The Philippine Potential Presentation by Brycg Group

Page 1

09|26|2013

THE PHILIPPINE POTENTIAL


Q. So where are we?  It’s never been this GOOD  The real estate sector is BIGGER than ever  There are RISKS outside of our control  But in the LONG-term, we’re good

2


About me‌. Living

Working

Education

0%

20%

40%

60%

80%

100% 3


IT’S NEVER BEEN THIS GOOD


Asian Tiger 16th Biggest Economy by 2050 A “Breakout Nation” An “economic bright spot in Asia”

Improved Competitiveness & Economic Freedom Improved RE Transparency 5


TREND #1 | Consumer Bank Rate Borrowing has never been this cheap and easy for consumers‌

Source: National Statistics Office

Source: 2008, Dr. Jean-Paul Rodrigue, Department of Economics & Geography, Hofstra University

6


Source: Bangko Sentral ng Pilipinas 9/1/2012

2/1/2012

7/1/2011

12/1/2010

5/1/2010

10/1/2009

3/1/2009

8/1/2008

1/1/2008

6/1/2007

11/1/2006

4/1/2006

9/1/2005

2/1/2005

7/1/2004

12/1/2003

5/1/2003

10/1/2002

3/1/2002

8/1/2001

1/1/2001

6/1/2000

11/1/1999

4/1/1999

9/1/1998

2/1/1998

7/1/1997

12/1/1996

5/1/1996

10/1/1995

3/1/1995

8/1/1994

1/1/1994

6/1/1993

11/1/1992

4/1/1992

9/1/1991

2/1/1991

7/1/1990

12/1/1989

5/1/1989

10/1/1988

3/1/1988

8/1/1987

1/1/1987

TREND #2 | 91-day T-Bill Rates …as well as for the government.

30

25

20

15

10

5

0

7


TREND #3 | Total Loans Outstanding 4,000,000.0

The banking sector is rapidly expanding‌ 2008-2012 CAGR: 14.5%

3,500,000.0

3,000,000.0

2,500,000.0

1998-2002 CAGR: -0.2%

1993-1997 CAGR: 36.2%

2,000,000.0

2003-2007 CAGR: 5.2%

1,500,000.0

1,000,000.0

500,000.0

92

93

94

95

96

Source: Bangko Sentral ng Pilipinas

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12 8


TREND #4 | NPL as % of Total Loans …with the healthiest balance sheets we’ve seen since 1996.

Source: bancofilipinofailure.com infographic,

9


TREND #5 | PSEi 8,000

Our stock market is booming…

7,000

2/09 –5/13 277.7%

6,000

11/07-1/09 -49.0%

5,000 4,000 3,000

11/01-10/07 233.1% 1/00 – 10/01 -50.1%

2,000 1,000 -

Source: Philippine Stock Exchange

10


TREND #6 | Debt to GDP ‌while the government continually pays down its debt‌ 80.0

75.0

74.9

70.0 65.0 60.0 55.0

50.0 45.0 40.0

40.40 35.0 30.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: Department of Finance; www.tradingeconomics.com

11


10

8

0 1/1/01 5/1/01 9/1/01 1/1/02 5/1/02 9/1/02 1/1/03 5/1/03 9/1/03 1/1/04 5/1/04 9/1/04 1/1/05 5/1/05 9/1/05 1/1/06 5/1/06 9/1/06 1/1/07 5/1/07 9/1/07 1/1/08 5/1/08 9/1/08 1/1/09 5/1/09 9/1/09 1/1/10 5/1/10 9/1/10 1/1/11 5/1/11 9/1/11 1/1/12 5/1/12 9/1/12

TREND #7 | Inflation Rate ..all within a steady price environment.

12

Headline Inflation

Core Inflation

6

4

2

Source: Bangko Sentral ng Pilipinas 12


TREND #8 | Competitiveness All these trends leads to making the country more competitive‌

Source: World Economic Forum; National Competitive Council Philippines

13


TREND #8 | Competitiveness ‌one of the best improvers in Asia‌

Source: World Economic Forum; National Competitive Council Philippines

14


TREND #9 | Manila as a RE Destination ‌improving our ranking in investment surveys‌ 22 20 18 16 14 12 10 8 6

Ranking Higher the lower the number

4 2 0 2007

2008

2009

Source: Urban Land Institute Emerging Trend reports

2010

2011

2012

2013 15


TREND #10 | Investment Grade ‌with more potential as we hit investor’s radars.

Source: Rappler.com infographic; with Author manipulating the S&P line to incorporate recent upgrade

16


TREND #11 | Capital Freeze Index Safe from sudden stops in capital inflows

Source: The Economist

17


REAL ESTATE IS BIGGER THAN EVER


TREND #1 | It’s no longer just Makati and BGC New central business districts are rising‌

Source: National Statistics Office

Source: JLL Research & Consulting

19


TREND #2 | Increase in Office Supply …leading developers to build offices, mainly for the BPO sector…

Source: National Statistics Office

Source: JLL Research & Consulting a/o March 2013

20


TREND #3 | Concentration of Office Development …but mainly in Bonifacio Global City.

Source: National Statistics Office

Source: JLL Research & Consulting a/o March 2013

21


TREND #4 | The Condo Boom As cities develop, vertical developments become key.

Source: HLURB; Issued Licenses to Sell (units)

22


TREND #5 | The Condo Boom: Manila Edition The residential developments are consistently in the same areas‌

Source: National Statistics Office

Source: JLL Research & Consulting a/o March 2013

23


TREND #6 | Vertical Housing for the ‘Masses’ …also consistently in the mid-end price range.

Source: National Statistics Office

Source: JLL Research & Consulting a/o March 2013

24


TREND #7 | It’s More Fun in the Philippines Hotels are the new asset class thanks to foreign & local tourism‌

1,800,000

% change (y-o-y) China

South Korea Australia

US Taiwan

Japan Others

1,600,000

25% 20%

1,400,000

15%

1,200,000

10%

1,000,000 5% 800,000 0%

600,000

-5%

400,000 200,000

-10%

0

-15% 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012F Source: National Statistics Office

Source: Department of Tourism

25


TREND #8 | Move over Macau ‌especially in gaming & casinos in Bay City / Entertainment City‌

Source: National Statistics Office

Source: JLL Research & Consulting a/o March 2013

26


TREND #9 | Move over Manila …as well as quality and affordable hotels all across the country.

Source: National Statistics Office

Source: JLL Research & Consulting a/o March 2013; Selected provincial hotels only.

27


TREND #10 | ‘Everyone’ Wants to Build Overall, the # of building projects are increasing… Additions, Alterations, Repair Non-Residential Residential Residential YoY Growth Non-Residential YoY Growth

140,000

120,000

40.0%

30.0%

100,000

20.0%

80,000

10.0%

60,000

0.0%

40,000

-10.0%

20,000

-20.0%

0

-30.0% 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012 Source: National Statistics Office

Source: NSO

28


TREND #11 | Construction Values NCR @ PHP 29.2M

‌ and so are the value per project.

NCR @ PHP 13.8M

9,000,000 8,000,000

Residential

7,000,000

Commercial

6,000,000 5,000,000 4,000,000 3,000,000

2,000,000

11/1/12

7/1/12

3/1/12

11/1/11

7/1/11

3/1/11

11/1/10

7/1/10

3/1/10

11/1/09

7/1/09

3/1/09

11/1/08

7/1/08

3/1/08

11/1/07

7/1/07

3/1/07

11/1/06

7/1/06

3/1/06

11/1/05

7/1/05

3/1/05

11/1/04

7/1/04

3/1/04

11/1/03

7/1/03

-

3/1/03

1,000,000

Source: National Statistics Office

Source: NSO

29


THERE ARE RISKS ARE OUTSIDE OF OUR CONTROL


Small-scale war between China & Philippines

Worsening poverty & income equality

“The spectre of populism in Philippine politics and society: artista, masa, Eraption!�

Current low interest rates may lead to a RE bubble Global Banking Sector Collapses 31


TREND #1 | Wholesale Prices It costs more and more to build. All Items

Sand, stone and gravel

Cement

Wood products

Fuels and lubricants

Reinforcing steel

Structural steel

Index (1985 = 100)

850

All Items CAGR 7.3%

750

Reinforcing Steel CAGR 14.5%

650 550 450 350 250

Source: NSO

1/1/2012

7/1/2011

1/1/2011

7/1/2010

1/1/2010

7/1/2009

1/1/2009

7/1/2008

1/1/2008

7/1/2007

1/1/2007

7/1/2006

1/1/2006

7/1/2005

1/1/2005

7/1/2004

1/1/2004

7/1/2003

1/1/2003

7/1/2002

1/1/2002

7/1/2001

1/1/2001

7/1/2000

1/1/2000

150

32


TREND #2 | The Peso Appreciation A good economy eventually strengthens the currency.

Source: National Statistics Office

Source: Bangko Sentral ng Pilipinas; Peso per currency noted

33


TREND #3 | OFW Remittances Still increasing, but at a much slower rate. CAGR: 6.6% CAGR: 13.3%

Source: National Statistics Office

Source: Bangko Sentral ng Pilipinas;

34


TREND #4 | RE Loan as “FAST” Since the Lehman collapse, one of the fastest growing…

Source: Banko Sentral Ng Pilipinas

35


TREND #4 | RE Loans as “BIG” …also now the largest of all loans in the system. 35

Manufacturing Wholesale and Retail Financial Intermediation Real Estate, Construction, Hotel Credit Card Auto Loans

30

25

20

15

10

5

0 Dec-01

Dec-02

Dec-03

Dec-04

Source: Banko Sentral ng Pilipinas

Dec-05

Dec-06

Dec-07

Dec-08

Dec-09

Dec-10

Dec-11

Dec-12 36


TREND #5 | A Slippery Target in Office Demand July 2010 Forecast

Source: Jones Lang LaSalle

37


TREND #5 | A Slippery Target (continued) October 2011 Forecast

Source: Jones Lang LaSalle

38


TREND #5 | A Slippery Target (continued) July 2012 Forecast

Source: Jones Lang LaSalle

39


TREND #6 | Which Offshore Location? {OVERALL} 40% Financial | 30% People Skills | 30% Business Environment 2004 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

India China Malaysia Czech Republic Singapore Philippines Brazil Canada Chile Poland Hungary New Zealand Thailand Mexico Argentina Costa Rica South Africa Australia Portugal Vietnam

2005

2007

India China Malaysia Philippines Singapore Thailand Czech Republic Chile Canada Brazil United States Egypt Indonesia Jordan Bulgaria Slovakia Mexico Poland Hungary United Arab Emirates

India China Malaysia Thailand Brazil Indonesia Chile Philippines Bulgaria Mexico Singapore Slovakia Egypt Jordan Estonia Czech Republic Latvia Poland Vietnam United Arab Emirates

Source: A.T. Kearney's Global Services Location Index™ (GSLI)

2009 India China Malaysia Thailand Indonesia Egypt Philippines Chile Jordan Vietnam Mexico Brazil Bulgaria United States Ghana Sri Lanka Tunisia Estonia Romania Pakistan

2011 India China Malaysia Egypt Indonesia Mexico Thailand Vietnam Philippines Chile Estonia Brazil Latvia Lithuania United Arab Emirates United Kingdom Bulgaria United States Costa Rica Russia

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 40


TREND #6 | Which Offshore Location? Based on Financial Attractiveness‌ 2004 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

India Vietnam Philippines Thailand China Argentina Brazil Mexico Malaysia Costa Rica Chile Poland South Africa Hungary Czech Republic Portugal New Zealand Singapore Australia Canada

2005

2007

Philippines Egypt Indonesia India Bulgaria Thailand China Jordan Malaysia Brazil Mexico Chile Slovakia Poland United Arab Emirates Hungary Czech Republic Singapore Canada United States

Vietnam Indonesia Philippines India Egypt Thailand Bulgaria Jordan China Malaysia Slovakia United Arab Emirates Chile Brazil Latvia Mexico Poland Estonia Czech Republic Singapore

2009 Ghana Indonesia Vietnam Philippines India Sri Lanka Pakistan Egypt Thailand Jordan Tunisia Bulgaria Malaysia Romania China Mexico Chile Brazil Estonia United States

2011 Vietnam Indonesia Philippines India Egypt Thailand Costa Rica Bulgaria Malaysia Mexico China Latvia Lithuania Russia Chile United Arab Emirates Estonia Brazil United Kingdom United States

Source: A.T. Kearney's Global Services Location Index™ (GSLI); countries based on Top 20 (Overall Score)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 41


TREND #6 | Which Offshore Location? Based on People Skills & Availability‌ 2004 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

India Canada Australia New Zealand China Singapore Philippines South Africa Czech Republic Hungary Poland Portugal Brazil Argentina Mexico Malaysia Chile Costa Rica Thailand Vietnam

2005

2007

United States India Canada China Singapore Brazil Philippines Mexico Malaysia Czech Republic Indonesia Poland Chile Slovakia Egypt Thailand Jordan Hungary Bulgaria United Arab Emirates

India China Brazil Singapore Mexico Indonesia Malaysia Philippines Thailand Chile Poland Egypt Czech Republic Bulgaria Slovakia Vietnam Jordan Estonia Latvia United Arab Emirates

2009 United States India China Brazil Mexico Indonesia Thailand Malaysia Egypt Chile Philippines Pakistan Vietnam Sri Lanka Estonia Jordan Tunisia Romania Bulgaria Ghana

2011 United States India China United Kingdom Brazil Russia Mexico Indonesia Thailand Malaysia Egypt Philippines Chile Vietnam Estonia Costa Rica United Arab Emirates Latvia Lithuania Bulgaria

Source: A.T. Kearney's Global Services Location Index™ (GSLI); countries based on Top 20 (Overall Score)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 42


TREND #6 | Which Offshore Location? Based on Business Environment‌ 2004 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Singapore Canada New Zealand Australia Czech Republic Portugal Malaysia Hungary Chile Poland Brazil Costa Rica India Mexico South Africa Thailand Argentina China Philippines Vietnam

2005

2007

Singapore Canada United States Malaysia Czech Republic Chile United Arab Emirates Hungary Slovakia Thailand Poland Jordan India Brazil Mexico China Bulgaria Philippines Egypt Indonesia

Singapore Estonia Czech Republic Malaysia Latvia Chile United Arab Emirates Poland Slovakia Thailand Mexico Bulgaria Jordan Brazil India China Philippines Egypt Vietnam Indonesia

2009 Estonia United States Malaysia Chile Bulgaria Jordan Romania Mexico Tunisia Thailand China Egypt Brazil Ghana India Philippines Vietnam Sri Lanka Indonesia Pakistan

2011 Estonia United Kingdom United Arab Emirates Latvia United States Lithuania Malaysia Chile Bulgaria Costa Rica Mexico Brazil Egypt China Thailand Vietnam Philippines India Russia Indonesia

Source: A.T. Kearney's Global Services Location Index™ (GSLI); countries based on Top 20 (Overall Score)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 43


TREND #6 | Which Offshore Location? If cost is not the issue… 2005 (Original %) India China Malaysia Philippines Singapore Thailand Czech Republic Chile Canada Brazil United States Egypt Indonesia Jordan Bulgaria Slovakia Mexico Poland Hungary United Arab Emirates

2005 (25%/25%/50%) Singapore Canada United States Malaysia United Kingdom India Australia Germany Czech Republic Chile New Zealand France China Thailand United Arab Emirates Ireland Slovakia Hungary Jordan Brazil

Business Environment • Business & Political Environment • FDI Confidence Index • Security Risk • Regulatory Burden • Employment Rigidity • Infrastructure Quality • Cultural Exposure • Security of Intellectual Property

Source: A.T. Kearney's Global Services Location Index™ (GSLI); countries based on Top 20 (Overall Score)

44


TREND #7 | Philippine Competitiveness Improving, but ways to go. Out of 148 countries‌

#59 Overall

#117 Hiring & Firing Practices

#118 No. of Days to Start a Business

#124 Business Costs of Terrorism

#145 No. of Procedures to #130 #130 Burden Tuberculosis Start a Business of Customs Cases Procedures

Source: World Economic Forum

45


TREND #8 | Natural Disaster Risk 7,107 islands & the Pacific Rim, leads to vulnerability

#3 Philippines

Source: United Nations

46


BUT IN THE LONG-TERM WE’RE GOOD


TREND #1 | Urbanization People need houses, places to shop, work, and have fun‌

Source: Census

48


TREND #2 | Concentration of ‘City Dwellers’ …and Manila will no longer be the only city. World (Total Pop.) Philippines (Total Pop.) Manila (share of Urban Pop.) 2,500.0 2,000.0 1,500.0

World (Urban Pop.) Philippines (Urban Pop.)

Philippines (Urban) – 20x Philippines (Total) – 8.5x World (Urban) – 8.5x World (Total) – 3.7x Manila (as a share) – .7x

2036.3

1,000.0

842.2

500.0

367.5 100.0

0.0

70.0 Source: National Statistics Office

Source: Census; CIA Factbook

49


TREND #2 | Young and Ambitious The future consumers and office workers‌ Population

Cumulative %

12,000,000

120%

10,000,000

98% 99% 99% 100% 96% 94% 100% 92%

84%

88%

78% 8,000,000

72%

80%

65% 57%

6,000,000

48% 37%

4,000,000

60%

40%

25% 2,000,000

20%

13% 3%

0

0% Under '1-4 1

Source: Census

'5-9 '10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80 and over 50


TREND #3 | Household Consumption …who will drive our economy. Philippines 4,000.0 3,500.0 3,000.0 2,500.0

World

European Union

China – 35x Philippines – 32x EU – 21x World – 20x North America – 16x

North America

China 3501.7 3223.5

2116.2

2,000.0

1977.7

1,500.0

1601.8

1,000.0 500.0 100.0

0.0 Source: National Statistics Office

Source: Census; CIA Factbook

51


TREND #4 | Philippine Competitiveness Out of 148 countries‌

#59 Overall

#27 Financing thru Local Equity Market

#36 Soundness of Banks

#31 GDP (PPP) Source: World Economic Forum

#11 HIV Prevalence

#42 FDI & Technology Transfer #48 Capacity for Innovation 52


TREND #5 | Go AZKALS! The highest ever ranking‌

Source: FIFA

53


TREND #5 | Thank You Efren “Bata” Reyes Our champions

Source: World Pool-Billiard Association

54


TREND #5 | Thank You Manny Flyweight Division

Source: World Pool-Billiard Association

55


Where Are We Headed?

56


WHO WE ARE


We are committed to providing highly focused and tailored advisory work for each client. Our team has unique skills in independent financial and research advisory, equipped to develop and deliver comprehensive strategies and solutions to any financial undertaking or transaction. We set the standard in investment advisory services. Our approach is deeply rooted in macro- and microeconomic research, looking at both the physical and financial aspects of the project.

ď ą Investment Advisory ď ą Strategy ď ą Financial & Research Analysis

www.brycggroup.com


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