{"id":327835,"date":"2024-05-09T17:37:08","date_gmt":"2024-05-09T09:37:08","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=327835"},"modified":"2024-05-09T17:37:10","modified_gmt":"2024-05-09T09:37:10","slug":"stock-in-focus-ayala-land-inc-ali-9-may-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-ayala-land-inc-ali-9-may-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: Ayala Land, Inc. (ALI) – 9 May 2024 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>9 May 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 39.32<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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We see the current delay in interest rate cuts as something that would pose minimal effect on ALI\u2019s earnings given their client composition, especially in the long term. To recognize the effect on ALI\u2019s projected earnings, we revised our Target Price, downgrading it by 5.6% from our previous target of P41.67 to P39.32. <\/p>\n\n\n\n

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

Sustaining Earnings<\/h3>\n\n\n\n

ALI managed to sustain its earnings outperformance with 2023 earnings of P24.5-Billion coming in at 107.5% of our estimates. We attribute this outperformance mainly to their Shopping Centers, which beat our revenue forecast by 22.2%. Resi on the other hand managed to perform in-line with our estimates, coming in at 104.2% of APS estimates.<\/p>\n\n\n\n

Delay in rate cuts pose some risk to certain resi segments<\/h3>\n\n\n\n

We noted that the BSP\u2019s tone seem to imply that a June rate cut is off the table. This would then only leave BSP with a room to cut rates by only 75bps, which led to a revision in our rate cut forecast from 100-125bps to 75-100bps. As the market priced in easing by to begin by the end of 1H 2024, the re-emergence of inflation risks resulted in the market\u2019s retreat, pricing in a later rate cut. Despite this however, we have always stated that ALI\u2019s client composition, which is geared towards the premium market is not as sensitive to movement in interest rates.<\/p>\n\n\n\n

Maintain caution for offices<\/h3>\n\n\n\n

Offices however, tell another story. We raised our cap rate for Offices by 100bps as we still see this segment to hamper the overall growth of the company driven by the emergence of different work setups. Note though that ALI\u2019s vacancy rate of 8% is much lower than industry\u2019s 19.3%. Moving forward, Collier\u2019s projects rent to marginally rise by only 2.5% for 2024 given the current surplus of office space. Given this, we see Office revenue contributions as % of total continue to dwindle from 2023\u2019s 8.5% to 2026\u2019s 6.8%.<\/p>\n\n\n\n

Consumer demand plus travel resurgence<\/h3>\n\n\n\n

Our outlook for ALI\u2019s Hotels and Malls remains positive as we see consumer demand continue to pick up alongside the return of travelers. We note however, that ALI\u2019s mall renovations would mean a reduction in revenues for the segment as TriNoma is set to be completed by 4Q 2025, Glorietta, Greenbelt 2, and Ayala center Cebu to be finished by 2026, and Greenbelt 1 to be completed by 2028.<\/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>