CDC: Stable middle-market property developer with minimal debt selling well below par

Source: The Philippine Stock Exchange, Inc.

Cityland Development Corporation (CDC) is a potential value BUY given the company’s consistent performance over the course of the pandemic, stable financial position, and bargain price. However, interested investors should consider the fact that the recovery of CDC’s revenues over the last two years has slightly lagged its peers and Philippine property prices remain mostly depressed which could dampen the company’s prospects in the near future.

Company Overview

CDC, incorporated on January 31, 1978, mainly develops or leases medium- to high-rise office, commercial, and residential buildings and subdivisions located in the cities of Makati, Mandaluyong, Manila, Pasig, and Quezon City.

CDC has two subsidiaries: City & Land Developers, Inc. (LAND) and Cityplans, Inc. (CPI). LAND is also a real estate developer while CPI is engaged in the business of developing, maintaining, and selling pension plans. Cityland, Inc. (CI) is CDC’s ultimate parent.


No.NameSharesOwnership (%)
1Cityland, Inc.2,474,939,72250.98%
2PCD Nominee Corporation1,032,665,96221.27%
3Grace C. Liuson232,441,3614.79%
4Stephen C. Roxas154,660,1433.19%
5Dr. Andrew I. Liuson148,603,6573.06%
6Josef Gohoc107,316,5422.21%
7Helen C. Roxas73,801,2681.52%
8PCD Nominee Corporation49,376,4321.02%
Source: List of Top 100 Stockholders as of September 30, 2021

Key Personnel

NamePositionSharesOwnership (%)
Dr. Andrew I. LiusonChairman of the Board148,603,6573.06%
Stephen C. RoxasChairman of the Executive Committee154,660,1433.19%
Grace C. LiusonVice Chairman of the Board232,441,3614.79%
Josef C. GohocPresident107,316,5422.21%
Source: 2021 General Information Sheet



Consistently strong 2021 profit margins even despite pandemic

Prior to the pandemic, CDC managed to post an average annual earnings before tax (EBT) margin of 36.58% against the industry average and median of 31.62% and 34.28% respectively for the years 2016, 2017, 2018, and 2019. It also posted an average annual net margin of 25.83% against the industry average and median of 22.17% and 25.23% respectively over the same period.

EBT Margins2016201720182019Average
Industry Average30.99%30.66%32.08%32.75%31.62%
Industry Median33.07%32.99%33.71%34.45%34.28%
Net Margins2016201720182019Average
Industry Average22.28%21.64%22.11%22.66%22.17%
Industry Median23.91%23.98%24.14%23.96%25.23%

The table below presents the change in industry EBT margins for the first three quarters of 2020 and 2021 against the industry EBT margin for the same period in 2019.

The results show that CDC has done a commendable job improving their EBT margin by 13.98% and 11.88% against their 2019 EBT margin for the first three quarters of 2020 and 2021 respectively . This is substantially higher than the -18.35% and -13.36% averages posted by the industry over the same respective periods.

CDC was likewise able to post an 11.07% and 29.32% improvement in net margins against their 2019 net margin for the first three quarters of 2020 and 2021 respectively. This is also substantially higher than the -22.45% and 25.72% averages returned by the industry over the same respective periods.

EBT Margins, 2020 & 2021 vs. 20192020 Change (%)2021 Change (%)
Net Margins 2020 Change (%)2021 Change (%)
Conservatively financed

In terms of debt, CDC only has PhP1,208.2 million in the form of commercial papers with varying maturities ranging from 30 to 365 days as of September 30, 2021.

With cash and cash equivalents to the tune of PhP1,190.4 million, CDC is not expected to struggle with repayment on its short-term borrowings even with the additional PhP500.0 million worth of commercial papers the company hopes to issue.

In its latest quarterly report, CDC also expressed its intention to continue maintaining a cautious stance with regards to financing to better ensure its ability to turn-over on-going projects in a timely manner.

The company’s debt ratios are further summarized in the table below.

Financial Ratiosas of September 30, 2021
Current Ratio3.36
Debt-to-Equity Ratio0.14
Solvency Ratio *0.26
Interest Rate Coverage Ratio453.52
Acid-Test Ratio **1.62
* Solvency Ratio = (Net Income After Tax + Depreciation Expense) / Total Liabilities
** Acid-Test Ratio = (Cash and Cash Equivalents + Short-Term Investments + Installment Contracts Receivable, Current + Contract Assets, Current + Other Receivables, Current) / Total Current Liabilities
Bargain pricing

As of September 30, 2021, CDC has PhP6,976.2 million in tangible current assets which account for 94.86% and 57.09% of its total current assets and total assets respectively.

TANGIBLE CURRENT ASSETSas of September 30, 2021
(in PhP Millions)
Cash and cash equivalents1,190.4
Short-term investments2,034.9
Real estate properties for sale3,750.9
Source: Q3 2021 Quarterly Report

Meanwhile, the Company has only PhP2,686.6 million in total liabilities as of September 30, 2021.

TOTAL LIABILITIESas of September 30, 2021
(in PhP Millions)
Total Current Liabilities2,187.2
Total Non-Current Liabilities499.4
Source: Q3 2021 Quarterly Report

Subsequently, subtracting the company’s tangible current assets by its total liabilities returns a very stringent net working capital value to the tune of PhP4,289.5 million.

NET WORKING CAPITALas of September 30, 2021
(in PhP Millions)
Tangible Current Assets6,976.2
Total Liabilities2,686.6
NET VALUE4,289.6
Source: Q3 2021 Quarterly Report

CDC’s net value as computed above divided by its 4,855.1 million listed shares returns an indicative net value of PhP0.88 per share.

CDC’s December 14, 2021 closing price of PhP0.75 per share is a 15.11% discount from its indicative net value of PhP0.88 per share.

Last Traded Price Per SharePhP0.75
Net Working Capital Per SharePhP0.88

At PhP0.75 per share, CDC is also currently selling at 25.0% below its par value of PhP1.00 as per the company’s latest general information sheet.


Lackluster sales recovery

The local property sector has been one of the hardest hit in the Philippines since the start of the pandemic as a result of disruptions to construction and higher default rates across the country. The Philippine Stock Exchange’s (PSE) Property Index is likewise down by 22.52% as of December 10, 2021 compared to its close on January 3, 2020, making it the worst performer of all the indices by far.

IndexClose, 12/30/19 to 01/03/20Close, 12/06/21 to 12/10/21Change (%)
All Shares4,655.543,830.43-17.72%
Holding Firms7,631.726,968.68-8.69%
Mining & Oil8,020.769,196.4514.66%
Sources: PSE Weekly Report (January 3, 2020), PSE Weekly Report (December 10, 2021)

The tables below present the year-on-year change in 2020 and 2021 industry quarterly revenues compared to their 2019 counterparts. As can be observed, the industry as a whole has not averaged a positive growth rate for any quarter save for Q1 2020 given that the declaration of national lockdowns to curb the spread of COVID-19 in the Philippines only began in March of that year.

In terms of revenue recovery against 2019 figures, CDC has performed below the industry average. However, comparing CDC’s 2020 and 2021 revenues shows the company has actually outperformed the industry average for all but the third quarter of 2021.

Revenues, 2019 vs. 2020Q1 Change (%)Q2 Change (%)Q3 Change (%)
Industry Average0.93%-43.71%-18.58%
Industry Median-5.39%-50.82%-24.48%
Revenues, 2019 vs. 2021Q1 Change (%)Q2 Change (%)Q3 Change (%)
Industry Average-3.39%-18.32%-14.45%
Industry Median-18.50%-28.10%-19.25%
Revenues, 2020 vs. 2021Q1 Change (%)Q2 Change (%)Q3 Change (%)
Industry Average-1.72%76.82%7.43%
Industry Median-11.80%80.58%6.51%

As per the company’s latest quarterly report, CDC still has real estate properties for sale to the tune of PhP3,750.9 million and a significant land bank worth PhP896.5 million mostly located in “prime lots … ideal for horizontal and vertical developments”.

Nationwide residential property prices continue to slump year-on-year

As per the Bangko Sentral ng Pilipinas (BSP), nationwide residential property prices declined by 9.4% year-on-year in Q2 2021 compared to Q2 2020 due to the continued effects of the COVID-19 pandemic.

The decline was led by the 18.3% year-on-year drop in residential property prices in the National Capital Region (NCR) in Q2 2021 compared to Q2 2020 driven by negative price changes in single detached, condominium, and townhouse units across the region.

Source: Bangko Sentral ng Pilipinas
Source: Bangko Sentral ng Pilipinas

However, residential real estate loans for new housing units rose year-on-year by 82.3% and 27.2% across the country and in the NCR respectively in Q2 2021 compared to Q2 2020 possibly implying improved bank and consumer confidence.

Source: Bangko Sentral ng Pilipinas

These factors alongside recent uncertainty surrounding the Omicron (B.1.1.529) COVID-19 variant may negatively impact CDC’s ability to produce sales and margins as consistently and efficiently as it was previously able to under more favorable economic conditions.

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