Ayala-led Cebu Holdings Inc. is debuting on the local bond market and has obtained a triple-A credit rating from local credit watchdog Philippine Ratings Services Corp. on its proposed debt issue of as much as P5 billion.
In a statement, Philratings said it had assigned a PRS Aaa rating to Cebu Holdings’ bonds due 2021 with a base offer size of P3 billion and an oversubscription option of up to P2 billion.
Obligations rated “PRS Aaa” are deemed of the highest quality with minimal credit risk. The borrower’s capacity to meet its financial commitments on the obligation is deemed extremely strong.
Philratings said the rating on Cebu Holdings’ bonds had taken into consideration the company’s consistently improving profitability leading to expected improvements in cash flows; strong competitive position in the Cebu market; competent and experienced management team and strong support from its shareholders; financial flexibility and capital adequacy, and proven resiliency in the light of external stresses.
“The prospects for the Philippine economy as a whole and for Cebu in particular were likewise seen as a positive credit-rating factor,” Philratings said.
Cebu Holdings was established in 1988 with the vision to transform the urban landscape of Cebu and help realize its economic potential. Its Cebu Business Park or CBP, an integrated master-planned mixed-use economic zone, is reportedly the largest operating economic IT (information technology) park in the country.
“Even with keener competition expected in Cebu with the entry of bigger property developers into the area, Cebu Holdings benefits from its first-mover advantage in the market and its track record in terms of the quality of development of its existing projects,” Philratings said.
The company is likewise seen leveraging on its strong ties with its shareholder, Ayala Land Inc., in the areas of property development, management, sales and various operational aspects.
Throughout the years, Philratings said Cebu Holdings’ historical performance had generally shown a positive trend, with revenues from 2009 to 2013 rising at annual rates ranging from 13 percent to as high as 33 percent. Revenues reached their peak in 2013 at P2.2 billion.
In 2013, the company grew its net profit by 13.6 percent to P501 million. Philratings said profit margins were similarly “positive” historically and were generally on an uptrend.
“The company’s performance in 2013 is noteworthy considering the effects of natural calamities (such as Cebu earthquake, Typhoon Yolanda/Haiyan) during the year. Such demonstrates the company’s resilience amid external stresses,” the rating firm said.
Cebu Holdings has a “significant” amount of undrawn credit lines from various financial institutions and a sizable amount of landholdings, which add to its financial flexibility while its existing land bank enhances the company’s ability to pursue expansion plans over the next 10 to 15 years, Philratings added.
“It is also worth noting that as a company, Cebu Holdings was able to withstand the 1997 Asian financial crisis, which negatively affected the property development sector and the Philippine economy as a whole. Cebu Holdings was able to keep its bank loans and payables to suppliers current and it did not incur any net loss during this difficult period,” it noted.