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Ayala Land to Boost Record Profit on Increased Home Demand

Ayala Land Inc. (ALI) said it expects to expand its record profit this year as the Philippines’ largest builder takes advantage of a housing shortage and develops business districts outside the capital.

“That is very possible given the very positive tailwind we’re getting from the Philippine economy,” Ayala Land President Antonino Aquino said in an interview with Bloomberg Television on March 20.

The developer stands to benefit from an under-supply of housing it estimates at 4 million homes nationwide. Profit rose 27 percent to a record 9.04 billion pesos ($221 million) in 2012. The company, which developed the Makati business district in Manila, has said it targets to boost profit to 10 billion pesos by 2014.

The Philippines’ $225 billion economy expanded 6.6 percent last year, the fastest pace in two years, as government spending and consumption rose. Its 6.8 percent expansion last quarter beat that of Indonesia, Malaysia and India. Standard & Poor’s in December raised the Philippines’ sovereign debt outlook to positive on improved governance and public finances, bringing it closer to investment-grade status.

“Ayala Land is in the best position to capitalize on the economy’s growth momentum because it is in everything from housing to retail to offices, and geographically it is everywhere,” Richard Laneda, an analyst at Manila-based COL Financial Group Inc., said.

Profit growth may decelerate after coming from a high base in 2012, he said. Growth in net income has been slowing, rising 35 percent in 2010 and 31 percent in 2011.

Robust Market

Ayala Land rose 3.7 percent to 30.90 pesos at the close of Manila trading, the biggest gain since March 6. Ayala shares have gained 17 percent this year, compared with the stock benchmark index’s 14 percent advance.

The builder, based in Manila, has diversified its residential portfolio into five brands selling homes from 400,000 pesos to 35 million pesos. Its housing business accounts for almost half of earnings.

“From a total fundamental standpoint, we see this market will continue to be robust,” Aquino said, citing the shortage of homes across the country.

Competition in the Philippine property market has led to “very disciplined” pricing, such that “we don’t see the risk as far as a price bubble is concerned,” Aquino said. The risk could be in terms of “potential oversupply in some market segments in some locations, and we just have to be alert to being able to spot this particular risk.”

Ayala Land seeks to replicate the Makati business district on 74 hectares of prime land it bought from the government last year, and build communities outside the Philippine capital, Aquino said.

The company will continue to boost its land bank to build, he said. It will spend 65.5 billion pesos this year and start 69 projects worth 129 billion pesos, the company said on Feb. 13.

To contact the reporter on this story: Cecilia Yap in Manila at cyap19@bloomberg.net

To contact the editors responsible for this story: Colin Keatinge in Singapore at ckeatinge@bloomberg.net; Andreea Papuc in Hong Kong at apapuc1@bloomberg.net

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