Monday, November 12, 2012

Spotlight: Century Properties Group, Inc (CPG)



Latest update related to CPG: 
as of October 6, 2014: CPG's 800 Million Share Buy Back Program 
This article was written as of: November 11, 2012: Spotlight: Century Properties Group, Inc (CPG)

Business Overview


Century Properties Group, Inc is one of the leading real estate companies in the Philippines with over 26 years of experience.  It has only recently been made public via the corporate buyout of publicly listed East Asia Power Resources Corporation (PWR), then transferring its asset to it.  Through its Subsidiaries, Century develops, markets and sells residential, office, medical and retail properties in the Philippines, as well as manages residential and commercial properties in the Philippines.  

CPGI believes that it has earned a reputation for pioneering new housing concepts in the Philippines. One of Century’s significant contributions is the Fully-Fitted and Fully-Furnished (“FF/FF”) concept, which is now an industry standard in the Philippines. They also employ a branding strategy that focuses on strategic arrangements with key global franchises to help capture and sustain consumers’ awareness. To date, CPGI has entered into agreements with Gianni Versace S.P.A., Donald Trump (through the Trump Organization) , Paris Hilton, and Missoni Homes, among others.

Subsidiaries

1. Century City Development Corporation (100%) - CCDC, incorporated in 2006, is focused on developing mixed-use communities that contain residences, office and retail properties. CCDC is currently developing Century City, a 3.4-hectare mixed-use development along Kalayaan Avenue in Makati City.
2. Century Limitless Corporation (100%) - CLC, incorporated in 2008, is Century’s newest brand category that focuses on developing high-quality, affordable residential projects. Projects under CLC will cater to first-time home buyers, startup families and investors seeking safe, secure and convenient homes.
3. Century Communities Corporation (100%) - CCC, incorporated in 1994, is focused on horizontal house and lot developments. From the conceptualization to the sellout of a project, CCC provides experienced specialists who develop and execute the right strategy to successfully market a project. CCC is currently developing Canyon Ranch, a 25-hectare house and lot development located in Carmona, Cavite.
4. Century Properties Management (80%) - CPMI, incorporated in 1989, is one of the largest property management companies in the Philippines, as measured by total gross floor area under management. CPMI currently has 51 projects in its portfolio, covering a total gross floor area of 2,192,338 million sq.m. CPMI has been awarded 18 safety and security distinctions from the Safety Organization of the Philippines.

Key People

(L-R: Jose Marco Antonio, Jose E.B. Antonio, and John Victor Antonio)

1.) Jose E.B. Antonio - founder and chairman.  Also, current chairman of Century Asia Corporation, Prestige Cars , Inc., and Philtranco Service Enterprises.  Father of the Antonio brothers listed below.
2.) John Victor R. Antonio - COO and Managing Director. BS Econ (cl) and MBA from Wharton.  Involved in managing projects in the company's middle income and affordable product lines (i.e. Gramercy Residences and Azure Urban Residences).
3.) Jose Marco R. Antonio - COO and Managing Director. BS Econ (scl) and MBA from Wharton. Involved in managing projects in the company's middle income and affordable product lines (i.e. Canyon Ranch, Knightsbridge Residences, and Acqua Private Residences).
4.) Jose Roberto R. Antonio - COO and Managing Director.  BS Econ (Northwestern Univ) and MBA (Stanford).  Handles the company's luxury product line (i.e. Milano Residences and Trump Tower)
5.) Jose Carlo R. Antonio - CFO.  BS Econ (mcl) from Wharton.
6.) Ricardo Cuerva and Rafael Yaptinchay - co-founders of Meridien (developer for early CPI projects).
7.) Washington Sycip - Independent Director.  Founder of AIM and SGV.
8.) Monico Jacob - Independent Director. President and CEO of STI Education Services Group, PhilPlans First, Inc., and Philhealth Care Inc.

4 Current Master-planned Communities:

1.) Century City - A 3.4-hectare mixed-use project in Makati City with eight buildings (6 plans so far:  Gramercy Residences, Knightsbridge Residences, Milano Residences (interior by Versace Home), Centuria Medical Makati, Trump Tower Manila and Lifestyle Center)
2.) Acqua Private Residences - Located in Mandaluyong City, this development comprises six towers with views of the Makati City skyline and will feature a country club with fitness, retail, dining and entertainment facilities, as well as what we expect to be the first riverwalk promenade in the Philippines.
3.) Azure Urban Resort Residences - Century’s first property in the affordable market segment, Azure
Urban Resort Residences is a nine building residential property set on six-hectares in ParaƱaque City. The development will feature what we expect to be the first man-made beach in an urban residence in Manila and a beach club designed by Paris Hilton.
4.) Canyon Ranch - A 25-hectare house and lot community that is part of the 77-hectare San Lazaro
Leisure Park in Cavite City targeted for middle-income buyers. The community features a clubhouse with sports and leisure facilities and offers residents views of the Leisure Park which includes one of only two operating horse racing tracks in the Philippines.



Completed Projects (sample)

1. Medical Plaza Makati/Ortigas
2. Essensa 
3. South of Market
4. SOHO Central
5. Grand SOHO Makati

Properties Under Management  (sample)

1. Essensa East Forbes
2. Asian Development Bank
3. BPI Buendia Center
4. One Corporate Center Ortigas
5. PNB Financial Center

Dividend Policy


CPGI intends to maintain an annual cash dividend payment ratio for the issued and outstanding common shares of the Company of approximately 10% of its consolidated net income from the preceding fiscal year, subject to the requirements of applicable laws and regulations, availability of unrestricted retained earnings and the absence of circumstances which may restrict the payment of such dividends.




Quick Numbers

Fundamentals



Book Value of Equity (AR 2011): ~Php4.33B
Outstanding Shares: ~4.01B

BV/share: Php 1.08 


Debt Ratio (Long term): 11%
Beta: 0.77
Cost of Capital: 9.8%


Net Income:  

2011:  Php 864M
2010: Php 180M

2009: Php 696M   

time-weighted average NI: Php 625M


A conservative assumption of long-term growth (3% yearly), would put the fair value of the company  (
based on earnings - DCF analysis) at around:

Fair Value/share: Php2.43 


As of the end of November 9, 2012, the closing price is at 1.4 which gives us room for about 70% in order to achieve the conservative target price.

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Technicals




When CPG took over the dormant PWR, there were lots of speculations over how much the company would be valued.  Stock prices skyrocketed up to 5 before it finally settled down to the current range which is already less than 2.  I would expect a long overhang on this range unless there would be significant news that could propel demand on this stock.  There are a lot of resistances up there that needs to be broken.

Analysis

Given that our fundamental analysis show that CPG is undervalued, we might consider starting to accumulate on this stock.  The RSI shows a range trade and currently prices seem to be at the bottom unless it breaks.  The MACD indicator shows some strength which may signal some bullish divergence on the stock's prices.

References: Financial Statements of CPG (AR 2011)
                    www.wikipedia.org