Our previous coverage on 8990 Holdings, Inc. (HOUSE) highlighted how it had significantly benefitted from the increasingly strong demand for residential real estate in the country prior to the pandemic. In this report, we detail how HOUSE faired during the height of the lockdowns and introduce our 2022E estimates.
HOUSE saw record high quarterly revenues in 3Q 2020, owing to strong real estate sales despite the protracted quarantine measures. There was a brief period of downturn in 2Q20 during the height of the lockdowns in Luzon.
However, since then, its performing accounts ratio increased to 82% as of end-September from 1H20’s 77%. Based on this strong sequential recovery, it is highly likely that HOUSE was able to further improve its collections in 4Q20 in spite of the holiday season. However, we do not think this would be enough to offset the significant drop in 2Q20 revenues. Therefore, our model projects a top- and bottomline decline in 2020.
Demand for affordable housing will likely remain strong, especially beginning 2021E when the economy starts to slowly reopen. As of 9M20, unrealized sales stood at P5.6 billion, equivalent to 3,214 units. Barring another Luzon-wide ECQ, it is highly likely that HOUSE will be able to sustain its sequential growth per quarter. The low interest rate environment coupled with increasing real estate prices outside the capital will prove to be beneficial for HOUSE at least until 2022E.
We maintain our 12-month Fair Value Target Price for HOUSE at P9.70/share, but also upgrade our recommendation to a BUY. The last traded price now provides a significant upside to our Target Price.