Effective end of this year, Januario Jesus “JJ” Atencio retires as president and CEO of 8990 Holdings, Inc., the publicly listed leading mass housing developer.
It is not that JJ has been ousted from 8990 for so-so performance. “8990 remains a growth company,” he points out.
The more likely reasons for his self-imposed retirement are: one, burnout brought about by cumbersome red tape; two, his desire to do other things, for himself and for the country, over which he has complete control and probably, complete ownership; and three, his decision to remain as director, which means he could still help in visioning for 8990’s directions.
As CEO, JJ was a hands-on manager. He encouraged his homebuyers to text him anytime of the day. “It is part of our consumer focus,” he says. But then 8990 is on track to build 40,000 homes.
Also, building houses is not as easy and predictable as it used to be. From concept to actual delivery, mass housing now requires at least 100 signatures and at least 200 supporting documents. If you are really good, he smiles, “you can produce all that in one year, double from just six months 25 years ago.”
A large 8990 project in east of Metro Manila has been gestating for past two years and a half, because the mayor does not want to give the go-signal “even if we are willing to share.” Of late, the Department of Agrarian Reform has stopped land conversions, restricting land available for both housing and factories.
Another trend. Every time there is a new president, the company suffers a hiccup, not necessarily a plateau. Thankfully, 8990, each time, stages a rebound—and what a rebound it always is. “We are a patient and a very resilient company,” he asserts with pride in calming fears of headwinds. “With a housing backlog, it is imperative for a business like ours to continue innovating and reading the signs to be flexible.” Why that missionary zeal?
“Homelessness remains a major problem in the Philippines,” JJ notes. At least four million families do not have a dwelling place they can call a home. Demand grows by half a million a year but annual production is 250,000 units at best. “8990 is blessed that God has given us an opportunity to run a good business,” says JJ, “but also to solve a great social problem—housing.” Food, clothing and shelter are man’s basic needs. Among the 12-million Filipino expats—their needs focus on three: education, insurance, and housing.
“A company,” the Jesuit-educated JJ argues, “is more than about profits. It must have a sense of mission to change this country for the better. Otherwise, the business is not sustainable.”
JJ owns only 10.37 percent of 8990 Holdings. He has two main partners—Luis Yu, the chairman, who owns or controls 44.24 percent, and Mariano Martinez, who has 19.91 percent. The partnership has been exceedingly profitable for the three. Named after an old model of a Nokia phone, 8990 started in 2003, with 30 employees and four projects.
From barely $4 million, 8990 grew in market value (and assets) to as high as $1 billion, making JJ, Luis and Marin awesomely wealthy. It has completed 50 mass housing projects and is completing a dozen more to bring total completed houses to 41,000. The company can build a house in just eight days but lately, it has taken eight months to sell them, because of government red tape.
Share price rose to as high as P10.50 after its listing. It has fallen to as low P5.37 (valuing the company at P29.6 billion), down 33 percent from its 12-month high of P8.05 (or P44.4 billion market cap) but still above its book value per share of P3.50 (P19.3 billion in total book value).
As of end-2016, 8990 had assets of P47.77 billion, equity of P19.26 billion (P9.34 billion retained earnings), and annual revenues of more than P10.87 million. In 2015 and 2016, 8990 had revenues of P9.27 billion and P9.33 billion, respectively, with net income of P3.722 billion and P3.575 billion, respectively.
In the first half of 2017, 8990 Holdings hit 95 percent of its target registering P3 billion in revenues versus its goal of P3.2 billion. After tax net income of P1.2 billion was also on target, with 94 percent of internal quota of P1.3 billion.
Still, year-on-year gross and net income figures fell 41 percent and 44 percent, respectively because of the continued delays in the delivery of its new projects’ licenses, labor shortages in the construction finishing and the momentum build-up of recently launched projects, but which are being addressed by the company.
Since the second half is usually stronger, 8990 still expects whole year revenues of P10 billion and profits of P5.4 billion, up 42 percent, boosted by the launch of 11 new projects.
Aside from the additional revenues arising from the new projects, he pointed out 8990 expects to realize revenues arising from the delay in the processing of the permits of various projects last year.
JJ says a total of 2,706 units in eight projects worth P2.4 billion in Iloilo, Cebu, Bacolod, and Davao were not realized last year due to various delays in the processing of permits.
“We wish to emphasize that these revenues are not lost, but merely delayed,” Atencio says.
He added that, “given an environment of stricter licensing and permits, coupled with the possibility of interest rates increasing in the short-term, the thrust of 2017 is generation of cash from increased take-out levels with HDMF, CTS Purchase of banks, securitization and issuance of preferred shares which will be used to pare down debts.”