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
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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