Corporate News

By Keith Richard D. Mariano,

8990 Holdings reveals cost of delay in securing project permits

Posted on February 01, 2017

8990 HOLDINGS, Inc. missed an estimated P2 billion in sales, after five projects encountered delays in the permitting stage.

8990 Holdings’ main office is shown in this undated file photo. -- BW FILE PHOTO
The mass housing developer only launched nine developments instead of the 14 scheduled last year, President and Chief Executive Officer Januario Jesus B. Atencio III told reporters after a special shareholders’ meeting in Makati City on Tuesday.

“I’d say the delay easily [cost] P2 billion,” Mr. Atencio noted. “If we were on schedule, these five new projects could have generated (revenues) in the ballpark of P2 billion.”

8990 Holdings flagged the deferment of three developments in Davao City last October. At the time, it was hoping to push through with three more projects located in Cebu, Iloilo and Bacolod before the yearend.

The property developer, however, had to push back the planned developments in Iloilo and Bacolod as well.

Mr. Atencio attributed the delays to the leadership transition in the government, which ushered in some policy changes. In Davao, for instance, the council amended the City Land Use Plan 2015 to require 10-30% of open spaces in subdivisions.

“The issues that confront us sadly are not issues that we can handle. If it was a production issue, it was a sales issue. If it was a documentation issue, if it was a housing finance issue (but) this one basically is a permit issue,” Mr. Atencio said.

8990 Holdings may therefore register flattish sales and earnings for the entire 2016. At end-September, the company booked a 1% uptick in net income to P3.19 billion, following a 3% rise in revenues to P7.18 billion.

The company will release its fourth-quarter and annual report on Feb. 7. It had targeted a 20% increase in gross sales and net income to P12 billion and P4.8 billion, respectively.

“We’re now hopeful for 2017 because all these projects that were delayed plus the new ones in 2017 will be on stream, so we’re just delayed. So, the revenue is not lost; it’s just delayed,” Mr. Atencio said.

Accordingly, the financial performance of 8990 Holdings should bounce back, with sales likely increasing faster than 20% this year.

In addition to the delayed projects, the company is looking to launch five more developments. The pipeline includes a complex of residential buildings offering around 18,000 units near the Ortigas Center in Pasig City.

The company is looking to deliver 13,000 units and subsequently realize P13 billion to P14 billion in sales. It was setting aside P3 billion to P5 billion for land acquisition and P7.5 billion for project development, Mr. Atencio noted in an earlier interview.

8990 Holdings will raise P5 billion by issuing 50 million preferred shares in July. The issue represents the first tranche of the P10-billion shelf offering of 100 million preferred shares.

The company’s shareholders, in the special meeting held Tuesday, approved the reclassification of 100 common shares to preferred shares along with their shelf registration with the Securities and Exchange Commission.

China Bank Capital Corp. will arrange the fund-raising meant to refinance the existing obligations of 8990 Holdings with banks, among other purposes, Chief Executive Officer Roan Buenaventura-Torregoza said after the special stockholders’ meeting.

“We have a bond and we have bond covenant that we can only borrow as much. We also have to maintain a 1.5 debt-to-equity ratio. If we want to grow as aggressively as we are right now, we cannot just depend on banks,” Ms. Buenaventura-Torregoza noted.

Shares in 8990 Holdings closed flat at P7.30 apiece on the Philippine Stock Exchange on Tuesday.