Cebu Landmasters, Inc. (CLI) Earnings Call Transcript

Good morning, everyone. Thank you again for taking time out of your busy Friday to be with us today. We're very privileged to have you. I'm Franco Soberano, the COO of CLI. And with me is our hardworking CFO, Mr. Grant Cheng here. And we are also assisted by our team here in Cebu in our main office. So the year has gone by very quickly. We're very proud and pleased to report that CLI continues its growth trend. We already reported in the start of the year that we already exceeded pre-pandemic performance in 2021. So 2022 is shaping up to be a banner year for us. You can see here that with sustained earnings growth momentum, 40% growth year-on-year. So this is normalized net income to parent increased PHP 1.55 billion. So we're at PHP 1.55 billion, that's our highest half performance so far in our history, and this is a jump from the PHP 1.11 billion in the first half of 2021 after taking out the tax adjustment due to CREATE. This is really driven by the very, very strong top line growth across all segments. Consolidated revenues increased to PHP 7.5 billion from PHP 5.1 billion. I like going back down memory lane. I think we were just PHP 2 billion the whole year 5 years ago. So now we're at PHP 7.5 billion with 6 months to spare. We have a very solid and healthy balance sheet of PHP 75 billion in quality assets. And the asset growth was driven by the increase in receivables as units became ready for takeout. With -- as you know, we're a very busy company. We're very busy on the ground here. We actually launched 7 residential projects worth PHP 7.4 billion in sales value so far. And we recently made available very exclusive prime commercial lots for sale worth PHP 7.7 billion in our Davao Global Township. The busiest guy in the room is to my right, your left of the screen, with Grant Cheng leading our first retail bond offering. Due to the overwhelming demand and interest from PHP 5 billion offering with a PHP 3 billion oversubscription, it's now a PHP 8 billion offering. We're very proud to have increased our bond rating from an AA and now to a AA+ with stable outlook. So we're very honored. And we've actually been very busy the last 2 weeks meeting various investors and also the retail market. With this, with the very positive momentum that we have, we are poised to exceed our year-end earnings guidance of 20%. Thanks to you, our investors, who keep us very motivated. So next slide. So I will let Grant discuss the financial performance, then I'll come back for the business updates and milestones and with Mr. Cheng to conclude our briefing with the outlook for 2022. So Grant, please take it away.

Thanks, Franco. I'm only busy because you are equally busy deploying our funds and putting them to work now. So our capital is being put to good use in construction, meeting construction target and really delivering houses that have been sold and have been reserved many years ago. So it's just a matter of delivering them and putting them on our financial statement. And this is where we are now. In the first half of 2022, our revenues are still mostly driven by our real estate sales at PHP 7.3 billion, stands at PHP 7.45 billion overall revenues, which is a growth of 45% year-on-year versus first half of 2021 last year. Our gross profit after cost of sales stands at PHP 3.3 billion versus PHP 2.3 billion last year. So you could see that our top line is growing well. Demand continues to be strong. And this is a reflection of our operational continuity and operational strength, the ability to deliver on reservation sales, okay, resulting in a consolidated net income after tax of almost PHP 1.6 billion and a parent net income after tax of PHP 1.5 billion. So overall, this means that we are pretty much on track to hit what we said would be our guidance, what we said would be our growth in top line and our bottom line. When the year started, we said that we'd grow 20%. So far, in the first half, we grew 40%. So we're pretty confident that we're in prime position to meet, if not exceed, our guidance targets. A quick note of why we emphasized and we wanted to show the growth, and we're using the growth numbers using normalized earnings. Last year, as you're probably all aware, there was a one-off effect on our financial statements, a positive one-off effect, of course, due to the CREATE bill. By lowering our corporate income tax rate from 30% to 25%, it gave us the ability to recalculate our deferred tax liabilities, in other words, income tax payable from future collections that we were projecting. So we lowered it from 30% to 25%, resulting in a onetime gain of PHP 209 million from that credit loan. Of course, it's a noncash gain yet, but this means we pay less taxes in the future. This one-off event, of course, is not part of our operating -- it's not part of our normal operating activity. So in order to compare apples-to-apples and to really see the growth of our operations and our financial performance, taking out this one-off effect, we highlight this normalized earnings at the parent level of PHP 1.55 billion versus PHP 1.1 billion. Again, we're just taking away a little bit -- or just taking away that one-off effect. That resulted in a 40% growth in our earnings per share. And this is something that we also want to highlight. We are using the number of shares normalized after our stock dividends because there was no dilution, no real capital anyway that went into CLI. So the way we would like to show our earnings per share from the same capital base is on the adjusted post-stock dividend number of shares. We were able to achieve this while maintaining our margins. So you did notice there was a very slight pressure on our margins due to inflationary pressures. This is a reflection of the challenging inflationary environment we faced, mostly through quarter 1 but has stabilized since in quarter 2. Franco will elaborate quite extensively on how, for example, our input prices have stabilized. For example, steel and cement cost and fuel cost, as you all probably know, have reached a peak and have now moved back to lower levels. And so on a first half and on a blended basis, we managed to be mitigate the impact on our gross profit margin. Our realized and unrealized revenues continued to grow. So this is a great sign of the continuous growth of your company in the foreseeable future as well. So I keep emphasizing that even as we are on track to reach another year of record-breaking growth, we probably -- and again, we are -- this gives us a lot of confidence about our ability to meet, if not exceed, our earnings target. Not only are we growing our actual revenues, we're actually growing our warehouse or what we call unrealized revenue. So [Foreign Language] revenues even increasing. This is mainly driven by the economic or housing business segment, giving us 49% revenues from there and 28% coming geographically from Cebu. And this is a good sign. And we just continue to serve into the very much underserved demand here in VisMin of the housing sector. There are -- by our estimation, there are over 2 million -- probably closer to 2.5 million of housing backlog in VisMin area. So imagine if you just put an average of PHP 3 million per house, we're talking about PHP 7.5 trillion backlog of housing demand here in VisMin alone. So we want to dominate the state. We want to continue to become #1, and we will foresee -- that's what gives us the confidence of being able to achieve this continuous growth. We're not going to do anything crazy or anything new. We're simply doing what we've done well already in the previous years, and we'll just continue to do that and be on that growth path. Our reservation sales is showing a very good trend. So we've already closed over PHP 8.28 billion in reservation sales for the year-to-date, and we're targeting another PHP 5.5 billion in quarter 3. And this is -- with this kind of results, it's going to very likely be another banner record-breaking year of reservation sales. Again, this is one of my favorite numbers to keep track of because while financial statements is a lagging indicator each -- of demand, it does show how well we are building up the product to meet previous year sales. These numbers show our actual market impact and the actual market demand when we go on our luncheon and our road shows and when we bring a new product to the market. And if you look at the pandemic years of 2020 and 2021, we continued to grow. There -- the fact is there's just so much more demand than there is supply, that even through the 2 years of pandemic, we were able to sell out our inventory and really just serve the many, many layers of underserved demand. Okay. Next slide. So later, Franco will be able to actually pinpoint and, in fact, identify which projects we're going to launch in the second half of this year that will allow us to exceed those targets. So these are all moving up along their own time line from a permitting and design standpoint, but we're pretty confident that these launches are going to be well taken up if the first half is any indication. Our prime example is you have to know the market, right? You have to know the market to know where and what to sell and we -- a prime example is that 4-tower condominium we launched in Davao. We sold out PHP 4 billion worth of inventory, I think, within a month. So that's the kind of success and that's the kind of market understanding that we wish to continue in the second half. Moving on, I want to show you our balance sheet. We're just highlighting the growth of our balance sheet. We've now grown our balance sheet to PHP 74 billion. It is quite a significant growth. It's a 12% growth just in the first half of this year from PHP 66 billion year-end of 2021. And it is mostly driven by the growth of our accounts receivables and contract assets or, in other words, the value of the contracts we are allowed to recognize already. And these are -- this is simply a reflection of future cash collections. So we sleep very well at night knowing that all our capital obligations, our debt service obligations, are more than covered just on our sales alone booked on our financial statement. So I want to give you this quick mental exercise. Remember, I showed you that we had over PHP 26 billion worth of unrealized revenues or sales value that we're not putting on our balance sheet or in our financial statements yet. Now you add that to the over PHP 30 billion of sales value that is on our financial statements. That's over PHP 56 billion in contract sale of cash that we will convert in the next 3 to 5 years as the project completes. So for us, it's just a matter of sticking to our budget, constructing well and turning over on time. And we are very, very comfortable and -- with how we're managing our capital. It's one project facility loan. We don't tie our projects. We don't double leverage. That is why later, when I talk a little bit about our retail bonds, that is the same confidence that we were able to express to our credit ratings agencies as well as to our underwriters. Okay. Next slide. This is our debt maturity profile and a quick look at how we're managing our debt profile. We wanted to show you that we're avoiding very high towers at any given year. In the next 12 months, we're projecting a cash collection from our completed units of about PHP 8 billion, if not more. So if you compare the PHP 8 billion we are scheduled to collect in the next 12 months versus the debt maturity profile, you could see how -- the prudence and the comfort by which we know we can service our debt. One very key strategy that we're doing is we're trying to move more of our debt towards the fixed end and the low end of the curve. The reason for this is, I think, it's quite obvious. With the off-cycle increase of the BSP, and the recent movement of the yield curves, it's the shorter end of the curve that's being affected a little bit more when you see increase in reference rate. In fact, if anything, the longer end of our reference yield curves -- of the [ eval ] curve is a little bit more stable. In fact, it's gone down the last couple of weeks [indiscernible]. And so our strategy is to shift a little bit more of our debt from the short end into the long end. So if you've been following our retail bond offering, we're operating at 3.5, 5.5 and 7 years. So at the 5.5 and 7 years, we're talking about putting more debt here in the longer end of the curve where rates are pretty stable and where we feel it is an advantageous position for your company to fix rates. So right now we have just under 35% of our debt profile using floater rate, and these are the rates that are quite competitive, but we plan to move them to the longer end after we finish our retail bond exercise, okay? Our overall cost of debt still stands at 4.78% per annum. So we're very competitive in our vision, especially for a high CapEx real estate developer like us. Next slide, please. So just to quickly recap our ongoing retail bond offering. So we have filed our registration statements with the SEC and we are undergoing review with the SEC. So just to be very technical and very proper about this, we are in the process of applying and getting our permits to sell approved. And we have already proactively responded to our comment -- to the comments and the reviews of the various parties involved. We are in the process of scanning the market for demand, and we have a very high confidence that there is enough demand out there for our PHP 8 billion retail bonds. There will be 3 series, I mentioned 3.5, 5.5 and 7 years, with the indicative spreads being presented to you here. And we look forward to the offer period where this can -- we will accept the offers from the public sometime in the second week of September. Okay. Next slide, please. I now turn it over to Franco so he can talk about our specific projects and business updates that underpins our financial performances. And later, I'll recap for you our 2022 outlook. Thank you, everyone.

Thank you, Grant. As always, thank you for articulating that very well. So I want to breeze through our business updates. We have now expanded our land bank to 116 hectares. Of course, this is net of whatever we've developed. And we've reported that we've developed over PHP 90 billion worth of real estate over the last 10 years. You can see here a new addition to our growing portfolio. You can see here Butuan city. We've always eyed it, and we finally got a very good property there. And that's where we're going to bring our award-winning Casa Mira project, and we should be able to start development there next year. So you can see here that we really had a steady net of our strength in new launches, but kept really adding quality land bank. So this is worth over PHP 11.6 billion in land value. We purchased over 22 hectares in the first half. We have 100 hectares for reclamation, which is the one in Minglanilla, and over 81.7 hectares developed. Next slide. Okay. So we've spent so far PHP 5.5 billion in capital expenditures, and primarily these were spent for property development, and there was PHP 1.225 billion spent for acquisitions. We're still -- the second half will be more busy, more productive for us. We're really expecting to spend the PHP 13 billion that we've set to spend in CapEx this year with some key acquisitions in the second half and us really rolling out projects. We have several projects that we're turning over as we speak. Next slide. This is very important because this is really the batting average that should give a lot of assurance and comfort to our market. We are 90% sold across all our inventory. These are inventory that we've had since 2003, net of whatever cancellation or backout. So that's a healthy sign. Why does CLI have this kind of statistic? We really cater to an end-user market, right? And end-user market is the market that we've always had that discipline where we avoid bulk purchasers, large foreign investors to take a building or floors because it's end user who will ride out any cycle. It's end users who will protect their investment. And that is why we've really grown. The 7.5 -- PHP 7.4 billion in recognized revenue is our highest half performance so far. And it's very gratifying because it shows that our diversification in different geographic locations, different asset classes have paid off. And as we reported in the first half alone, over PHP 7.4 billion of new project sales value was created. Next slide. Okay. So this is a very important slide, and this really shows you our confidence and transparency. This is all the residential projects we've built since our company started. That's 90% sold across all this inventory, over 31,000 units. We've been through the 2008 crisis. We've been through, of course, COVID and now inflationary. And look at this, and we're just very proud that we've invested this much, almost PHP 100 billion, in our VisMin region. And what's really important here is for all our completed projects, 97% sold. Usually, you see several other maybe companies where even in completion, they're at 80% to 90% sold. But us, 97%. For everything that we're still constructing or about to complete, 88% sold. And for everything we've launched so far this year, 80% sold. I think it shows -- this really reflects leadership. This reflects our very strong team. We're 800 -- we're a team of 800 already now. And we are not just responsible in our development, we are very efficient in our operations, and this is why we're able to maintain these figures. Next slide. Okay. So this is our footprint in terms of our sales in the first half alone. So you can see here how proud we are of our diversification. You can see economic housing launch in Dumaguete. You can see upscale office condo sold here in Mandaue, Cebu. You can see our award-winning township having its first residential offering, which sold out quite quickly in a few months. And you can see here a mid-market offering in Panglao, moving very strongly with Phase 2 alone 54% sold since March. So very nice spread of products, meaning CLI can tailor fit to where the demand is and bring that need and supply, because supply has really slowed down. As you know, a series of successive challenges in the market. You have COVID with less mobility; of course, the election period, meaning there's less movement in LGU processing. But we've managed to really be -- persevere now and bring new projects because there is demand. I can tell you, there's demand there. So it's about bringing supply, having a good brand that delivers on quality service. Next slide, please. Okay. So this is what keeps me busy and working. And I'm very proud to say that these are in various healthy stages of construction. You have MesaVirre Garden Residences here. Our first condo in Bacolod, which is already turning over. Casa Mira Iloilo, we launched at the height of pandemic, but I have maybe more than 600 houses built already there. Bohol, in just 2 years, I think I have half of the houses that are ready for turnover. So these projects like Velmiro, Cagayan, 38 Park Avenue are now turning over and -- turning over the keys to the initial residents. So we have a healthy mix of recently launched projects, capping off projects and turning over projects here. So these all encompassed a sales value of PHP 54 billion. Next slide. So you can see here our completed inventory or showcase now, not just in Cebu but also Bacolod, Dumaguete, Cagayan de Oro and Davao. And if you ask me what is our outlook, now having completed several projects in the region, I feel we are still scratching the surface. There's a lot more that we can offer to our market here. Next slide. Okay. So I want to talk about our -- really our diversification efforts. As you know, when we became a publicly listed company in 2017, we wanted to expand not just geographically but also product-wise, revenue-wise. So we've completed over 28,400 in gross leasable area with 47,000 more in leasable area coming online very soon. Our goal is really 200,000 square meters of total gross leasable area in the next 5 years. And you can see our leasing revenue growing as mobility and traffic has returned. Now with schools coming back face to face like one of our mixed-use projects in the mall, it's getting very busy. And you can see us really doing things. If we're able to do great helping, we can do great office buildings like this one in Latitude Corporate Center. Next slide. So these are the upcoming leasing business for us with our first lifestyle model, just close to 8,300 gross leasable area, which will be online next year. Your very important and meaningful Patria de Cebu project with 21,000 gross floor area and 182 hotel rooms with the Mercure brand in the heart of downtown Cebu should be completed in 2024. So you can see our gross leasable area investment growing, contributing more to our financial performance, and we're very selective in our leasing partners. Next slide. Okay. So our other diversification effort, CLI became -- becoming a hospitality and recreational player. So quietly, CLI is actually assembling probably the best collection of international hotel brands in the VisMin region. We have actually 10 hotels in our portfolio. And our single hotel of -- with Citadines Cebu grew 20 -- 271% from doing low occupancy during COVID to now doing very good and strong occupancy. So you can see here our Masters Tower. For those fans of CLI, keeping track of our SOM design building here, you can see a very large excavation with very large footings and foundations there. You can see our Abaca Resort Mactan here starting also the foundation works. And next slide to show you our portfolio. So as you can see here, people ask us why assemble hospitality? For one reason, it's attached to several of our mixed-use projects. Second, if you look at VisMin, there are really a scarcity of international brands, and you have one of the strongest regions for hospitality. So you have our 4 projects with the Ascott Group with Citadines Cebu, Lyf, Citadines Bacolod, Citadines Davao. You have one with Radisson RED. This is very exciting. We're opening this next year. And you have 2 with Accor. And we acquire the Abaca Resort and will be managed by our partners, our friend firm, the Abaca Group. And you have our first co-living brand with The Pad. So if you ask us, this will be an exciting hospitality REIT in a few years. Next slide.

I just wanted to add further, Franco, that we welcome our new officer of Investor Relations right now. And one of our special projects and watch out for this to those listening in. The next -- we will hold one of our next few analyst briefings. Maybe not the immediate next one, but in the near future in one of these new hotels. What we plan to do is -- now we're opening up a little bit. We want to invite those who can't travel to Cebu. So we want to show them our project, take a look at what makes our product so appealing and so compelling to the market and organize an analyst briefing day probably to coincide with one of our public briefings. So hopefully, we can get that done in 2023 when things are a little bit more open. So just watch out for that. And we look forward to welcoming our listeners and our audience, especially our analysts and those who are following us here in Cebu.

We should definitely bring our analysts and investors around. There's so much potential that you will see, and CLI is there at the forefront. So as I said, the way we do housing, our leadership in housing, we want to achieve that leadership also in hospitality and offices. You can even Google Citadines Cebu. We're actually one of the highest-rated hotels in the whole Cebu. Next slide. Okay. So our townships. The picture here on your right is our recently inaugurated DGT. We're very proud of this showcase there. So we have 3 existing township sites plus 8 mixed-use portfolio sites. And as I said, we're really now going to generate a lot of good turnaround with even commercial lots becoming available worth PHP 7.7 billion. Next slide. So these are our township locations. As you know, Ming-Mori is the, we reported this several times, the only reclamation -- sustainable reclamation that was issued a notice to proceed outside Luzon. This is 80% owned by CLI. You have Cagayan de Oro, one of my dream projects and our -- very close to our hearts, our project with Xavier University Ateneo de Cagayan, where we acquired a 14-point hectare township property, and adjacent to it will be the new location of Xavier University Masters Campus. We're actually breaking ground next month. In Davao, coming full circle with a project township that has completed site development, and we've already launched residential, retail and civic project there. Next slide. Okay. I'll close my portion with some significant milestones. So just last month, we welcomed the public and officials to our Davao Global Township here, where we inaugurated. So you can see this is located in Matina, Davao. Matina is probably the southern growth center or the most densely populated portion of Davao, just beside the downtown. And we are really positioning this to be the CBD. There is no CBD yet in Davao, and this is what we can offer. And with what we design with sustainable features and probably the largest private roads you'll see in the whole Davao with our township. So this is us with our joint venture partners. We're very proud to work with Yuson, Huang and Tan families of Davao from the Villa-Abrille clan. Next slide. And as I said, very exciting, PHP 7.7 billion worth of -- so that's actually just 4 hectares of land that we set aside for outside investors, while CLI and our partners still kept close to 11 hectares of salable land there. Next slide. Okay, okay. So this is what keeps me and Grant excited. When we turn over projects, I feel this is where we have to prove ourselves. How happy our buyers are, how satisfied they are with our finishing. Our turnover time, I think sometimes some developers may think the turnover time [indiscernible] we're so conscious now. A small delay, we're already very concerned. I can't sleep. So we do our best to deliver. That's your hard-earned investment there. So you have 38 Park Avenue here turning over the lower floors. You have MesaVirre, such a beautiful property and I think -- it's exceeded my own expectations. So we turned over more than 200 units there. MesaVirre in Davao, probably the nicest finished condo so far in Davao. We've turned over more than 500 units there. Cagayan de Oro, where we -- this came out in the news where we gave Carlo Paalam, silver medalist from Cagayan de Oro, who was living in a shanty in an informal settler home, gave him a home here in Velmiro. So we've turned over nearly 30 homes. And here in Sibulan, Negros, we've turned over more than 400 houses. I think as a developer, we really end-to-end have some discipline because we need to turn over and generate good cash flow, at the same time, enhance customer satisfaction. Next slide. Okay. So with that, that ends my part on the operations, and I turn it over to my closer here, Mr. Grant Cheng, to conclude our presentation. Thank you.

Thanks, Franco. So we have several projects that we're excited to launch in the second half of 2022, starting with our flagship Casa Mira product that we're bringing to the north of Cebu. So we have Casa Mira South. We're going to build a Casa Mira North. The Casa Mira South is a 3,000-plus strong community already. It is -- it allowed us to really perfect that Casa Mira model. And we can't wait to bring this to the vibrant North where there are -- there's so much economic activity, tourism activity. And we know that this is going to sell like hotcakes because even as early as now, even as we're still in the design and planning stage, our brokers and our potential buyers are already inquiring about this. And the demand is going to be very strong. We have a beautiful mid-market tower that we're building in Downtown Cebu called Calle 104 with a very strong Cebuano heritage flavor that we're going to put in. It's going to be a beautiful project with -- and it's very centrally located right beside the economic and commercial heart of Cebu as well as many of its strongest medical and health care institutions. We're expanding our Mandtra Residences in Mandaue. And in fact, just one last note, we're going to expand as well our first-ever beach town condo. We sold out our first 2 towers very strongly. And this condominium, which has its own beachfront, is -- it reminds me of how real estate we book in the coastal towns of Miami and California and how you could really build a community with its own beachfront. But this is -- we're talking about Cebu prime white sand beachfront. And you could literally see corals of fish swimming in front of it. And this used to be a marine resort, and we can't wait to offer the third tower in this development. It's going to be a beautiful project. And of course, as Franco mentioned, the other big driver is our lot sales at Davao Global Township, which we've already launched. So that's going to come. That's ongoing, and we have some very key locators, very strategic investors where -- that we're reaching out to and that we're in dialogue with right now. And then one last thing to mention, we're coming to Palawan. And we're launching our beach town condo as well in Bohol. Again, just replicating what is already a successful business model with already an established proof of concept. So please, I would like to take this opportunity actually to invite everyone on this call, visit our website. We invested a lot in monitoring and documenting the progress of our projects. So if you're a buyer or an investor, if you're just curious about what we do and why we sell out our products, take a look at our virtual tours. Visit our so-called economic and affordable housing project. Have you ever wondered what a PHP 3 million house and lot product will look like and how we deliver that? It's really beautiful. It's something that we're proud to give to the Filipino family.

Yes. Grant, I'll just add here. Sometimes I know buyers of ours join analyst briefings. So our buyers in Palawan are to be excited. We're really about to launch this very soon, the first condo -- or Casa Mira tower condo in Puerto Princesa. So please expect that to be another hit because we designed a very generous product for you. All right. Thanks, Grant.

Okay. Let's go, next slide. So we do want to keep -- to allocate time for our Q&A. It's always very lively. We want an engaged community. So this is my last slide. So we gave guidance of 20% earnings growth for -- year-on-year from 2021. So by all indications, this is the kind of growth to the parent that we will be able to deliver, even after that onetime gain. So this is what gives us that confidence. And we're pretty -- we're -- we have an assurance or at least if the first half is anything to go by, this is a number that we will comfortably hit, if not exceed. So once again, thank you, everyone, for your time. I see some questions in the Q&A box already. We're going to queue them up. And I encourage everyone to please send in your questions as we address them one by one. Thank you, guys.

Thank you, Sir Grant and Sir Franco. Let me read this first question from [ Aaron White ]. Congratulations on your strong results. Can you update us if you intend to pay off or refinance the PHP 3 billion short-dated notes?

Yes. I'll answer that. We will pay it off. But will we refinance it? Not in the traditional definition of refinancing where we completely roll it over. The unique thing about these short-dated notes is it's being held by only one institution or one investment house. What we want to do is we want to respect their decision and flexibility to be able to redeem or take delivery of the principal of these short-dated notes. And should they come -- should -- in our further conversations, should we establish that there is mutual interest to reinvest a certain amount in CLI, certainly we can -- that's something that we very much welcome, something that we very much entertain towards next year. But for now, that PHP 8 billion corporate notes will definitely be used to help us pay that down.

Thank you for that, sir. We have another question from [ Michael Hilado ]. What was your cancellation rate on booked revenues for the first half 2022?

Yes. I can also answer that. For the first half of 2022 -- sorry, for the first half of 2022, our cancellation rate is just slightly under 4% versus the cancellation rate of 4.1% for the whole year of 2021. So if anything, in fact, 2020 and 2021, during those pandemic years, our buyers probably faced a little bit of an economic challenge, economic squeeze. And we saw a slight uptick in our cancellation rate to 4.1% in 2020 -- by end of 2021. So it's stabilized now. We are just under 4% this year. And I will very quickly add a couple of things. The reservation sales number that we are reporting are all net of cancellations. The revenue figures that we are reporting are net of any reversal of revenues that we'd had to recognize from cancellations, so something to keep in context. Two final points to keep in context. The other one is, I talked about the strong demand that CLI is selling into, right? So while cancellations is something that we are proactively managing, we have a dedicated customer service team that reaches out to buyers and offers them stretch payment terms, grace periods, penalty waivers in case it's justified. So we don't just sit idly and just let these accounts go delinquent and eventually get canceled. We know that this is an investment. And if we can find a way to work together to rescue and give you more opportunities to -- if you are committed into your contract, we will find a solution in a mutually acceptable path by which you can continue your contract. But having said that, if there is a cancellation, there is also a corresponding recovery rate. And I want to answer your question -- I want to answer this question in conjunction with -- by giving the recovery rate, [ Aaron ]. And recovery rate means the rate at which I can sell my canceled units in a 12-month period. Our recovery rate is over 70%. So I'm not too worried about cancellations at this point because, in fact, there's a waitlist of buyers. And in fact, most of the time, I can sell my canceled units at a slightly higher price because when they cancel, it means the project is a little bit further in its construction progress, there's been price increases. This is really more of an administrative concern. We don't want the hassle of cancellations. But more importantly, it's for our buyers. It is not a good -- we feel it's not a good financial decision to buy into a home and then cancel afterwards. You're not going to get an entire -- a full refund on that because of some costs. So it is our way to not only watch out for our business model and the health of our eventual portfolios. It's our way to also help our buyers make sure they stay committed to what is a big financial responsibility of owning a home. So hope that's able to answer those questions. I think there are a couple of questions in our chat box that address that or that's related to it.

Thank you, Sir Grant. For this next question, I think this is for Sir Franco. How many -- this is from [ Carmela Marquez ]. How many years of development does your 116-hectare land banks need?

Yes. What's good with our land bank now, we've added townships to it. Projects like the Davao Global Township and the Xavier University, we call it [indiscernible], will take 10 to 15 years to fully develop. And of course, to maintain our growth momentum, we are very committed to maintaining that growth momentum. So I would say the existing land bank, if we don't acquire anything at all, will be consumed in 5 years plus the 10 to 15 of the township. So our goal is always to prospect for good properties. And the good thing about this [indiscernible] is the cost of land is much less than the cost of land in Luzon. So we're able to have good margins, good speed with our development. So you know how we've grown from 30 projects to 100 projects in the last 6 years. And so -- but our land bank has been maintained above the 1 million square meters. So there is this really organic ability for us, really good source of land. And on top of buying land, partnerships. 1/4 of CLI's projects are with joint venture partners with the largest landowners in the region. That allows us really to sustain the type of trajectory we set out for. So thank you for that question.

Next question, sir, is I think still for you. How are your residential payment terms so far, considering that CLI has high exposure towards economic to mid-market segment? Are we seeing stretched payment terms similar to what the other developers are doing?

Yes. I think -- no, I have an important answer to this, right? Honestly, we are past pandemic stage. I think we are not already living in a pandemic mindset. We have to go out of it. I would say that we're very happy that we're catering to the economic and mid-market segment because these are the buyers, the end users that are protecting their investment. They will strive to protect it. Now with jobs returning, even OFW remittances back from, these are now more stable. This is actually the more stable market because when you go to the higher end of the range, these are -- maybe they can afford, but these are the buyers who also don't need it.

Right. They speculate a bit more, right?

Yes. Yes. So I would say that economic, mid-market are the better market right now, the end user. But stretched payment terms, to be very honest, we're still doing 3 years to 4-year down payment terms. We have never been tempted to go 5 years, 6 years. What for? I mean why will money of the buyer be stuck 5 years, 6 years? What's that about?

Actually, I want to supplement that answer. Actually, we've gone the other way. We've actually tightened our payment terms because tighter payment terms such as increased reservation fees, a higher equity amount actually screens and filters out what I call weaker buyers or weaker hands. And really, we get the buyers that are committed to their purchase. So if anything, we've gone the opposite direction, increasing or at least ensuring the quality -- the type of buyers we're getting in our portfolio.

Right. I think one good thing we're doing now is we're -- as I said, 90% sold net of cancellation. We're also feeding out the account. So those who really don't have the capacity to maintain their units, we just say, we have to give it to somebody else. And that's better because if you hang on to a bad account until the end, it's harder to resell or find a new buyer at the end. And I think that's the discipline we've been doing these last 2.5 years. So I would say, us being disciplined, keeping our payment terms at 3 to 4 years, also to our ability to deliver in 3 to 4 years.

Yes.

That's a good ground game, again, we're talking about. In most cases now for housing, we're actually advanced. The houses are standing, but I still -- my due date for the houses are still next year. So we have a better problem to deal with, with that. So thank you for that good question. And I would say, just to recap, the economic and mid-market housing are actually a better market because they will protect that investment. And what's PHP 2 million, what's PHP 10,000 in down payment versus a PHP 10 million to PHP 50 million condo where the buyer can say, "No, I will just pay later. I'm not in a rush." Thank you for that question.

I think related to that, let's answer the question about in-house financing because that's related to our buyers and our payment terms. And the question here is, if I may read this out loud, "Is offering in-house financing a part of your future plans? And if not, what are the challenges that you anticipate with offering in-house financing to the buyers?" And the answer there is we do not plan to offer in-house financing as part of our future plans and -- because -- and why not? What are the challenges? That's a different core competency. Credit analysis and reporting and collections and enforcement, and that's just a very different type of business model of a real estate developer. And the key difference with in-house financing is that you are essentially turning a part of your balance sheet into a [ bank ] because you're transferring already inventories into the name of your end users. So you practically delivered that unit, and then you are financing that purchase versus our normal business, which is that if they cancel, their inventory has not been delivered and the asset remains on our balance sheet, we could resell it very easily, right? There's no foreclosure. There's no eviction process here. So we want to stick to being a real estate developer. And we want to give -- or we want to work with our banking partners, especially our friends at Pag-IBIG. They are the ones that offer the creditors that are able to analyze that how an infrastructure to be able to do this. And so we want to pass -- we are a developer. We build, we design, we sell, we market, and then we turn over the products. And then we let our banking and financial institution friends handle the collections and the financing. And one last note on that. Usually, if you offer in-house financing, and this is a very point that -- I don't know, matter that I do want to raise. If you scan the market, normally, in-house financing offers the highest rate of financing. So you ask yourself the question, why would a -- or why would a business offer in-house financing for their own product versus your buyer getting financing on their own, especially if you offer the highest rate? Usually, it means that the buyer might not have qualified or might have been rejected. So that also means, by definition, you are using your balance sheet to catch or to risk -- or to essentially hold on to the worst credit, right? Those that don't pass banking standard. So [ Foreign Language]. So not really sure if that's what I want to do with my balance sheet, which goes back to our earlier point: what we want to do very early on this thing is to be able to nurture and inculcate the value of financial discipline to our buyers. So eventually, when we give them to the financing institutions like Pag-IBIG, like the home loan division of the bank, this is something that they are already accustomed to in terms of their financial responsibilities [Foreign Language] monthly payment. So that's our business model. I hope I was able to answer that question.

Maybe we can answer this question also from [ Carmela Marquez ]. This is also related to collections. So how is the collection experience of CLI? And what is your [ cancellation ] rate?

Okay. The collection experience is very good, in fact, qualitative and quantitative answer. Qualitative answer is that we have already enhanced many payment channels for CLI and make it convenient for our buyers. You can pay with GCash. You can pay with your credit card. You can go to many of our accredited banks where CLI is an accredited biller. You can go online banking. You could pay by credit card. You could go to Lhuillier and, in fact, pay your contracts with CLI. So we've enhanced and made it more convenient for our buyers to find different ways to pay us their monthly payment, number one. Number two, so our collection experience is that about 5.3% of our buyers are behind on their payment. So if you translate that to the cancellation rate that I mentioned earlier of below 4%, it means while we have some buyers who are a little bit behind in their payments, we have a dedicated department now that reaches out to them and -- where we try to work with them and say, "Is there a way we can save your account? Do you need a little bit more stretched payments? Do you need a great period? Or do you need an alternative payment method that maybe you're not yet aware of?" We're able to rescue a good portion of these accounts and bring them back to current.

Yes.

Thank you, sir. For this next question, I think this is for Sir Franco. Will you be taking part in the 101-hectare Global City Mandaue? And how about in the SRP?

I assume this attendee is from Cebu. So no, we're not taking part in the 101-hectare Global City Mandaue. Although we do have a site close by, in map, a 25-hectare development that is titled inland in Umapad. And in SRP, we really not seriously considered SRP. I think the challenge with SRP is property values have risen, I would say, beyond the real value. SRP is doing PHP 250,000 per square meter of land costs when you can go to the heart of Cebu, Banilad, Cebu IT Park at PHP 300,000 per square. So I would say -- and also it's reclaimed property, meaning you have to spend more for additional files and foundation. So I would say it's not a value-for-money site anymore. It's more of a nice-to-have. Although I would admit that SRP is really developing quite nicely with what Robinsons Land is doing there, a very nice mixed-use project. I think SRP is also developing arena plus the connection to the new bridge. But the downside really is the property values have risen too high there. And -- meaning if we would develop there, we would have to do a high-end project. But that's not a high-end...