RLC down 7.15% on first day of MECQ; Strong enough to weather the storm

The market sell-off on the first day of the re-imposition of the Modified Enhanced Community Quarantine (MECQ) had Robinson Land Corporation down by 7.15% the most on that day with a volume of 3,110,220 above the 65 day average volume of 2,573,380 that made us wonder if RLC was in danger.

As of the end of Q1 2020, RLC had a cash balance of 6.3 Billion Pesos while total debts falling due before the year 2020 ends is at 11 Billion Pesos. With limited cash flows due to the COVID-19 pandemic shutdown, this looks worrisome. But this is where the quality of of the Board and the top management comes in. You got to have experienced bankers in the Board and in the top management. On July 17, 2020 RLC quickly raised 13.2 Billion Pesos of mostly 3-Year fixed-rate bonds.

Proceeds of the bond issuance will be used to finance RLC’s capital expenditures and repay short-term loans maturing within the year.

The pandemic quarantine restrictions did not completely shut down RLC’s cash flows. Office rentals are steady. Robinsons Offices is a leading BPO office provider in the country with 13 completed office buildings in Metro Manila and Cebu. In 2019, the Office Buildings Division of RLC accounted for 5.32 Billion Pesos or 17% of RLC’s revenue for that year. There is no reason this will not continue in 2020. With new buildings coming in during the year 2020, it will still grow.

Rents from tenants providing essential services such as supermarkets, banks, and pharmacies also kept on flowing. In Residential Sales, equity payments of real estate buyers are still flowing despite the job losses caused by the pandemic.

With the sell-off, it is now within a striking distance to its 52 week low of 10 per share. At current prices it looks like a good inclusion in your recovery portfolio.

Disclaimer: This is an independent analysis with the objective of informing readers about company fundamentals. Accuretti Systems Inc. does not own any shares of Robinson Land Corp.

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