{"id":325322,"date":"2023-10-12T13:02:08","date_gmt":"2023-10-12T05:02:08","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=325322"},"modified":"2023-10-12T13:02:10","modified_gmt":"2023-10-12T05:02:10","slug":"stock-in-focus-ayala-land-inc-ali-12-oct-2023-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-ayala-land-inc-ali-12-oct-2023-by-ap-securities\/","title":{"rendered":"Stock in Focus: Ayala Land, Inc. (ALI) – 12 Oct 2023 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>ALI<\/td><\/tr>
Company Name<\/strong><\/td>Ayala Land, Inc.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>12 Oct 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 41.67<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

We have a BUY rating on Ayala Land Inc. (ALI) and Target Price of P41.67 per share. We believe that ALI has compelling upside as it is trading at a steep discount to our Target Price. <\/p>\n\n\n\n

The recent change in management is also a positive move for the company, given that the new President and CEO has already held several key positions within ALI. As such, we expect continuity in the company\u2019s strategy of focusing on premium offerings.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

Recovery and Resiliency of Residential<\/h3>\n\n\n\n

Sales reservation growth in ALI\u2019s residential segment shows pick-up in demand as early as the 3rd quarter (3Q) 2022, despite BSP\u2019s aggressive rate hikes and the 4.5ppts rise in the Residential Real Estate Price (RREP) index. Notably, the 10.2% rise in the RREP index also outpaced the 3.25% pre-pandemic average from 1Q 2016 to 1Q 2019 despite high inflation and interest rates. <\/p>\n\n\n\n

We attribute the resilience of ALI\u2019s sales reservations despite these macro factors to its focus on upscale (Alveo) and luxury (ALP) segments, which have proven to be more insulated against rate hikes as clients from these market segments tend to have more investable resources in hand. ALI\u2019s sales reservations declined in 2020, but this could mostly be attributed to mobility restrictions more than anything. <\/p>\n\n\n\n

The segment is now on a slow recovery trajectory as rates stabilize and demand picks up once more, but we believe this recovery in sales reservations will be further boosted when rate cuts are eventually implemented. Even more so, since the loosening in monetary policy would be due to lower inflation and overall improvement in economic conditions, as opposed to the cuts back in 2020 which were due to the pandemic. We note however, that there is a risk that rate cuts may be delayed past 1H 2024, as the BSP recently reiterated its hawkish stance, along with considerations of another hike by November.<\/p>\n\n\n\n

Normalized foot traffic, higher occupancy<\/h3>\n\n\n\n

Foot traffic in Ayala Malls is already back to pre-pandemic levels, leading to higher occupancy rates which translates to higher revenues. We remain optimistic regarding ALI\u2019s shopping centers, as recent earnings distribution data for commercial leasing has shown stable growth in the segment which is underpinned by normalizing rental rates and occupancy. <\/p>\n\n\n\n

We see occupancy rates returning to normal at 88% by 2024, while we project 2023 2025 lease rates to grow at 2.3% per year. These projections are in-line with their current mall pipeline of 243K sq.m wherein 77K sq.m will be completed this year. <\/p>\n\n\n\n

After several years of pauses on construction of their malls, we see ALI allocating capital for the expansion of this segment, as shown in the increase in GLA in the table below. This further validates the positive outlook that the company has on the segment.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>