8990 eyes P9B in bonds float to fund expansion

Mass housing leader 8990 Holdings Inc. seeks to raise up to ₱9 billion in fresh funds from a retail bond offering to further fund its expansion plans.

In a report to the Philippine Stock Exchange, 8990, or HOUSE in the bourse, said its board approved the issuance of ₱5 billion in registered corporate notes with an oversubscription estimate of ₱4 billion.

The board also tapped local investment houses BDO Capital and Investment Corp. and First Metro Investment Corp. as joint issue managers and joint lead underwriters for the offering.

The board also approved 8990’s investment to create a subsidiary that will engage in the provision of cable and Internet services to its housing developments which will diversify the services offered by the company.

The bond market offers a very efficient way to borrow capital. While companies can borrow from banks, issuing bonds has become a more attractive proposition as the interest rate they pay bond investors is often less than the rate available in banks.

By issuing bonds directly to the investors, corporations can eliminate the banks as “middlemen” in the transaction, making the borrowing process more efficient and less expensive.

8990 Holdings President and CEO Januario Jesus Atencio said the bond float will allow the company to convert its short-term debts into long-term debts with the end view of more easily meeting other expense obligations and strengthening the balance sheet.

The company has been aggressively expanding as part of its strategy to maintain an annual profit growth of at least 20 percent. Last year, its net income surged 52 percent to ₱3.3 billion, exceeding its goal amid a growing local economy and a strong housing demand amid a huge backlog in the market.

8990 targets this year a net profit of between ₱3.8 billion and ₱4 billion or up to 21 percent from last year. The company plans to achieve a healthy profit growth.

It will start eight new projects covering nearly 80 hectares of land totaling 14,010 units or 20 percent more than the 11,574 units rolled out in 2014 and the start of horizontal projects in Cebu, Davao, Cavite, Rizal, medium-rise buildings in Davao and the National Capital region, and a high-rise project in Makati.

8990 Holdings has completed 11 developments translating to about 22,000 local housing units. The company seeks to further increase its geographical reach from the current seven of 14 regional growth centers of the country.

8990’s profit last year exceeded the guidance of ₱3 billion earlier set for the year, Atencio said.

Revenues were projected to rise by 22 to 27 percent to between ₱9.6 billion and ₱10 billion this year from gross sales that expanded last year by 48 percent to ₱7.9 billion.

The company’s net margin improved to 43 percent compared to 41 percent in the previous year.

Atencio said 8990’s robust performance last year was driven by a good macroeconomic environment, a growing business processing outsourcing sector and higher overseas remittances that complements the backlog in demand.

Atencio said 8990 also increased average prices, negotiated for lower prices of materials such as paint, boosted its capacity to produce new housing units to meet the backlog in the market and provided more sales bonuses to sellers.

“More than sales velocity, our capacity to build more and more units is the main determining factor to our long-term sustainability,” Atencio said.