Philippine Markets Newsletter

This real estate company is bouncing back, showing its adaptability to the digital space with Uniform ROA of 5%, not 3%

June 22, 2022

This real estate company was able to combat pandemic-related issues through continued growth and diversification strategies. Despite that, its as-reported metrics showed it delivered little to no shareholder value.

Also below, Uniform Accounting Embedded Expectations Analysis and the Uniform Accounting Performance and Valuation Tearsheet for the company.

Philippine Markets Newsletter: 
Wednesday Uniform Earnings Tearsheets – Philippine-listed Focus
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While businesses have already somewhat recovered from the pandemic, new COVID-19 variants have kept any quick recovery in the retail and hospitality segments at bay.

Nevertheless, Robinsons Land Corporation (RLC:PHL) has been able to navigate these less-than-ideal circumstances through growth in its different business segments—Robinsons Malls, Robinsons Hotel and Resorts, and Robinsons Offices, to name a few.

Its retail segment Robinsons Malls achieved a 22% increase in mall revenues in Q4 2021 versus the same period last year. Foot traffic also improved from a low of 20% in 2020 to 65% of pre-pandemic levels currently.

While many consider people physically coming back to stores as a good signal for recovery, we cannot deny the increasing significance of e-commerce in our lives. This is one reason why Robinsons Malls launched MallDash, which serves as a universal shopping platform for products from Robinsons Malls’ affiliated partners.

Other initiatives Robinsons Mall undertook to adapt to the changing consumer behavior include its mobile app called RMalls+ in 2021 to create a seamless online and offline customer experience.

Besides pushing the limits of its digital capabilities, Robinsons Malls also focused intensely on its expansion initiatives by increasing its presence across the country.

In 2021, it opened Robinsons Place La Union, developed Robinsons Place Dumaguete, and reopened Robinsons Place Tacloban, leading to a 4% increase in total leasable space to 1.58 million sqm.

With the easing of quarantine restrictions, the company’s hospitality segment, Robinsons Hotel and Resorts, also showed signs of recovery. The increase in demand for long-stay bookings resulted in revenues rising by 11% to PHP 1.2 billion in 2021.

Like Robinsons Land’s retail segment, it also focused on growing massively, opening a new property called Grand Summit General Santos. At the end of 2021, this business had a total of 3,200 keys across 21 company-owned properties.

Finally, with Robinsons Offices, this segment garnered a 9% increase in revenues to PHP 6.5 billion.

With hybrid work becoming more popular post pandemic, Robinson Offices have been gearing up for another wave of portfolio expansion with the opening of Cyber Omega in Ortigas CBD, Cybergate Tower in Iloilo, and Bridgetown East Campus One in Pasig.

Also, it is already preparing to add new office inventory in Bacolod, Cebu, and Iloilo, which will help strengthen its position as one of the major IT-BPM office providers in the Philippines.

Overall, Robinsons Land has been thriving through its expansion and diversification strategies for years. However, looking at as-reported metrics, it appears that the company is generating little to no shareholder value, with return on assets (ROAs) reaching below cost of capital levels since 2016.

In reality, the company’s long-term growth plan actually did better than presented, with Uniform ROAs reaching just above cost-of-capital levels at 5%.

One of the distortions of the said discrepancy is due to Philippine Financial Reporting Standards (PFRS) accounting for interest expense.

According to PFRS, interest expense can be classified as an operating cash flow. In reality, interest expense represents the cost of debt and is rightfully always a financing cash flow. As such, in Uniform Accounting, interest expense is added back to earnings.

For example, in 2021, Robinsons Land recognized an interest expense of PHP 1.6 billion, 20% of as-reported net income of PHP 8.0 billion. When we add the PHP 1.6 billion back to earnings, along with many other necessary adjustments made, it leads to a 5% Uniform ROA in 2021, higher than as-reported ROA of 3%.

Robinsons Land Corporation’s earning power is stronger than you think

As-reported metrics distort the market’s perception of the firm’s recent profitability. If you were to just look at as-reported ROA, you would think that Robinsons Land’s profitability has been stronger than real economic metrics highlight.

Through Uniform Accounting, we can see that the company’s true ROAs have been understated over the past decade. For example, as-reported ROA was 3% in 2021, but its Uniform ROA was actually higher at 5%.

Robinsons Land Corporation’s earnings margin is weaker than you think

Since 2006, as-reported metrics have significantly overstated Robinsons Land’s earnings margin, a key driver of profitability.

Moreover, Uniform margins have only reached a peak of up to 30%. In comparison, as-reported margins have already reached 55% in the same time period, making Robinsons Land appear to be a more profitable business than real economic metrics highlight.

SUMMARY and Robinsons Land Corporation Tearsheet

As our Uniform Accounting tearsheet for Robinsons Land Corporation (RLC:PHL) highlights, the company trades at a Uniform P/E of 22.1x, around the global corporate average of 20.6x, but below its historical P/E of 23.8x.

Low P/Es require low EPS growth to sustain them. In the case of Robinsons Land, the company has recently shown a 51% Uniform EPS decline.

Sell-side analysts provide stock and valuation recommendations that in general provide very poor guidance or insight. However, sell-side analysts’ near-term earnings forecasts tend to have relevant information.

We take sell-side forecasts for Philippine Financial Reporting Standards (PFRS) earnings and convert them to Uniform earnings forecasts. When we do this, Robinsons Land’s sell-side analyst-driven forecast is to see Uniform earnings shrinkage of 23% and a 51% growth in 2022 and 2023, respectively.

Based on current stock market valuations, we can use earnings growth valuation metrics to back into the required growth rate to justify Robinsons Land’s PHP 17.50 stock price. These are often referred to as market embedded expectations.

The company is currently being valued as if Uniform earnings were to shrink 2% annually over the next three years. What sell-side analysts expect for Robinsons Land’s earnings growth is below what the current stock market valuation requires in 2022, but above the requirement in 2023.

Moreover, the company’s earning power is below the long-run corporate average. Furthermore, cash flows and cash on hand are below total obligations—including debt maturities, capex maintenance, and dividends. However, intrinsic credit risk is 330bps above the risk free rate. Together, this signals average dividend risk.

To conclude, Robinsons Land’s Uniform earnings growth is below its peer averages, but above its average peer valuations.

About the Philippine Markets Newsletter
“Wednesday Uniform Earnings Tearsheets – Philippine-listed Focus”

Some of the world’s greatest investors learned from the Father of Value Investing or have learned to follow his investment philosophy very closely. That pioneer of value investing is Professor Benjamin Graham. His followers:

Warren Buffett and Charles Munger of Berkshire Hathaway; Shelby C. Davis of Davis Funds; Marty Whitman of Third Avenue Value Fund; Jean-Marie Eveillard of First Eagle; Mitch Julis of Canyon Capital; just to name a few.

Each of these great investors studied security analysis and valuation, applying this methodology to manage their multi-billion dollar portfolios. They did this without relying on as-reported numbers.

Uniform Adjusted Financial Reporting Standards (UAFRS or Uniform Accounting) is an answer to the many inconsistencies present in GAAP and IFRS, as well as in PFRS.

Under IFRS, each company’s financial statements are rebuilt under a consistent set of rules, resulting in an apples-to-apples comparison. Resulting UAFRS-based earnings, assets, debts, cash flows from operations, investing, and financing, and other key elements become the basis for more reliable financial statement analysis.


Every Wednesday, we focus on one Philippine-listed company that’s particularly interesting from a UAFRS vs as-reported standpoint. We highlight one adjustment that illustrates why the as-reported numbers are unreliable.

This way, we gain a better understanding of the factors driving a particular stock’s returns, and whether or not the firm’s true profitability is reflected in its current valuations.

Hope you’ve found this week’s Uniform Earnings Tearsheet on a Philippine company interesting and insightful.

Stay tuned for next week’s Philippine company highlight!


Angelica Lim
Research Director
Philippine Markets Newsletter
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