8990 Targets Profit to Rise by 45% as Philippines Short of Homes

8990 Holdings Inc. (HOUSE), the largest builder of affordable homes in the Philippines, targets to boost profit by 45 percent this year amid a shortage of houses in the Southeast Asian nation.

Net income this year is expected to increase to 3.2 billion pesos ($73 million) from 2.2 billion pesos in 2013 as sales may rise by half to 8 billion pesos, President JJ Atencio said in an interview in Manila. The company, which builds houses in as little as eight days and sells them as cheaply as $10,000 each, will spend at least 5 billion pesos to double its land bank by 250 hectares (617 acres) as the current portfolio may run out after 2018 given the increase in demand, he said.

The Philippines’ housing backlog is expected to almost double to 6.5 million by 2030 from the current 3.9 million units as the $250 billion economy improves and the population grows, based on estimates from the Subdivision and Housing Developers Association.

“We’re talking about a market whose housing needs are aspirational,” Atencio said in an interview on June 13. “What they want to do is to move up in society by graduating from being renters to being asset owners.”

The economy expanded 7.2 percent in 2013, the fastest in Asia after China, and is poised to remain among the world’s five fastest expanding until 2016, according to economists surveyed by Bloomberg News. The country will reach a demographic “sweet spot” from 2015 when a large portion of the population will enter the workforce, President Benigno Aquino said in a February interview.

Rising Competition

The shares of 8990 rose 2 percent to 8.60 pesos as of 9:49 a.m. in Manila trading. They have risen 23 percent this year and 30 percent since the company sold shares at 6.50 pesos each in May.

Larger builders, including Ayala Land Inc., have entered the mass-housing market as demand rises, adding to competition that had been mostly concentrated among smaller developers.

“8990 has already built big communities in Cebu and Cavite provinces and that’s something they can leverage,” said Miguel Agarao, an investment analyst at Wealth Securities Inc. in Manila. “They’re also very efficient and can build a house very quickly. Their only problem is they don’t have as big a land bank as Ayala Land.”

8990 targets to build more than 64,000 units using its 250-hectare land bank until 2019, about half of which will be in the Philippine capital, Atencio said. These include a high-rise condominium with 27,000 units on a 13.2-hectare property in Ortigas, he added.

Talks for a partner that will run a mall at its Ortigas property had been expanded to include several local and regional mall operators, Atencio said, declining to elaborate.

8990 plans to securitize about 1 billion pesos, or a 10th of its receivables, to generate funds for projects, and will probably offer an interest rate of 7.5 percent, Atencio said.

“It’s only a billion pesos, but we want to show that securitization is a viable, feasible alternative to expand the housing finance sources of the country,” he said.

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

To contact the editors responsible for this story: Chua Baizhen at bchua14@bloomberg.net; Andreea Papuc at apapuc1@bloomberg.net Tomoko Yamazaki, Andreea Papuc

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