The outstanding P12 Billion bond issue of Robinsons Land Corporation (RLC), the real estate arm of the JG Summit Group, kept its PRS Aaa rating from Philippine Rating Services Corporation (PhilRatings). The rating has a Stable outlook.
Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. PRS Aaa is the highest rating assigned by PhilRatings.
The rating reflects RLC’s solid market position; its sound growth strategy, backed by quality management; its strong liquidity; and sound capitalization structure. The rating also considers the favorable industry outlook for its businesses, supported by expectations of continued growth for the domestic economy.
RLC has a diversified business model, which is seen as responsive to changes in the property industry’s cycles and thus, supportive of continued company growth. The model has two components: an “investment” component, in which RLC owns and operates commercial real estate projects (shopping malls, office buildings and hotels) and a “development” component, in which RLC develops residential and real estate projects for sale (residential condominiums, upper-middle to high-end residential development, and low- and middle-cost lots and houses in its subdivisions).
RLC is the second largest mall operator in the Philippines. It currently has 42 malls with 9 malls in Metro Manila, and 33 malls in major urban cities throughout the Philippines. For its mall business, RLC considers its mixed-use retail, commercial and residential development projects as the company’s key strength. It is a leading provider of office space for business process outsourcing firms (BPOs) in the Philippines. The company has 11 completed office buildings, with a leased out rate of almost 100%. It has a diversified hospitality portfolio under its International, Summit and Go Hotels brands with 14 hotel properties nationwide. Its residential business has over 100 residential projects, both residential condominiums and subdivisions, located strategic areas in the country.
JG Summit Holdings, Inc. (JGSHI) is a majority shareholder of RLC, with an ownership share of 60.97% as of December 31, 2015. JGSHI is one of the leading conglomerates in the Philippines, with business interests in food and beverages, real estate and hotels, air transportation, banking and petrochemicals, as well as core investments in real estate, telecommunications and power distribution. As of report writing date, JGSHI has issue ratings of PRS Aaa for its outstanding bonds in the total amount of P30.0 billion.
Despite JG Summit’s concentrated ownership of RLC, the Company is considered to be professionally-managed. Lance Gokongwei and Frederick Go have proven themselves to be highly qualified for their respective positions, given RLC’s sustained growth under their leadership. RLC was also awarded by Euromoney as the Overall Best Managed Company in the Philippines for 2013 and 2014.
Recurring lease rentals, which continue to account for bulk of company revenues, provide a stable platform for RLC’s healthy liquidity. Historically, revenues from lease rentals have been a steady source of operating cash flows for the company. Although lower from end-FY 2015, current ratio was more than satisfactory at 1.1x as of December 31, 2015 (end of first quarter FY 2016). Cash from operations remained positive, amounting to P5.3 Billion in the first quarter of FY 2016 (1QFY2016). Going forward, liquidity is expected to remain sound despite the significant increase in outstanding short-term loans. Operations will continue as the company’s primary source of liquidity.
Debt management has been prudent, with debt-to-equity (DE) ratio at 0.5x as of December 31, 2015. RLC monitors its capital structure using a debt-to-capital ratio, defined as gross debt divided by total equity. As of December 31, 2015, debt-to-capital ratio stood at 0.54x. The company’s policy is to have a debt-to-capital ratio not exceeding 2x, and which is consistent with the requirements under RLC’s covenants with lenders.