62%. Core net income actually is recorded at PHP 9.4 billion. Our reservation sales was at PHP 79.1 billion. Total assets for the year-ended with PHP 380.5 billion with a total equity of PHP 137.3 billion and ended the year with a net debt to equity of 0.86x. We'll give you more details of this in the next few slides. The details of our income statement as follows. So we recorded a revenue -- total revenues of PHP 37 billion, reflecting a 5% year-on-year growth, and these are due to the following: First, real estate revenue registered a growth of 9% to PHP 16.6 billion from PHP 15.2 billion same period last year, and this is primarily to the increase in the overall completion rate of the sold inventories of the company's business units. And in terms of our unbooked revenues at the end of December, it was at around PHP 83.7 billion versus PHP 78.2 billion last year. Rental income registered PHP 16.6 billion from PHP 16 billion last year. This is up 4%, and the increase was primarily due to the increase in the rate for the year. Income from parking, hotel, mall administrative and processing fees and others decreased by 20% from PHP 2.1 billion for the full year 2023 to PHP 1.7 billion for 2024. The decrease was primarily attributable to the significant decrease in the forfeitures for the year. There were no significant cancellations for the year. Net interest income increased by 12% from PHP 1.8 billion for the year-ended December 31, 2023, to PHP 2 billion at the end of 2024. The increase was primarily attributable to the higher interest received from the investment at amortized cost, which clocking an increase of 46% to PHP 1.75 billion, which was offset by the significant decrease in our interest income from installment contracts receivable, which posted a decrease of 54% to PHP 277 million, as majority of our buyers are actually getting mortgage financing. Let's go to our gross profit. It increased 30% to PHP 11.8 billion with a gross margin improving to 71%. The increase was primarily due to the increase in the sales for the period, coupled with a 20% decrease in cost of sales due to -- as we took advantage of the various cost saving initiatives for the year. Operating expenses actually decreased by 8% from PHP 11.6 billion to PHP 10.7 billion for 2024, and this was due to the decreases in the provision for impairment losses and repairs and maintenance for the year. As a result, EBITDA posted an 11% increase to PHP 20.6 billion -- from PHP 20.6 billion to PHP 22.8 billion for the year-ended 2024, and this is due primarily to the gross margin improvement and the decrease in operating expenses. Interest and other financing charges increased significantly by 73% from PHP 5.7 billion for full year 2023 to PHP 9.8 billion for full year 2024. The increase was primarily attributable to the lower capitalization for the year, as part of the full adoption of the PAS 23 on borrowing costs. Overall, core net income ended full year 2024 with an 11% increase from PHP 9.4 billion -- to PHP 9.4 billion rather from PHP 8.5 billion in 2023. Moving on to our real-time sales, reservation sales continued to trend higher. If you look at this, full year 2023 had an increase of 10% to PHP 79 billion. The fourth quarter actually clocking in around 9% increase to PHP 20.6 billion. In terms of our real estate revenue contribution, our Camella rent accounts for 57%. This is a decrease from the 69% it contributed in 2023. If you look at it, most of the increases comes from the mid- to high-end brands, Crown Asia and Brittany. Brittany now contributes 16% combined compared to the 10% last year, as well as the Vista Residences or our subsidiary for vertical development, which accounts for 27% of the total in full year 2023 -- sorry, 2024 versus 21% in 2023. On to our leasing business, as of the end of December 31, 2024, we still have around 1.6 million square meters of gross floor area that's equivalent to 108 commercial assets across the country, comprising 42 malls, 59 commercial centers and 7 office buildings. If you look at the breakdown, 87% of our GFA are retail malls and 13% office. Our retail mall actually is taking advantage of being located near our existing communities. 76% of our total GFA is located near Vista communities. Anchor tenants account to around 75% of GFA, 70% of our GFA are affiliated. And what's new for the year is that we actually open to more third-party tenants, and we get sign-ups and openings of new tenants -- third-party tenants in some of our malls last year. On the next slide, these are the quarterly details of our leasing business. So operating GFA stood at 100%, system-wide occupancy at 87% with our mall at 86% and office at 92%. Moving on to the balance sheet, so the company has a cash and cash investment decreased by 9% to PHP 45 billion from PHP 49.9 billion last year, and this was due to the use of cash for debt servicing and investing activities. Total receivables went up to 47% to PHP 122 billion due primarily to the adoption of PFRS 15, higher reported sales, increase in other receivables and accrued rental income for the year. Real estate inventories decreased by 9% to PHP 58.2 billion, and this was due primarily to the launches for the year. Investment properties grew by 8% to PHP 135 billion, and partly this is due with the capitalized interest for the year. With the adoption of PAS 23, borrowing costs are now allowed only to capitalize on investment properties, as well as residential properties that are not yet launched. This brought our total assets to PHP 380 billion or up 11%. Interest-bearing loans slightly increased by 1% to PHP 163 billion because last year, the company just refinanced most of its debt maturities for the year. Total liabilities increased by 16% to PHP 243.2 billion due primarily to the increase in the accounts and other payables, as well as different tax liabilities in the year. While equity went up 3% to PHP 137.3 billion due to the net income recorded for the period. At the end of December 2024, our debt to equity stood at 1.19x, lower than the 1.21x end of December 2023, while our net debt to equity is at 0.86x, slightly higher than December 2024. We have a diverse funding sources. As you can see on the left slide -- left-hand side of the slide, majority of our debt are actually long term in nature, as shown in our maturity profile graph. Moving on to our land bank, it stood at around 2,690.5 hectares at the end of December 31, 2024, of which 30% are the Mega Manila area and 70% are provinces. Our land bank represents at least 27 to 30 years of development. If we don't acquire more land, then we'll be launching more vertical projects moving forward. We're present in 147 cities and municipalities, 49 provinces across the country. Please note that the almost our land bank is actually distinct and separate from the other lands owned by the group. Slide 12, we have launched 25 projects worth PHP 40.8 billion last year, comprised of 2 horizontals and 23 vertical projects. To date, we have a total of 30 Vista Estate projects launched. On CapEx, we set our CapEx for 2024 to PHP 30 billion. Majority are for construction and land development. And for the full year 2024, we have actually spent PHP 28.9 billion or 96% of the [indiscernible] and most of it is for construction and land development, while land acquisition still remains muted, as the company will be using existing land and reserve lands for launches. Slide 14, just an update on May 2, next slide. We actually -- VLL International obtained $150 million syndicated loan facility at a rate of 6.4% from various banks, namely Sumitomo, Casa United Bank, Changhua Commercial Bank, First Commercial Bank, Mega International Commercial Bank and [indiscernible] Bank. They use the proceeds for this PHP 150 million for the financing. That's it for the presentation proper. We're okay for the question-and-answer. Thank you very much.

How will the debt maturing this year be financed?

For the year, we're looking at around PHP 35 billion principal maturities. We were -- we will be refinancing all of that. So far, we acquired PHP 150 million from the Sumitomo Bank, I mean, from the dollar syndication as part of that. And the rest, we will be working on it.

Could you share the breakdown of the accounts receivable for both 2024 and 2023? How much of AR is related to leasing receivables and how much is related to property developments?

Around PHP 60 billion are actually from the receivables from contracts receivable from residential. There are some other receivables and leasing, I think, is around PHP 40 billion.

What are Vista Land's plans in relation to the payment of its maturities this year?

Usually look at the maturities or near maturities such as retail bonds and corporate notes. So most likely, we'll be refinancing using the same instrument. But then we already have other sources like the dollar funding or the dollar syndicated loan that we did. So we will work on that also.

Where do you attribute the margin expansion? Are these expected to be the norm moving forward?

I think the norm will be around 65%, 66%. This really came from the cost initiatives that the cleanup of some of the estimated land development costs of completed projects that were reversed. If we remove that, for example, this last year, 2024, the normalized margin would have been 65%. So that, I think, would be the -- what I say, the sustainable gross margin because this really came from the appreciation of land.

What is the total net income for the year 2024?

2024, PHP 9.4 billion.

When will you have the first quarter '25 earnings briefing?

We're looking at next week to do the briefing.

There was a substantial decrease in parking and other fees. Would you attribute this to lower foot traffic?

Actually, the name says parking, administrative -- mall administrative fees, as well as miscellaneous income. Majority of the decrease came from forfeitures, where we have -- if we have cancellation, we have -- we get like whatever the payment to the buyers are. Actually, parking increased, all the other mall-related collateral increased. The one that decreased in the miscellaneous income line item or the parking miscellaneous administrative is the forfeitures.

Do you have any plans for buyback of USD bonds?

We are looking at that. So the company is evaluating on the buyback of the U.S. dollar bonds.

Any material risk given higher refinancing costs?

Actually, if you notice, this dollar syndication, we got it at 6.4%. So I mean, we just have to -- we just have to see what's the potential for like lowering cost or opportunities whenever we do our maturities.

What was the rental income without including rental escalation?

Let me get back to you on that.

Could you provide more color why accounts receivable increased?

The significant increase is the adoption of PFRS 15 or the significant financing component, where most of our -- if you look at it, our construction is actually faster compared to the payment cycle of the buyers. So when we adopted the IFRS 15 (sic) [ PFRS 15 ], we have to recognize accounts receivable -- I mean, significant financing component and it was [indiscernible] that in the retained earnings beginning [indiscernible] that's around PHP 10 billion.

Can you share your CapEx plans going forward for the next few years?

CapEx plans we will disclose it next week for the first quarter briefing. So it's efficient.

Could you comment on the annual results being delayed?

Well, actually, the reason why we delayed the result is more -- as mentioned, we have a new accounting partner assigned to us because the original partner was already on its 7 years. So the new team has to do all the -- we do most of the procedures and then we release it now.

Should there be strains from SBLs on local banks, what other significant financing channels are you looking at?

Well, actually, that's why we actually always do our -- diversify our funding sources, and we just got a new diversified funding sources, which is the dollar syndication because we want to make sure that we have other options in case of -- there are some limitations in some sources that we have.

Where is the biggest area for your land bank?

If you look at the map a while ago, actually, majority are still Mega Manila, but these are outside the areas, where there's like oversupply in condominium. The majority of our land is really suitable for horizontal development, especially in the provincial areas.

Equity just only increased 3%, around PHP 4 billion, PHP 4 billion increased, but the net income is around PHP 9 billion. What is the breakdown and the difference?

I think that also there's an impact on the beginning retained earnings because we booked the adjustment pertaining to the PFRS 15, which is a change in accounting policy. So we will show -- I mean, the financial statement will show you the roll forward of the retained earnings, and you see the impact of the adoption of the accounting -- the new accounting standards.

Will the receivables be reversed in first quarter? And how will this evolve going forward?

No, we will be able to collect some of it especially on the leasing side. There will be some timing difference, especially in the AR tenant portion. The accrued receivables, which has significantly increased, will be actually reversed over time. So as mentioned, this pertains to future escalation, which has been straight line. So the moment we're actually in the second half of the contract, for example, most of our contracts like 15 years, if we're already in the 8th year to 15th year, you'll see accrued rent receivables to decrease because escalation already kicks in. So therefore, the billed receivables will be higher than the cash collected.

Could you share your unsold inventory levels? How much is RFOs and how much is under construction?

We have minimal RFOs. If you look at it, our inventory actually decreased. So it's PHP 58 billion now. If you look at it, majority of our inventories are subdivided lots. So there's no housing component in that. We have around PHP 11 billion in condominium units and then around PHP 3 billion in housing units because the way we do it is we presell first before we actually build. So that's why we don't build up inventories.

On potential buyback of USD bonds, any time line for decision-making? Also, could you let us know more details on local funding? The 39% of debt short term in nature, how much of this would be lines expected to be rolled over?

Well, we're in discussions with the local bank. And of course, we also look at other potential sources for funding to actually roll over. When it comes to the time line on the buying back of the receivable -- of the dollar bonds, we're actually actively looking at it, and we'll see the decision within the month -- in the month of June.

Can you talk a bit more about your loan book? What is the NPL in 2024?

Actually, if you look at it, our receivables from buyers is around PHP 60 billion. There is no allowance for doubtful account or impairment losses recorded for that because when we did our -- when the auditor did the evaluation of the potential impairment, the value of the property is still higher compared to the value of the receivables. So there's -- we don't see a significant like levels of NPLs for that one because at the end of the day, we think we were able to collect. And if in case they cancel, we can resell it at a better price. So that's why there's no impairment losses recognized.

What is the long-term outlook of the company in property sector?

Well, for this year, especially with the oversupply in economy in Metro Manila or certain areas, specifically Bay Area, Passive [indiscernible] City, most of our launches will be in the provincial, and we're going back to our base core business, which is horizontal housing, which is our core strength. So you'll see us more of our launches will be more horizontal moving forward and provincial.

Can you comment on the market for affordable housing, where you have a large exposure?

We think that the affordable markets are actually gaining traction, especially with potential rate cuts moving forward. Inflation clocked in 1.4% last month. So actually, there is a room to cut more rates moving forward. And I think that will increase affordability for our potential buyers.

How much is current book sales? What are the presales target for 2025 versus 2024?

And book revenues is around PHP 83 billion, as of end 2024. Presales, we haven't set the target yet, but at least the level of 2024.

Will the proceeds from USD syndication be used for the buyback? Or will you raise a separate loan or cash balance?

Well, I mean, it can be either. Well, I mean, we'll look at the deployment of our funds and see if we can use some debt for the buyback.

How have the sales take-up on your SE been so far for year-to-date? Can you give some guidance for 2024 -- 2025?

We'll give more guidance for next week, but I've seen that we're seeing flattish sales last first quarter. We haven't seen the exact number yet. I mean confidence was impacted. And I think in the next week, we'll be able to give more color.

How much in terms of sales value is unsold inventory as of end 2024?

We have around -- in terms of cost, it's around PHP 11 billion for condominium units. So [ bank ] stood is around PHP 22 billion.

How much of peso loans have come just year-to-date? And how much of that has been refinanced?

For the year, we're looking at around PHP 35 billion in maturities and they come in long. June will come in around PHP 13 billion and around PHP 17 billion notes in December. So the difference would have -- been already been paid out.

Does the company consider share buybacks?

That's always the plan. I mean, the company is, I mean, is always evaluating, and we'll see that we will be able to do some of the buybacks for the stock market.

The receivables come down due to better collection or due to partly reversal of effect of PFRS.

Well, it's a combination. For the first quarter, we'll see that, and we'll update you on where the receivables will be by the first quarter, and that's going to be next...

A question coming in from [indiscernible]. Well, you have successfully raised dollar syndicated loans, why not raise peso domestic loans as well?

We're looking at it. I mean, at the end of the day, we're looking at all potential options. I mean, we just want to diversify our funding sources. So we're looking and we're talking to banks. We're talking to some -- to do some retail bonds. So all potential sources of funding, we're looking at it.

Question coming in from [indiscernible].

Let me just check if you can hear me. Yes. I'd like to get a flavor of demand. So you mentioned, for instance, that you plan to do more horizontal and provincial projects. I recall at some point last year, maybe it was the year before, there was an intention to do, let's say, more leisure or like beach or mountain -- in my head, it was beach or mountain higher-end projects. What's your view on that now? And related to that, I believe you said you sold more Brittany and Crown Asia. How is the demand for that type of product? And is that, in your opinion, stronger than, let's say, affordable housing?

Right now, I mean, if you -- I mean, that was intentional last year, we were pushing for vertical projects, and it's not actually -- it's actually across the Philippines. Now we're still going to launch like the big leisure projects. We still have projects -- we have still land in like [indiscernible]. I mean, we're going to launch that still. But majority of our launches will be our horizontal projects in the provincial. I mean, I think confidence in the condo market has been a little bit weaker. So that's why we're looking at the other side, which is the horizontal. But Brittany, Crown Asia, we will still opportunistically launch. We've seen that market a little bit like they are actually more resilient. And that's why we've seen like contribution from Brittany and Crown Asia increased by 6% compared to last year, so from 10% to about 15%. I mean, also on the vertical side, Vista Residences, we will still be launching projects, especially in areas, where we see potential. I mean, we're not in the areas, where there's oversupply. So we'll see it. But the core business or the majority of our launches will still be in the affordable provincial and horizontal development.

Let me just check if I understand. Did you mean that the Brittany and Crown Asia sales were they vertical projects or horizontal projects?

Combination. I mean, there was a combination of vertical [ and horizontal ].

Got it. And with respect to demand from OFWs, let's say, as a percentage of your sales, do they comprise the same amount as before, let's say, 55% to 60%? Or is it come up or down?

Still the same. It's around 60% we'll see. I mean, so far, I mean, at the end of the day, most of our buyers are still the overseas Filipinos.

And to clarify, that's true even for Brittany and Crown Asia, just a richer OFW clientele.

Overseas Filipinos from the U.S., for example, where we say the profile will be different compared to the Camella and [indiscernible].

But still OFW.

That's correct.

For first quarter debt repayment, did you obtain loan to refinance? Or did you use cash to repay...

It was a combination. So we have some loans in the [indiscernible] to pay for the first quarter...

Does the company have dividend policy example as percentage of income for declaration of dividends?

We do. We actually declared dividends in the fourth quarter every year ever since we listed and it's around at least 20% of prior year's net income. We don't see additional questions in the Q&A box or the chat box here.

Regarding the previous allegations of unpaid property taxes, is there any investigation still ongoing?

Just to clarify, there's no investigation. Actually, it was -- it's political in nature. That particular unpaid property taxes pertaining to our hotel in Las Pinas, where the government of the [ Pinas ] had an assessment at around [ BRL 150 million ] property tax, where the basis were actually wrong. And then when we told them that the basis was actually wrong, they actually agreed to our basis, which would have been just [ BRL 50 million ]. So we're -- we actually settled this agreed. So there's no investigation in the first place. I mean, they're just saying that we haven't paid, but they actually are just waiting for them to actually finalize the -- and agreed with us on the correct amount and which we actually pay them.

So the change of emphasis from condo development to horizontal push increase of land bank purchase?

I don't think so because we still have about 2,600 hectares. That's still good for combinations, horizontal, vertical. If you can buy both, that will be around probably like 15 to up to 30 years of development. So we don't even have to buy that.

Among the total cash number, how much is free cash? How much is restricted cash and investment?

[ You get the ] breakdown of PHP 45 billion in cash. Investment in amortized cost is around PHP 42 billion and the cash, including long-term, short-term investment is around PHP 3.5 billion. That's the breakdown of the PHP 45 billion cash balance and investment. Okay. So we don't see any additional questions from the Q&A box or the chat box, but we're always available for you guys, so you can contact us in time, and I'll see you in a week. There's the last question. What is the amount of assets secured at collateral lines? Technically, there's not because we have a negative pledge. But the way we hedge around [ 35 ] -- or most of our investment in amortized cost is actually against an SBLC, which we borrowed against in peso. So that's what would you say a secured collateral lines. But technically, most of our investment in investment properties, inventories and [indiscernible]. So as I was saying, so thank you very much for your participation. We'll see you next week for the first quarter results, and we'll give more information. And if you have other questions, you can always contact us any time. Thank you very much, everyone, and we appreciate your participation. Thank you.