Full speed ahead for CLI

Cebu Landmasters' [CLI 3.03 4.12%] Q2/21 profit of P604 million, up 175% from Q2/20 profit of P220 million, and down 15% from Q1/21 profit of P714 million. While CLI’s 1H net income grew 66% y/y, it did dip 15% on a q/q basis. Compared to Q1, gross revenues were up 19%, but the increase was outpaced by CLI’s growth in gross expenses which, on a q/q basis, grew by 30%. The company attributed the 1H climb in revenue to improved sales and construction progress.

The company also said that it plans to enter into the REIT market, but only after having first established its hospitality segment. It anticipates making this kind of move in 2023 and believes that its REIT offering will differentiate itself from the existing pack by giving investors something that provides exposure to real estate growth in regions outside of NCR and Luzon.

MB BOTTOM-LINE

Full speed ahead for CLI. The macro-environment in Visayas and Mindanao is ripe for development, so CLI’s challenge seems to be one that is more about capacity and judgment more than anything else. Real estate development isn’t trivial to scale; CLI has done wonderfully so far in growing its asset base, its revenue, and its rolling book of projects in various forms of completion, but continued growth demands more. The company finds itself surrounded by opportunity, but shareholders will want CLI to spend its precious equity and attention developing only those projects and opportunities that have the highest relative returns.

From my experience, the company has demonstrated the ability to avoid the costly prestige project that ties up money and effort for headlines and low returns. Will they continue to be as selective in their project picking and skillful in their execution as the project value climbs and the number of simultaneous construction projects grows in response? That’s what I’ll be watching.

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