For the year 2020 rental income of Robinsons Land (RLC) was down 4.8 billion Pesos as compared to 2019. Understandably rental income is down during the year because the government imposed mobility restrictions on the population to counter the pandemic.
While rental income is down, RLC grew its real estate sales. Real estate sales were up 2.8 billion Pesos in 2020 to 11.9 billion Pesos. While the government imposed mobility restrictions, it has also lowered the interest rate to release more money into the economy to counter the effects of the mobility restrictions to the economy. RLC’s residential development projects is benefiting from the low interest rate regime. Under the low interest rate regime RLC’s project has become more affordable to buyers who relies on bank loans in buying residential units.
The key differentiating factor of RLC is its access to funding to deliver its residential projects to its customers. In 2020, RLC borrowed 19.2 billion Pesos. That borrowing allowed it to wipe-out short-term loans and fund capital expenditures.
For that access to funding, it earns the full faith of its customers. For the year 2020, RLC received 12.1 billion Pesos of cash as deposits from its customers. That cash from customers’ deposits composed the cash generated from operations of RLC.
The massive cash from customers strengthened the balance sheet of RLC. RLC ended 2020 with a cash balance of 14 billion Pesos with no short-terms loans. Current portion of loans payable stood at 6.7 billion Pesos.
The cash from customers’ deposits and funds from borrowings allows RLC to complete and deliver projects to customers. Delivery of units facilitates the full payment to RLC of the selling price by banks who lend buyers money to buy the units. Project completion bolster customers’ faith on RLC. With full faith customers are making deposits to RLC. The cycle repeats creating a money machine.
Enjoying the advantage of customers’ faith, real estate sales are expected to propel the earnings and cash generations of RLC in the years ahead.
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