Mao’s dictum is to encircle the city through the countryside. A Philippine company, 8990 Holdings Inc., has adopted that as a business strategy and has succeeded mightily and become hugely profitable.
A recently listed company, 8990 Holdings, has become a multi-billion-peso company from out of nowhere. As of this writing, it has a market capitalization of P33.52 billion, with its 4.655 billion shares doing at P7.97 a share, up 90% from only P4.20 per share early this year, and up a spectacular 290% from just P2.04 in July last year.
8990 Holdings’ business: mass housing, homes selling for P1.5 million each, or less.
The company is producing 6,000 units a year and will double production in five years to 12,000 units per year. Accordingly, the company also expects to double its sales to P12 billion in five years. It has so far built 36,000 units. This makes 8990 the Philippines’ largest homebuilder for the masses.
The company was organized as a joint venture among three partners—Luis N. Yu Jr., Mariano Martinez Jr. and JJ Atencio. Each has an average experience in the housing business of 30 years, or nearly a century of experience combining the three.
8990 Holdings began modestly in 1991 in Cagayan de Oro City with first project, Villa Candidad. Then it moved to Cebu City with its DECA Homes Bacayan and to Davao City with its DECA Homes Cabantian.
It is moving to Luzon, opening projects in Angeles City, Pampanga and in Cavite. It has also acquired properties in Metro Manila to go into vertical housing for the first time.
In 2003, the company became officially 8990 Homes Development Corp. “8990” is actually a takeoff from Nokia’s best-selling cellphone, the 8890. The company submitted a hundred proposed names to the Securities and Exchange Commission when it was being incorporated. All of them were rejected. Exasperated, the incorporators submitted “8990.” It was approved.
“8990 stands for infinity, prosperity and continuity,” justifies Mariano “Marin” Martinez, the chairman.
In 2007, 8990 breached the P1-billion level in sales. In 2010, it chalked up P2.85 billion, in 2011 P3.68 billion and by the end of 2012, P6.17 billion. This year, sales will scale P6.87 billion. “Growth has been 47% in the past three years,” gushes JJ Atencio, the president.
Steady shelter demand
Why the phenomenal growth? Well, the housing backlog is four million units and the government and private sector jointly produce no more than 250,000 units a year. This means the four-million-unit overhang does not diminish at all because demand grows by 5% per year, double the population growth rate.
By 2030 the backlog is expected to reach 6.2 million, with houses priced at P400,000 to P1.25 million accounting for a little more than 50% of demand. This corresponds to 8990’s market of houses in the P550,000 to P1.25 million price range. Thus, the company is squarely positioned to deliver the types of houses that are most in demand.
Filipinos have money. The savings rate is 30% of gross domestic product (GDP) of P14 billion or P4.2 trillion a year, enough to pay for the four million housing backlog – if the price is right and assuming there are enough developers and builders. Unfortunately, most developers focus on the middle to high end of the housing demand, for units P1.5 million and above.
Fuelling the economy are remittances of overseas Filipinos, numbering 10 million. They remit about $25 billion a year or P1 trillion, equivalent to half of the national budget. Much of that money is orphan – it has very little to go to, except consumption.
8990 got listed when it acquired a previously listed company, IConverge last year. The company operates under the brand names “DECA HOMES” for horizontal subdivision housing developments and “URBAN DECA HOMES” for medium-rise building (MRB) developments. It is presently developing 10 projects, with plans to develop an additional 13 projects.
The company offers several housing units/models from which potential homebuyers may choose, from single-storey detached houses with lofts, single-storey attached row-houses, two-storey townhouses and medium-rise building condominiums.
Pre-cast construction pioneer
Consistent with the company’s thrust of providing quality and affordable housing units to its customers, 8990 pioneered a pre-cast construction technology, which enables the company to develop housing units with improvements and innovations to consistently meet its market’s growing demands. The technology also allows the company to construct units in a matter of days rather than the usual months required under the conventional concrete cinder block method.
Through the utilization of this technology, the company is able to construct townhouses and single-storey attached units in just 8-10 days with an additional 10 days for two-storey houses with loft units. The use of said technology allows 8990 to realize significant cost-savings and enables the company to turn over the units to its customers in a fast and efficient way.
8990’s primary target market consists of salaried employees in government, business process outsourcing (BPO) industry and manufacturing industries, who account for about 93% of the company’s buyers, as well as self-employed people, who accounts for the remaining 7%.
About 53% of the buyers of 8990’s units earn more than P25,000 a month; 29% earn between P16,000 and P25,000; and 18% make P8,000 to P15,000.
8990’s overall business strategy, which has been the key to its success, is to deliver quickly and at good quality the right products to its target customers.
Based on its overall strategy and to further expand its business, the company plans to increase revenues from low-cost housing projects by at least 20% a year beginning 2014.
8990 will launch two high-rise condominium projects under the brand “8990 Towers” in the highest-density urban areas of Metro Manila. Floor area of each unit will be 12.5 square meters, or half the size of typical studio units.
The project is envisioned to provide a “halfway house” for commuters who typically have to endure two to four hours of daily travel and spend up to P5,000 a month for transportation between their inner-city work places and their homes in the outlying neighborhoods of Metro Manila.