AyalaLand : Long Cycles and Buying windows

[drbubb]

AyalaLand : Long Cycles and Buying windows

Philippines PROPERTY CYCLE: (Original posted in 2016, and then updated from time-to-time)

On another chat I posted this in JULY 2020: I said:

"I think I know where we are (in the 18 YEAR LONG PROPERTY CYCLE), and here you go, a chart that is labeled with the TURN points. 

Do remember that a bellwether share like ALI might turn 6-12 months ahead of the physical market.  And ALI peaked in mid-2019. 

The physical market peak should have been right around the beginning of 2020: ...

Update ALI & CHI data

Assuming a peak in the Beginning of 2020,

The next major low should be in 3 - 5 years, or the end of 2024 +/- 1 year.

(updated 2022) : As discussed at the May 1, 2022 Property Meet-up:

Update ALI & CHI data



The end 2019 Peak was forecast before it happened! 

The next major low should be in 3 - 5 years, or the end of 2024 +/- 1 year.

[drbubb]

Property Developers / ALI-etc ... from 2.15.22: Ytd: 10d:  28.25 / Psei-6,686 = 0.42% Target?: P 35-39

Falling PHL. interest rates (10yr > 6.0%), and rising earnings will help

MEG-etc... from 2018:

Ph:ALI ... All Data / Last: P 28.25, yrL: 22.35

===

(original comment follows)

AyalaLand Update

ALI ... update: All: 10yr: 5yr: 2yr: 1yr: 10d / Last: P28.10

ALI / AyalaLand : 28.10 -0.40, -1.4%  - No signs of a cyclical recovery yet in the stock chart.  But BPItrade still puts out a BUY.  

Worryingly, the report talks about Residential project bookings falling 5%, and Cancellations at ALP.  Plus some bullish points

Compare w/ Long term cycle in ALI-CHI ... All Data: w/MEG : ALI: 28.10, CHI: 6.12, Ratio at: r-4.59

w/MEG : ALI: 28.10, CHI: 6.12, MEG: 2.78 // All time Lows: xx, xx, xx

ALI Book Value is just P16.50. And ALI trades at 170% of that.  Still BPI calls Sum-of-Parts NAV circa.P 58, and calls it near 50% NAV. 

Point is:  there is a lot of room for getting some assumptions wrong.

BULL CASE: wide discount to NAV of c.51% following a sharp 22% YTD correction. This provides a
compelling entry point to a prime cyclical recovery play, in our view. We believe that ALI’s deep pipeline
of mixed-use developments and strategic landbank should enable the company to capture post-
pandemic recovery trends. In particular, we expect: 1) revenue recovery in the residential segment in
the coming quarters as construction activities continue to normalize, 2) rebounding mall revenues as
foot traffic accelerates and rental concessions ease, 3) a resilient office segment underpinned by stable
BPO and HQ operations, and 4) a sharp recovery in hotels and resorts as domestic revenge travel
picks up and relaxed flight restriction eventually attract foreign tourists. Moreover, we do not expect
to see large cancellations recurring in the following quarters as the one-off cancellation in 1Q22 was
not due to a change in the financial capacity of customers but arose from an adjustment in the unit’s
features. We believe that these units can be sold at higher selling prices in the coming quarters. We
forecast ALI to post EPS growth of 39.1%/51.5% in FY22/23F and rising ROE of 7.1%/10.2%

( per BPI Trade report, May 2022 )

[drbubb]

(original comment follows)

ALI the Bellwether ... at P 24.45 hit new Low for the Year

ALI: How does it get better for AyalaLand?  That's what I keep wondering. 

ALI's properties are dramatically overpriced in relation to RENTS, and there are fewer and fewer people who can be "fooled" into buying them.  Maybe rents can rise, but until we see a sign of that actually happening, and a better environment for wage and income growth, I remain a skeptic

Ph:ALI ... All Data / Last: P 24.50, yrL: 24.45

Maybe around P20. You can start to make the Deep Value / Breakup argument - that the assets will do better with a different business model.  ALI will have a decent ElliotWave target : A-B-C finishing? near P20.  Though you might get some lower targets too

TS: Yup looks like a clear A-B-C now at C with logical downside targets, based on wave counts, as you stated.

DrB: Yes.  Target looks pretty clear.  I think I may have identified a P20 target months ago, but it seemed very unlikely then

Clif.: Following elliotwave, p20 is more likely a safe price to enter.. meanwhile, it's a ploy by brokers n the likes...their means to unload their ALI holdings...hahaha...

DrB: Must be pretty painful already for LT holders of ALI stock

TS: What I find interesting is it did not peak with PSEI during 1Q 2018 and peaked instead mid 2019.

My opinion of that is how entrenched is the mass belief in property, generally speaking (helped then by the POGO frenzy; and frenzies normally occur at tops). Interesting to note too that 2018-2019 were “big picture” years/period of a major global topping process then came the pandemic Nov 2019 almost “on cue”.

DrB: The mid-2019 was a normal six months lead to the Peak in the Long property cycle.  I have been thinking, writing and making Video's about Fred Harrison's long cycle, since I discovered it back in about 2005-6.  Here's an old video, a previous one that got lost had almost 100k Hits.  Many people have copied the arguments in the video since it came out:  Property Cycle - Intro to Fred Harrison's 18 Year cycle : 11,898 views , Jul 25, 2008 

The cycle in PHL got extended to about 20 years - to end 2019, thanks to the CHINA invasion by POGOs

[drbubb]

CHI TAKEOVER

Based upon and subject to the foregoing, it is our opinion that as of the Valuation Date, the ranges of fair
values per share for ALI and CHI using a combination of Discounted Cash Flow and Net Asset Value
approaches yield a swap ratio ranging from 0.1866 to 0.1911 shares of ALI per share of CHI. We
cross-checked this using the range of swap ratios derived from the market approach. The range of swap
ratios where the two approaches intersect is at 0.1866 to 0.1904 shares of ALI per share of CHI.
Based on the above, we are of the opinion that the swap ratio set by the Management of 0.1900 shares of
ALI per share of CHI is fair from a financial point of view.
While CREATE was approved subsequent to the Valuation Date, we note that the swap ratio will still be
within range even if we simulate its impact on the valuation of the Groups.
We formed our Opinion in accordance to the requirements of SEC memorandum circ

> https://ir.ayalaland.com.ph/wp-content/uploads/2021/04/ALI_CHI-merger-fairness-opinion-04122021.pdf

[drbubb]

Wow!  ALI  24.85 +2.30, +10.20%     that is a big move up!

ALI wastes no time reinvesting AREIT share sale proceeds

By: Miguel R. Camus - Reporter / @miguelrcamusINQ

Philippine Daily Inquirer / 05:12 AM July 16, 2022

Property giant Ayala Land Inc. (ALI) has reinvested 65 percent of the proceeds from last April’s multibillion-peso sale of shares in real estate investment trust (REIT) arm, AREIT Inc.

Most of the proceeds were infused into Ayala Land’s Quezon City venture with taipan Lucio Tan’s Eton Properties Philippines apart from loans and disbursements to support other projects and the acquisition of land.

Last April, Ayala Land sold P3.47 billion worth of AREIT shares in relation to a separate property-for-share swap transaction. The builder generated P3.44 billion in net proceeds.

In its disbursement report covering the second quarter of 2022, Ayala Land said it reinvested P2.27 billion of the amount from May 2 to June 30 this year. The balance at the end of the period stood at P1.17 billion.

Ayala Land said P1.25 billion was deployed via a capital infusion in the 35-hectare Parklinks project, which is being developed by the 50-50 venture ALI Eton Property Development Corp.

A former industrial estate along C-5 road spanning Pasig and Quezon City, Parklinks is envisioned to be Metro Manila’s newest and greenest central business district.

. . .

Part of conglomerate Ayala Corp., Ayala Land entered the year with more bullish prospects in mind. It upsized its capital spending commitment by nearly 40 percent to P88 billion versus the previous year’s P64 billion.

About 49 percent of the spending would be allotted for residential projects. Ayala Land will spend the remainder on estate development and land acquisition, with a smaller share going to malls, hotels, resorts and offices.

It was also planning to roll out about P100 billion worth of residential projects this year.

[drbubb]

ALI LOW IN PLACE already?  You can argue it is already in place, at P 22.35, -58.2% from ATH

ALI/ AyalaLand. All: fr.2009: 10yr: 5yr: 1yr: 10d/ Last: 24.40, 1yr-Range: 22.35 - 39.80. AllTime H: 53.5 (7.15.19)

===

[drbubb]

ALI BOUNCE + 27% so far

ALI / AyalaLand ... update : 28.35

ALI LOW?  I was expecting ALI might go as Low as P20.  But we have seen a nice decent bounce off 22.35,  Up 26.8% already to 28.35

[drbubb]

Sliding again... AREIT has Danced with ALI in 2022, on its way to Retest Lows

AREIT and ALI vs (stronger) PSEI ... All: Ytd: 10d:  33.90 / 23.20 = R-146.1%

All: Ytd: 10d:  AREIT at launch (8.13.20) 27.00 / 33.00 = R-88.8% to start.  Peak: maybe XXX%

REITS are driven lower by Falling Bonds = rising rates

[drbubb]

PHL PROPERTY DEVELOPERS under pressure... Will we get another bounce from oversold?

MEG, ALI, SMPH, VLL. from 2018: 5yr: 2yr: Ytd: 10d/ 2.04, 22.85, 30.10, 1.60 vs. Lows: 2.03, 22.35, 29.70, 1.60

Sym.: 9.30.22: BkVal.: % BV: PER: Yield:
Smph: P 30.10: 11.53:   261.% 35.8: 0.32%
ALI.   : P 22.85: 15.83: 144.% 23.6:  1.19%
MEG  : P.  2.04: P6.24: 32.7% 4.53: 0.00%
Shng : P  2.58: P7.83:  33.0.% 5.75: 6.40%
ALCO: P. 0.53: P1.80:  29.4%  3.40: 2.26%
FLI.    : P. 0.76: P3.62:  21.0%  7.71:  6.12%
VLL.  : P.  1.60: P8.61:  18.6%  2.90: 1.83%
====

Nearly all of the developers are trading at a big discount to Book Values.  The exceptions, are the two with the best developed MALL businesses.  But the very recent drops in the shares of SMPH and ALI shows that these two are not immune either.

[drbubb]

GAME ON AGAIN?   Has the latest Rally in Property Developers stock just begun

Last two runs (June: +35%, and Oct.: +50%) brought nice rallies in ALI stock

If this one hits the Average (+42%) of those two, it will bring ALI to P 37.

ALI Rallies
July 22.25 > 30.00 : +35%
Oct. 22.30 > 33.50 : +50%
Now 26.00 > 37.00 : +42%... +35-50%: 35.00-39.00

Property Developers / ALI-etc ... from 2.15.22: Ytd: 10d:  28.25 / Psei-6,686 = 0.42%

Falling PHL. interest rates (10yr > 6.0%), and rising earnings will help

ALI - Great Q1- earnings just announced, +42%

ALI net income jumps 42% to P4.5B in Q1

Real estate giant Ayala Land, Inc. (ALI) delivered solid growth in the first quarter of the year with consolidated net income jumping 42 percent to P4. 5 billion as revenues rose 26 percent to P30. 9 billion.

Residential sales to local buyers jumped 13 percent in the first quarter, accounting for 68 percent of total sales. Sales to overseas Filipinos were almost the same as last year, while sales to other nationalities surged 61 percent.

> https://manilastandard.net/business/314328010/ayala-lands-q1-profit-climbed-42-to-p4-5b.html

MEG-etc... from 2018:

===

[drbubb]

The Classic "18 Year Cycle" in Property is:  14 years Up, followed by 3-5 years down. 

Here's how this looks in ALI stock, as a benchmark.  CHI is overlaid, since it helps to clarify the timing...

Personally, I don't think we have just seen THE Bottom.  But we may get a decent rally into mid-year followed by a lower low next year.  Since 2019, I have been targeting end 2024 as The Bottom of the Long Cycle, and I see no reason to change that timing call

Add on: MEG: 2.01, 7.12%, FLI: 0.79, 2.80% / ALI: 28.25

[drbubb]

ALI & MEG have lagged other Prop. shares

Separating the Boys from the Men... when the big guys (like MEG and ALI) aren't doing so well, the shares of SHNG, CDC (Cityland), and ROCK are thriving. 

Why is that?  SHNG has 3x PER and almost a 9% yield,  ALI's PER is 18x

Selective. Not all property shares are Rising...

These figures may be useful is seeing why.
Sym. :  Last :   B.V.  : PER : Yield :
SHNG P2.83:  8.43:  3.00:  8.82%
CDC : P0.79:   1.94:  3.50:  3.73%
ROCK P1.43:   4.16:  3.68:  3.76%
ALI.   : 24.45: 17.30: 18.20:  1.17%
MEG  : P1.96:  6.64:  4.25:  3.14%

ALI chart: 2019... Last: 24.45 +0.20, O:24.15, H:24.75, L:23.95,  Yr.Low: 22.35

==