FLI – Get to know Filinvest Land, Inc. and its prospects

Filinvest Land, Inc. (FLI) is one of the leading real estate developers in the Philippines.  It is engaged mainly in residential developments and in investments in rental properties for office and retail  use.

Revenue Stream

As of year-end 2016 FLI derived its revenue as follows:

Real Estate Sales from sales of residential units from its development – 14.3 Billion (80%)

Rents from its investment in office buildings and retail/mall properties – 3.4 Billion (20%).

Residential developments of the company covers the varying income segments of the Filipinos.  FLI’s Futura Homes offers value-for-money communities while its Spatial series offers affordable mid-rise condominium units (condos) for the low-income segment.  The mid-income segment is being catered through the Studio series of condos and the Oasis resort-style enclaves.  Filinvest Premiere offers luxury residences and premium leisure developments suited for the most discriminating tastes of the affluent segment.

Its investments in commercial retail properties is mainly anchored on the Festival Supermall in Filinvest City in Alabang (South Metro Manila) while its investments in office properties include the Northgate Cyberzone a business process outsourcing (BPO) Park also in Filinvest City. Filinvest City is owned and developed by Filinvest Alabang Inc. which is a 20% owned-affiliate of FLI. Rentals from investment properties provide steady recurring revenue and cash flows for FLI.

Growth Strategy

FLI has been acquiring large track of raw land for development into a sprawling mix-use townscape that features work-live-play environment. Master-planned townscapes allow FLI to sell residential units and at the same time invests in the retail and office rental properties. It has been noted that FLI has been increasing its investments in rental properties – retail and office. As of 3Q 2017, its investment properties has grown to 41.3 Billion from 38 Billion as of year-end 2016. Rental revenue as of 3Q 2017 now accounts 30% of the total revenue up 10% from year-end 2016.

Financials

FLI has a strong operating cash flows which as of 3Q 2017 amounts to 5 Billion Pesos. The strong cash flow generation from operations can be attributed to its disciplined costs management of its developments and investments. For the period up to 3Q 2017 it was able to generate a gross profit of 50% of its revenue. It generates a net income before tax 0.32 Pesos for every 1 Peso of revenue.

Although investments in rental properties takes a lot of resources to build, FLI has able to tap the capital/debt markets for funding for those investments. The predictable and recurring revenue and cash flows from the investment properties can very well cover repayment of debts. Residential developments of FLI are self-funding through pre-selling and project financing. The availability of funding avenue strengthens the balance sheet of FLI.

Funding for acquisition and/or development of assets are available to FLI. Assets acquired/or developed provide returns greater than their funding costs, thus, value accretive to stockholders. As of this writing FLI is trading at a dividend yield of 2.40%.

Ownership

FLI is controlled by Filinvest Development Corporation (FDC) which owns 59.4% of its outstanding common stocks. FDC is controlled by the Gotianun family. Aside from real estate development, FDC has investments in banking through East West Banking Corporation, sugar through Pacific Sugar Holdings Corporation, and power generation through FDC Utilities, Inc.

Of the 40.6% owned by the public, around 13% is held by institutional investors the biggest of which is Invesco Asset Management Ltd. holding around 5.05% of the total outstanding shares.

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