8990 Holdings: More than just housing

With a business model that is innovative, 8990 Holdings Inc. may yet become the Philippine stock market’s catalyst for its growth story. The company has, so far, elicited rave reviews from stock-market pundits and market analysts who are now beginning to view the housing developer as not just a builder of housing units.

In fact, stock-market analysts see a higher price point for the stock, which, last Friday, closed at P7.20 per share. Analysts, after looking at its second half financials that showed a net profit of P2.1 billion, and subjecting its project pipelines and its anticipated cash sales to analysis, look at a discounted cash flow (DCF) target price of P10.60, which is a 47-percent mark-up.

The bases for the great review about the stock were the anticipated higher housing deliveries and completion of project launches within the year. This augurs well for 8990 Holdings, which has, so far, redefined the housing market and even the amortization game, insofar as housing mortgages are concerned.

In a way, the reason for the emerging positive outlook at 8990 Holdings, which is listed as House, is not just its game-changing business model, which is fast pre-cast construction (eight construction days for its townhouse models), affordable amortization (2 percent of contract price), and proactive credit and collection (low in-house financing and “persuasive” techniques at collection).

The pre-cast technology of the company allows for tremendous economies of scale that lowers its construction costs, but which does not sacrifice its materials, like its higher-quality panels, while the 2-percent down payment is the lowest in the industry.

There are also favorable things that boost 8990’s expected higher price points. During its annual stockholders’ meeting last week, Januario Jesus Atencio, president and CEO, cited the bullish sentiments for the industry, such as the lowering of the interest costs charged by Pag-IBIG Fund to 6.5 percent, and the increase in the ceiling from P1.25 million to P1.7 million.

For prospective clients of 8990 Holdings, that means they can easily afford the housing units, many of which are below P1 million. This opens up great possibilities for the stock, which has, so far, ignited the interest of well-known foreign investment houses, such as Khazanah Nasional Berhad in Malaysia and TPG of Texas.

TPG, which is a leading global private investment firm founded in 1992 with $60 billion in assets; and Khazana, which is the strategic investment fund of the government of Malaysia, both pumped in almost P2 billon each, as they found the company’s narrative compelling due to its social dimensions.

For them, the company’s story is not just its profitable business model but its avenue for opening access to the poor. Imagine putting in a down payment of 2 percent that could translate to just P20,000 and a monthly amortization of about P8,000, which is what city dwellers would pay as rent, and voila, a family can look forward to a housing unit it can call its own for the price of paying what it could have paid for rent.

This is what the stock-market analysts and other pundits have seen in 8990 Holdings, the reason for the varying degree of positive take on the company stock’s potential for growth.

In fact, the analysts and pundits see a great upside for the company’s finances for the third quarter that is seen to eclipse its P2.5-billion revenues for the second quarter. Part of the positive outlook here does not yet include the higher takeouts from the Pag-IBIG Fund, which has, so far, taken out P1 billion of the company’s housing sales.