8990 Holdings prexy JJ Atencio at his artwork-laden office in Mandaluyong
In an interview after the listing of 8990 Holdings’ inaugural P9-billion bond float, company president Januario Jesus Atencio said the housing developer was targeting to grow by 20 percent each year starting this year, during which the company was projected to earn P4 billion for the full year.
“I think 20 percent (annual) growth for mass housing is achievable given huge backlog and given the market demand,” Atencio said in an interview at his office in Mandaluyong.
An annual growth of 20 percent is seen to double the business by 2020, but Atencio said this would not just be in terms of revenues and net profit. He said 8990 Holdings would want to double its manpower from 300 at present to 600 and scale up the corresponding project portfolio.
This also means that by 2020, 8990 Holdings would likely bring to the property market 20,000 in new residential units annually or double the current annual inventory of 10,000. The company also wants to expand its footprint to more areas in the Philippines, Atencio said.
The projected annual growth rate of 20 percent is also seen as a “more manageable” pace of growth even as 8990 Holdings has already significantly expanded in recent years. Compounded annual growth rate in the last three years was at 33 percent.
To fuel its medium-term growth outlook, 8990 Holdings’ annual capital expenditure is expected to reach P1 billion, Atencio said.
The recently completed P9-billion bond issuance by 8990 Holdings is seen supporting these growth goals. These bonds were listed on the fixed-income trading platform of Philippine Dealing & Exchange Corp. on Thursday.
“The bond issuance is not a fund-raising activity. This is meant to manage our balance sheet and make it stronger by moving short-term to longer term liabilities. Now that we have long-term bonds at five, seven and 10-year tenors, it’s now easier to plan our future growth,” Atencio said. “One of the biggest variables that can affect growth is interest rate, so now we can fix it.”
A fixed-rate borrowing over a long period is also seen eliminating the risk of interest rate fluctuations.
Based on the final breakdown of the fixed rate bond issuance, the sweet spot was the five-year and three-month tenor (series A bonds due 2020). 8990 Holdings issued P8.4 billion worth of such tenor at 6.208 percent per annum. About P375.5 million in seven-year tenor was issued at
6.131 percent a year while P218.91 million in 10-year bonds were priced to yield 6.8666 percent a year.
The joint issue managers are BDO Capital and Investment Corp., First Metro Investment Corp. (FMIC) and SB Capital Investment Corp. The joint lead underwriters are BDO Capital, FMIC, SB Capital and China Banking Corp.
“The interest earnings from our CTS (contract to sell portfolio) growing at only 20 percent sliding down to 8 percent in the next 10 years would sufficiently pay for the whole bond issuance,” Atencio said. “This is a conservative assumption.”
8990 Holdings currently has P15 billion worth of portfolio under this in-house financing program called CTS Gold. Under this program, homebuyers are required to shell out as low as 2 percent equity while other terms are similar to the housing loan guidelines of the state-owned Home Development Mutual Fund or Pag-Ibig: a low interest rate starting at 8.5 percent per annum, 25-year loan terms, and a monthly amortization cap of 40 percent of net disposable income. This allows the company to migrate the CTS portfolio to Pag-Ibig.