ALI seen hitting 20% annual growth in next five years

Local property giant Ayala Land Inc. (ALI) expects to be on track to achieving its goals under its “Vision 2020” strategy, which set the company’s growth target at 20 percent yearly until 2020.

The elections next year and the rising probability that the US Federal Reserve will start raising interest rates soon will not affect ALI’s determination to achieve its goal, ALI president Bernard Vincent Dy said on Thursday.

“We have rolled out our Vision 2020. We’re on track. We’ll continue to pursue that,” Dy said.

“Vision 2020” is seen allowing ALI to breach a net profit of P40 billion by 2020. Half of the profit will come from its development assets, like residential property development, while half will come from its leasing portfolio, including the shopping mall and office property operations.

As of the third quarter of this year, more than 40 percent of ALI’s earnings had come from  recurring income from its rental portfolio.

Dy is optimistic the macroeconomic backdrop will help ALI achieve an annual growth rate of at least 20 percent. This vision assumes an economic growth rate of 6 percent yearly through 2020.

On the impact of the  US Federal Reserve’s much-expected interest rate lift-off, Dy said: “I don’t think anybody is projecting a significant increase.”
Higher interest rates are not good for the property business but Dy said it had been widely anticipated that increases would be gradual.

ALI is also upbeat about the business process outsourcing (BPO) being a key growth driver of recurring earnings.

“My sense is that as long as BPO growth continues to be strong, rental rate will  continue to grow. You can talk to other developers and see that the BPO (industry) continues to grow,” Dy said.

Asked about prospects of rental rates slowing down, Dy said rental rates had not been significantly rising. Local rental rates, he said, had only been growing by 4-5 percent a year. “If growth continues to be strong, I think escalation will continue depending on the supply at a particular point in time,” he said.

ALI’s 2020 strategy builds on the momentum of the “5-10-15” strategy —achieve P10 billion in net income and 15 percent return on equity (ROE) over a five-year period—set during the term of Dy’s predecessor Antonino Aquino, who retired in April 2014.  It is also more aggressive than many analysts’ growth expectations.

In the first nine months of 2015, ALI grew its net income by 19 percent year-on-year to P12.8 billion, with consolidated revenue reaching P75.1 billion. Revenue from real estate amounted to P70.2 billion, driven by property development, commercial leasing and services businesses.