THE Philippine Rating Services Corp. (PhilRatings) has maintained the issue credit rating of PRS Aaa, with a stable outlook for Cebu Holdings Inc.’s (CHI) total outstanding fixed rate bonds of P5 billion.
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.
On the other hand, an outlook is an indication as to the possible direction of any rating change within a one-year period and serves as further refinement to the assigned credit rating for the guidance of investors, regulators and the general public. A stable outlook is assigned when a rating is likely to be maintained or to remain unchanged in the next 12 months.
The ratings were assigned given the following key considerations: (1) solid linkage with and support from Ayala Land Inc. (ALI) complemented further by the company’s competent and experienced management team; (2) strong competitive position given diversified portfolio; (3) sustained position of Cebu as an economic hub, albeit prospects have been tempered by the Covid-19 pandemic; and (4) sustained growth in profitability in the past years, with a slowdown expected in the medium term due to the pandemic.
PhilRatings’ ratings are based on available information and projections at the time that the rating review was performed. PhilRatings shall continuously monitor developments relating to CHI and may change the rating and outlook at any time, should circumstances warrant a change.
CHI is a leading property development company in the province of Cebu.
The company is a subsidiary of ALI and part of the Ayala Group. With a sustained solid performance and distinguished brand, ALI has consistently been one of the top property developers in the country. CHI has benefited from the strong influence and brand reputation of ALI in the market while establishing its foothold in Cebu.
In the first quarter of 2020, CHI’s total revenues surged by 86 percent to about P1.50 billion compared to the same period of last year.
In light of the unprecedented challenges stemming from the Covid-19 pandemic, the performance of CHI is expected to slow down for full year 2020. Given the enhanced community quarantine in Cebu, construction activities were delayed. Rent is likewise expected to decline given the closure or limited opening of malls and dining establishments. In response to this, CHI prioritizes cash preservation through controlled disbursements and managing of expenses, as market conditions stabilize.
CHI disclosed its budgeted capital expenditures for 2020 of P1.6 billion. This may be subject to change given the fluctuating economic and market conditions due to the pandemic. A total of P287.7 million was spent in the first quarter, mainly for the development of the various projects, equity infusion to affiliates and land acquisition. (PR)