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August 30, 2018

Big firms hard-pressed amid rising interest rates

NEWS

Big businesses in the Philippines could have a hard time coping with rising interest rates, an economic research group said, as this would mean higher costs and a growing debt stock.
Analysts at Natixis Research said that tighter financial conditions in the country do not bode well for local conglomerates, since these add pressure to “excessive” debt they may have accumulated.

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RESEARCH VIEW

Amid the slower economic growth in 2Q2018, the property sector remains resilient with major segments such as office, residential, and leisure poised for record-high demand and supply in 2018. However, we see challenges ahead, including rising interest rates which could dampen low to mid-income residential demand over the next 12 to 24 months. Aside from surging land values in major business districts, Colliers attributes the slowdown in condominium launches in 1H2018 to developers’ concerns surrounding increasing interest rates. On August 8, the central bank raised policy rates by 50 basis points, the most aggressive hike since the Global Financial Crisis in 2008. We believe that a volatile interest rate environment should entice local developers to be more open to partnering with foreign firms to develop horizontal and vertical residential projects.

Developers report mixed Q2 results

NEWS

Several property companies reported mixed performances in the second quarter of 2018, with Rockwell Land Corp. posting strong real estate sales, while others saw a drop in revenues.

In a regulatory filing, Rockwell said it generated P628 million in net income attributable to the parent during the April to June period, 21% higher than what it posted in the same period a year ago. This followed a 28% increase in revenues to P4.72 billion.

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RESEARCH VIEW

The benefits of warmer relations between the Philippines and China are spilling over to the residential sector. Developers have been benefitting from increasing residential demand from Chinese employees and investors. We see greater potential for partnership with foreign developers as Colliers Philippines has observed more enquiries from firms based in Hong Kong, Japan, and Mainland China. A number of developers are looking at building horizontal (house & lot) projects in key hubs outside of Manila such as Cavite, Bulacan, and Pampanga. Colliers believes that developers should continue to venture into residential projects in second-tier and third-tier cities all over the country, where bulk of demand comes from end-users.

Kuya J to bring back Popeyes to Philippines

NEWS

Kuya J Holdings Group, Inc. is bringing American fast food chain Popeyes back to the Philippines, years after the fried chicken joint exited the country due to issues with the previous franchise holder.
The operator of Kuya J restaurants said it has signed the exclusive master franchise deal for the Popeyes brand over the weekend, allowing it to develop and grow the brand in the country.

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RESEARCH VIEW

We believe that the proposed liberalization of entry of foreign retailers is a step in the right direction as more foreign brands can now enter the food and beverage (F&B) and home furnishing categories which are dominated by local players. From 2018 to 2020, Colliers sees food and beverage (F&B) and fast fashion businesses occupying a combined 50% to 60% of new retail space in Metro Manila. Data from the Philippine Statistics Authority (PSA) reveal that F&B and Restaurants &Hotels are among the fastest growing consumer spending sub-segments in the Philippines. The F&B mix in Metro Manilla should become more interesting especially after the entry of foreign brands such as Denny's Diner, Paradise Dynasty, Wolfgang's Steakhouse, Harry's, Pink's Hotdogs, and Olivia & Co. Sarabeth's, a popular bakery from New York is reportedly opening a branch in the country's capital while Wolfgang's opened a new branch in Podium mall. New York’s Magnolia Bakery recently opened a branch in Bonifacio Global City, the first in Southeast Asia. 

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Philippines
Colliers International | Manila 11F Frabelle Business Center, 111 Rada Street Legaspi Village, Makati City 1229 Philippines | Tel: +632 888 9988