By Marissa Mae M. Ramos, Researcher
INVESTOR concerns over stricter lockdown dragged property stocks, making Ayala Land, Inc. (ALI) the third most actively traded stock last week.
A total of 49.08 million ALI shares worth P1.65 billion were traded last week, data from the Philippine Stock Exchange (PSE) showed.
Shares in the property developer closed P32 apiece on Friday, down by 9.1% from the P35.2 price per share on July 3. Since the start of the year, ALI has retreated 28.7%.
“Property stocks, with ALI leading the charge, were actively traded for the duration of the week as investors continued to speculate on quarantine uncertainties,” Regina Capital Development Corp. Equity Analyst Anna Corenne M. Agravio said in an e-mail.
“Fundamentally speaking, a shift back to stricter types of quarantine would be another hit to the property industry, which has only just started to recover. Investors are pricing this in and the possible effects that it will have to ALI in the near-term,” Ms. Agravio added.
Wendy B. Estacio, senior equity research analyst at Philippine National Bank’s (PNB) Research Division, attributed the stock activity to “sustained profit-taking following its outperformance of the PSE index (PSEi) during market’s rally from March 19 (first trading day after the two-day closure of the stock exchange) and June 9 (post-lockdown peak).”
“During the aforementioned rally, ALI was the fourth-best performing index stock and gained 66%, which outpaced the PSEi’s 42%…” Ms. Estacio said in an e-mail.
After the country’s confirmed cases of the coronavirus disease 2019 (COVID-19) reached hundreds in mid-March, President Rodrigo R. Duterte imposed a lockdown on areas where there is a high concentration of the disease.
Community quarantines in some areas in Luzon were already eased by May to dampen the strain on the economy, but the increasing number of COVID-19 cases in July have renewed investors’ fears about stricter measures. Since July 3, the daily number of additional cases range from 1,233 to as high as 2,539.
“This year will be particularly tough on ALI since there are large downside risks to its property development and leasing revenues. This was already evidenced by its first-quarter performance, and it is widely expected that in second quarter, it will post an even deeper decline in topline,” Ms. Agravio said.
“In addition, the limited construction capacity and delayed residential launches in the second half of the year will be two more hurdles to recognizing real estate sales. Since this makes up a lion’s share of the ALI’s operations, the continuing narrative would be a brief extension of the company’s negative income growth,” she added.
Ms. Estacio shared the same assessment: “[T]he company’s residential business, in general, may be affected by soft investor demand during the pandemic. Therefore, we forecast ALI’s full-year earnings to decline by 30% y/y (year on year) as its property development segment (about 70% of total revenues) is seen to drop by 38% y/y as the company deferred all new project launches for this year.”
“Meanwhile, we believe ALI’s balance sheet remains healthy and we see the company will continue to prioritize financial stability over growth during the crisis,” Ms. Estacio said.
The company’s net income attributable to parent declined 41% to P4.32 billion in the first quarter from P7.32 billion in the same period in 2019 after being dragged by the slowdown in reservations and project completion due to the Taal eruption in January and the lockdown in March.
It pushed ALI to cut its capital expenditures for 2020 by 37% to P69.8 billion. Meanwhile, the Securities and Exchange Commission approved on Friday its real estate investment trust (REIT) offering this year.
The country’s first REIT listing would raise around P15.1 billion worth of shares and will likely debut at the PSE on Aug. 7 under the trading symbol “AREIT.”
Regina Capital’s Ms. Agravio sees the approval of the REIT to be a “plus to ALI’s valuation” as investors price in gains from the offering into ALI’s fundamentals.
“The REIT would allow ALI access to a wider pool of capital in the long term, which the firm would then be able to reinvest or recycle into higher-return opportunities,” she said.
In the coming weeks, Ms. Agravio placed ALI’s support between P30 and P31 apiece while resistance at its 100-day moving average of P34 apiece.
Manuel Antonio G. Lisbona, president of PNB Securities, Inc., noted that since the peak of P38.30 last month, ALI’s stock price trended lower and broke below its 50-day moving average of P34.28 apiece.
“It is quite likely that the price will cover the gap formed between May 28 and May 29 or P30.85 to P31.35,” Mr. Lisbona said in an e-mail.
