Robust growth across segments for Ayala Land in 2024

Ayala Land's FY 2024 results, released on February 20, 2025, demonstrated robust performance across all sectors, with total revenues increasing by 21% YoY to PHP180.7bn. Sales of the Services segment surged 57% to PHP18bn, driven by increased bookings from external projects. Sales from Property Development increased by 22% to PHP112.9bn, driven by higher bookings in residential space; Leasing and Hospitality posted 9% YoY growth to PHP45.6bn, led by growth in shopping centers, due to higher rent and the contributions of One Ayala and AyalaMalls Manila Bay.

Ayala Land's operating profit for FY 2024 increased by 16.5% to PHP59.7bn, although operating margins contracted by 141 bp to 33%. This margin decline was primarily attributed to reinvention initiatives in the commercial leasing segment, which contributed 25% of total sales, and quality initiatives in the services segment, which accounted for 10% of total sales. Consequently, net income rose by 15% to PHP28.2bn.

Ayala Land, Inc., established in 1988, is a leading property developer in the Philippines. The group has expertise in developing large-scale, integrated, mixed-use, sustainable properties. The company’s subsidiaries, Makati Development Corporation, and Ayala Property Management Corporation, lead the construction and property management services, respectively. Segment-wise Property Development contributes 62% of the revenue mix; Leasing and Hospitality, 25%; Services, 10%; and the rest 3% by others.

Ayala Land’s offerings include a balanced and complementary mix of residential developments, shopping centers, offices, hotels and resorts, and other businesses. The group has a robust network within the country, with a presence in 57 growth centers nationwide, complemented by 30 estates and 12,483 hectares in its land bank.

Capex across segments to drive growth

The group’s business model is capex intensive with capex accounting on an average over 54% of sales over the past three years. The company's capex reached PHP84.6bn in FY 24, of which 46% was spent on the build-out of residential projects, 27% on estate development, 15% on leasing and hospitality assts, and the remaining 12% on land acquisition activities.

Additionally, to fund the capex, the group has maintained a well-managed debt portfolio with 93% (PHP261.5bn) contracted long-term, having 77% of the amount under fixed rate of interest as of end-FY 24. The average borrowing cost stood at 5.3%, with an average maturity of 4.9 years. The group ended the year with a healthy interest coverage ratio of 5.1x.

Focus on shareholders’ returns

Ayala Land has consistently prioritized shareholders’ returns and accordingly disbursed total cash dividends of PHP7.4bn in 2024. Over the next three years, the group expects to pay dividends with yields averaging at 3.1%. In addition, it utilized another PHP7.4bn in the share buyback program during the year, thereby enhancing EPS growth to 17%. Overall, the group returned a total of PHP14.8bn of capital to the shareholders, making a case for value-hunting investors.

Flat long-term revenue trajectory

Ayala Land witnessed a flat trajectory in revenue growth over FY 19-24, registering a CAGR of 1.4% to reach PHP181bn. Operating profit declined at a CAGR of 1.4%, reaching PHP58.8bn in FY 24, which led to a 482bp decrease in margins to 32.5% in FY 24. Net income therefore decreased at a CAGR of 3.2% to PHP28.2bn in FY 24.

On the back of a muted bottom-line performance, the cash position also remained relatively flat over the past five years, reaching PHP21.5bn as of end-FY 24 from PHP20.4bn as of end-FY 19. However, the company reported improvement in its leverage levels, with debt to equity declining from 94.2% in end-FY 19 to 83.9% in end-FY 24.

However, the company’s local peer, SM Prime Holdings, delivered a revenue CAGR of 3.5% over FY 19-24 to reach PHP140bn. Operating income grew at a similar pace, demonstrating a CAGR of 3.7% to PHP68bn in FY 24, with margins reflecting a slight increase of 54bps to 48.5%.

Attractive valuation levels

Over the past 12 months, the company's stock has fallen by about 34%. Shares in the company’s peer, SM Prime Holdings, experienced a similar decline, with its stock dropping by 30.3% over the same period.

The company is trading lower compared to its historical average and SM Prime Holdings. Ayala Land is currently trading at a P/E of 10x, based on the FY 25 estimated EPS of PHP2.2, which is significantly lower than its 10-year historical average of 29.1x and its peer SM Prime Holdings (14x).

Likewise, in EV/EBITDA, the company is currently trading at 8x, based on the FY 25 estimated EBITDA of PHP72.7bn, which is lower than its 10-year historical average of 14x and SM Prime Holdings (12x).

Ayala Land is liked by 12 analysts, with all of them having ‘Buy’ ratings for an average target price of PHP38.2, implying 71% upside potential from its current level. Analysts’ views are further supported by an anticipated EBITDA CAGR of 8% over FY 24-FY 27, reaching PHP85.6bn, with margins of 38.5% in FY 27. In addition, analysts estimate net profit CAGR of 13%, reaching PHP40.6bn with margins of 18.2% in FY 27. Likewise, analysts estimate EBITDA CAGR of 7% and net profit CAGR of 6% for SM Prime Holdings.

Overall, the company appears to be set to post growth over the long-term, driven by a solid fundamental trajectory, a well-established presence in the Philippines, and strong project execution capability. Moreover, favorable valuation levels, along with a focus on returning shareholder wealth should keep long-term investors hooked to the stock for investment evaluation. However, Ayala Land is prone to a few risks, including project execution and timely delivery risks, regulatory risks, political risks, environment and financial risks.