ABARQUEZ, Fritzie Anne E.

AGPALASIN, Frances Audree E.

DE GUZMAN, Junierose Ann E.
DE LEON, Kamylle Anne T.

2FM5
 CHAPTER I 

I.              Brief History of Company

Formerly IP Converge Data Center, Inc., now 8990 Holdings, Inc. (HOUSE), was founded by
Las N. Yu on July 08, 2005 as a provider of information technology and telecommunication
services. The Securities and Exchange Commission approved on 1 October 2013 the change in
its corporate name to the present one as well as its primary function to that of a holding firm.
Iholdings, Inc. (Iholdings), Januarius Resources Realty Corporation (Januarius), and Kwantlen
Development, Inc. (Kwantlen) obtained control of the Company in May 2012 by acquiring
61.4% of HOUSE 's outstanding capital stock.

II.            Corporate Governance

(In compliance with SEC Memorandum Circular No. 9, series of 2014) (SEC Memorandum
Circular No. 6, as amended, series of 2009, effective July 15, 2009) The Board of Directors and
Management of 8990 Holdings, Inc. (the "Corporation"), in compliance with the Securities and
Exchange Commission requirements and guidelines, hereby commit themselves to the principles
and best practices contained in this Manual of Corporate Governance (the "Manual") and
acknowledge that the same will be the Corporation's primary source of guidance on all aspects of
governance.

III.           Corporate Social Responsibility

8990 Holdings Inc. emphasizes inclusive growth and environmental management as a corporate
citizen of the country. In the aftermath of super-typhoon Yolanda that ravaged the Visayas in
November 2013, 8990 CARES relief operations were undertaken in hard- hit barangays of
Bantayan Island, Northern Cebu; Ormoc City, Leyte; Roxas City and the municipalities of
Pontevedra and Pilar in Northern Capiz.

As part of the company’s corporate social responsibility, tree planting activities were conducted
at Savannah Green Plains, Angeles City in January 2013 and in Barangay Quiot, Cebu City in
February 2013. A total of more than 500 trees were planted in the two sites.

The company in partnership with ABS-CBN Foundation’s Lingkod Kapamilya held a project in
August 2013 for the painting of classrooms and school chairs at Castuli Elementary School in
Macabebe, Pampanga

8990 Housing Development Corp. launched a feeding program in three barangays of Davao City
last July 2013. Up to 300 children aged 3 to 4 years old were the beneficiaries.

The company believes that life well lived is life shared with others in the spirit of community.
Thus, 8990 Holdings Inc. encourages camaraderie in their housing projects nationwide through
fellowship activities for homeowners, such as the summer sports clinics and swimming events at
DECA Homes Esperanza and DECA Homes Resort Residences, both in Davao City
IV.          Subsidiaries

In May 2013, in line with the goal of consolidating those real estate firms owned or operated by
Iholdings, Januarius and Kwantlen. The Company bought all of its outstanding shares having six
wholly owned subsidiaries namely, 8990 Housing Development Corporation, 8990 Luzon
Housing Development Corporation, Fog Horn, Inc., 8990 Leisure and Resorts Corporation, 8990
Davao Housing Development Corporation and 8990 Mindanao Housing Development
Corporation.

8990 Housing Established in 2003, 8990 Housing is flagship subsidiary of the Company. Its
primary purpose is to own, use, improve, develop, subdivide, sell, exchange, lease and hold for
investment or otherwise, real estate of all kinds, including buildings, houses, apartments and
other structures. 8990 Housing registered with the Philippine SEC on March 20, 2003. 

8990 Luzon is a corporation duly organized and existing under and by virtue of the laws of the
Republic of the Philippines and registered with the Philippine SEC on October 28, 2008. 8990
Luzon engages in acquiring by purchase, lease, donation or otherwise, and own, using,
improving, developing, subdividing, selling, mortgaging, exchanging, leasing and holding for
investment or otherwise, real estate of all kinds, whether improve, manage or otherwise dispose
of buildings, houses, apartments

8990 Mindanao is a corporation duly organized and existing under and by virtue of the laws of
the Republic of the Philippines and registered with the Philippine SEC on September 17, 2009.
8990 Mindanao primarily engages in 91 developing Mass Housing projects.

8990 Davao is a corporation duly organized and existing under and by virtue of the laws of the
Republic of the Philippines and registered with the Philippine SEC on September 17, 2009. 8990
Davao primarily engages in the Mass Housing development business. 

8990 Leisure is a corporation duly organized and existing under and by virtue of the laws of the
Republic of the Philippines and registered with the Philippine SEC on November 24, 2009. It
engages in acquiring, purchasing, holding, managing, developing and selling land with or
without buildings or improvements for such consideration and in such manner or form as the
company may determine as the law permits. 8990 Leisure owns certain parcels of land used for
the Company’s development projects. 

Fog Horn is a corporation duly organized and existing under and by virtue of the laws of the
Republic of the Philippines and registered with the Philippine SEC on January 14, 2004. Fog
Horn engages in acquiring by purchase, lease, donation or otherwise, and own, using, improving,
developing, subdividing, selling, mortgaging, exchanging, leasing and holding for investment or
otherwise, real estate of all kinds.
V.            SWOT Analysis

STRENGTHS WEAKNESSES

·         4.5 million Housing Backlog growing at ·         Expanding of human resource

5%. capacity. Internally, we need to build up our
organization to cope with higher levels of
·         Massive land development, at least three performance every year.
months ahead of house construction.
·         A feeling of a bubble at the top may
·         A strong presence, brand acceptance, create a contagion effect that may spill into
experience and track-record in the growth the low-cost housing.
centers outside Metro Manila: Angeles, Cebu,
Iloilo, and Davao.  

·          

OPPORTUNITIES THREATS

•       A successful return to Pag-IBIG Home ·         Middle East and oil issues may affect
Financing. Serious interest in CTS purchase of monthly amortization payments of OFWs in
receivables by banks financial institutions. the petroleum and oil tanker shipping
industries.
•       Pre-Cast Capacity of 14,880 units. 2016
ramp-up of additional 56 forms and 13,440 ·         LGU elections may delay permits for
units capacity. new projects.

·         Longer Processing of BOI

Accreditation.

CHAPTER II.
A. CAPACITY
 Industry Analysis

Threat of new entrants

The threat of new entrants in the real estate industry can be considered as low to medium.
It takes quite some high start-up costs to start a construction services company. Capital
could be considering a high barrier mostly for large-scale, specialized projects. The
ability to obtain banking financing also limit small players from scaling up their projects.
Besides, new entrants need licenses, insurances, and other qualifications that are not easy
to obtain when you are new to industry. With this, it prevents new competitors from
easily entering in this kind of industry.

Bargaining power of suppliers

Bargaining power of suppliers is considered as medium. When looking at the major
inputs that real estate need, we see that they are dependent on the supply of raw materials
like cement, steel, wood and many more. With this, the supplier concentration is quite
high. However, supply of land is limited in real estate and due to this, the supplier of land
has a high bargaining power in real estate industry.

Bargaining power of buyers

Bargaining power of buyers in the real estate industry is medium. As the real estate is
being standardized. Switching costs are very high. People will look for developers with
good track record, as a result of this, the bargaining power of buyers was low. Also, many
real estate firms are having difficulty because people were unable to buy property due to
high rates, that resulted to offering discounts and offers, with this, bargaining power of
buyer increased.

Threat of a substitute product

There is no substitute for real estate sector from the point of view of real estate
construction and development. However, in real estate business, substitute might be new
home or personal space, new location for office and many more. But as a whole real
estate itself has no substitute.

Rivalry among existing competitors

The rivalry among existing competitors in the real estate industry is strong since the
number of competitors is increasing in the industry which means that the competition
become larger which also results to decreasing rate of profit of the industry. Furthermore,
the real estate industry is expanding which also increases the rivalry among existing
firms.
  Industry Fundamentals

Based on the movements of the stock price shown above, 8990 Holdings Inc. shows that the
company’s stocks are cyclical which indicates that the company is highly sensitive to business
cycle, to be more specific, it means that the prices of the stock are dependent on the economy of
the country. The company’s revenues are generally higher in periods of economic prosperity and
expansion however, it is lower in periods of economic downturn and contraction. Therefore, the
company tends to be riskier. When jobs are scarce and disposable income is lower, people tend
to hold off on buying new homes. But when employment is high and wages are rising, these
industries often shines.

Since stocks in cyclical companies like 8990 Holdings Inc. often rise in good economic times
and fall during bad times, investors attracted to stocks in cyclical companies are faced with
difficult task of trying to look for the right timing in the market. It means that the investors must
predict the bottom of business cycle in order to buy these stocks at the optimal time and predict
where the top of the cycle in order to sell the stocks at the optimal time. Especially now that the
country is facing with the pandemic crisis, it can take years to recover from the economic
downturn and contraction.

Philippines real estate industry has grown at an exceptional ate in the past years, following
the country’s strong economic growth. During the second quarter of 2019 due to the delayed
2019 budget implementation and public decelerating, the real estate industry remained strong
and stable. However, since the beginning of 2020, there’s lot of unexpected events that continues
to affect the global economy. Despite the impact of the COVID-19 pandemic and downturn in
stock market including the international stock markets, the Philippine real estate industry
remains optimistic, according to real estate service company Santos Knight Frank.
 There will be favorable opportunities and strong demand for residential, office and
commercial spaces continue to sustain optimism and growth in the real estate industry and there
are several reasons why real estate industry continues to grow in the Philippines. According to
Santos Knight Frank, BPO industry will continue to be a major driver of demand for office
space, growing by 3% to 7% annually, since they still pursue expansion in Metro Manila. Co-
working spaces are also increasing in Manila and which is driven by demand from freelance
workers, start-up companies and entrepreneurs. In addition, industrial and logistics also
continues to fuel the real estate industry with its increasing warehouses and distributions centers.
Moreover, with the traffic congestion in Metro Manila, co-living spaces have become the
solution for most of employees and young professionals working near their offices or businesses.
Various forms of affordable accommodations have introduced, such as micro-studio.

With these opportunities, Philippine real estate industry seems to sustain a robust growth and
expected to post revenues due to increasing urbanization and expansion in the real estate
construction projects. Subsequently, with the continuous growth and numerous opportunities for
the real estate industry, this can certainly help 8990 Holdings Inc. in paying off debt obligations
because the demand is expected to rise due to growth in the number of multinational companies
and will be also capable of having diverse opportunities and profits for the business.
 Company Fundamentals

o Competitive Advantage

1. Market and industry demographics of the Mass Housing sector

The Company believes that it is one of the few developers dedicated to serving the
housing needs of the Mass Housing segment throughout the Philippines, with most of its
direct competitors being smaller regional developers with limited geographical coverage.
This has allowed the Company to build significant nationwide brand equity for its DECA
Homes and Urban DECA Homes brands across its target market and also achieve
economies of scale from its operations.

2. Customer-focused product and payment scheme best suited for the Mass Housing
market, coupled with effective collection and risk management policies.
The Company believes that its industry experience has equipped it and its
management with in-depth knowledge and understanding of the needs, preferences,
means and constraints of the Mass Housing segment customer base. The Company
continuously undertakes demographic analysis of its customer base, which helps in
developing products and payment schemes that are in line with the needs and lifestyles of
its target customers. The Company believes that sustainable affordability is critical in
serving the Mass Housing segment. Accordingly, the Company tailors the house area, lot
area and locations of its developments to deliver housing products where the monthly
amortization payments are affordable for its target customers when compared to monthly
rental payments for comparable housing units, hence allowing a smooth transition from
home rental to ownership.

3. Market innovations with respect to construction processes, which translates into

efficiencies and cost-savings.
The Company has continually invested in innovation to update its building processes
and minimize wasted materials while at the same time maintaining the quality of its
products and rapid completion of housing units. To this end, the Company has developed
its own unique building system that makes use of a pre-cast construction process,
enabling the Company to construct and complete housing units and MRBs in a cost- and
time-efficient manner without compromising the quality and standards of the housing
units being turned over to its customers. The utilization of this pre-cast construction
process on-site, as opposed to traditional building methods, likewise results in significant
cost reduction for the Company, particularly on labor costs. The Company believes that
these factors help it to achieve and maintain healthy profit margins.
 4. Strong relationships with key housing and shelter agencies.
The Company, through its Subsidiaries and Principals, has been recognized by key
Government shelter agencies with respect to its success in the industry. These
recognitions demonstrate that the Company has a good reputation and working
relationship with key Government agencies that are essential to any success in the Mass
Housing development industry. Pag-IBIG serves as the primary Government housing
financial assistance program in the Philippines, with a statutory mandate to provide
financial assistance for the housing requirements of its members and allot not less than
70% of its available funding for deployment of housing loans to qualified buyers. The
Company closely coordinates with Pag-IBIG to increase the efficiency in Pag-IBIG’s
take-up of the Company’s contracts-to-sell under its CTS Gold in-house financing
scheme.

5. Experienced management team with extensive expertise in Mass Housing

development.
The Company prides itself in having an experienced management team under the
leadership of Mr. Luis Yu, Jr. (Chairman Emeritus and Founder), Mr. Mariano Martinez,
Jr. (Chairman of the Board) and Mr. Januario Jesus Gregorio III B. Atencio (President
and CEO), who each have extensive experience and in-depth knowledge of the real estate
business, particularly in the Mass Housing market, and span an aggregate of over 80
years in the industry. In addition, they have also developed, over the years, positive
relationships with key market participants, including construction companies, regulatory
agencies, local Government agencies and banks. Mr. Yu carries with him over 30 years
of experience in the Mass Housing business.

o Horizontal Analysis

INCOME STATEMENT - HORIZONTAL ANALYSIS

2018-2017 2017-2016
Sales/Revenue 15.36% 9.83%
Cost of Goods Sold (COGS) 16.99% 6.02%
Gross Income 14.05% 13.12%
SG&A Expense 16.82% -0.21%
Other Operating Expense 35.60% 3.24%
EBIT
Non Operating Income/Expense 9.77% 1.16%
Non-Operating Interest Income -14.09% -1.19%
Interest Expense 6.26% 17.76%
Pretax Income 5.43% 10.29%
Income Tax -98.99% -33.63%
Net Income 12.95% 15.78%
 BALANCE SHEET - HORZONTAL ANALYSIS
2018-2017 2017-2016
Assets
Cash & Short Term Investments 55.70% 95.60%
Cash Only 55.70% 95.60%
Total Accounts Receivable 40.86% 24.45%
Accounts Receivables, Net 28.13% 78.82%
Accounts Receivables, Gross 33.41% 58.83%
Other Receivables 50.94% 0.38%
Inventories 13.17% 251.80%
Finished Goods 11.72% 256.04%
Work in Progress 16.84% 241.30%
Other Current Assets 96.18% 67.51%
Prepaid Expenses 96.07% 67.96%
Miscellaneous Current Assets 200.00% -33.33%
Total Current Assets 22.73% 173.46%
Net Property, Plant & Equipment 166.45% -97.66%
Property, Plant & Equipment - Gross 111.39% -96.13%
Buildings 950.00% 3.57%
Land & Improvements 0.00% -99.10%
Machinery & Equipment 10.45% 4.69%
Construction in Progress -29.63% 92.86%
Transportation Equipment -2.10% 23.28%
Other Property, Plant & Equipment 27.10% 35.44%
Accumulated Depreciation 28.23% 31.45%
Buildings 52.17% 21.05%
Land & Improvements 0.00% 5.56%
Machinery & Equipment 30.23% 43.33%
Transportation Equipment 18.92% 32.14%
Other Property, Plant & Equipment 40.00% 42.86%
Total Investments and Advances 7.19% 4.05%
LT Investment - Affiliate Companies 35.82%
Other Long-Term Investments 5.80% -0.55%
Long-Term Note Receivable -15.77% -0.12%
Intangible Assets 0.00% 0.00%
Net Other Intangibles 0.00% 0.00%
Other Assets 48.98% -79.61%
Deferred Charges
Tangible Other Assets 48.98% -16.00%
Total Assets 8.82% 14.97%
Liabilities & Shareholders' Equity
ST Debt & Current Portion LT Debt 16.65% -9.44%
Short Term Debt 153.50% -46.11%
Current Portion of Long Term Debt -58.55% 44.66%
Accounts Payable 47.28% 25.43%
Income Tax Payable -53.52% -35.16%
Other Current Liabilities 16.07% 32.49%
Miscellaneous Current Liabilities 16.07% 32.49%
Total Current Liabilities 21.20% 3.44%
Long-Term Debt 2.24% -4.40%
Long-Term Debt excl. Capitalized Leases 2.24% -4.40%
Non-Convertible Debt 2.24% -4.40%
Provision for Risks & Charges -25.00% -66.67%
Deferred Taxes -56.49% -14.44%
-41.58% 3.33%

Deferred Taxes - Debit 27.84%

Other Liabilities 68.09% 143.10%
Other Liabilities (excl. Deferred Income) 68.09% 143.10%
Total Liabilities 9.20% -1.01%
Common Equity (Total) 8.63% 38.36%
Common Stock Par/Carry Value 0.91% 0.00%
Additional Paid-In Capital/Capital Surplus 0.00% 111.45%
Retained Earnings 11.07% 26.56%
Total Shareholders' Equity 8.42% 38.62%
Total Equity 8.42% 38.62%
Liabilities & Shareholders' Equity 8.82% 14.97%
 o Management’s Strategy

1. Risk Management
Risk Management considered a strategic competitive advantage by the Management -- is
an integral part of the Corporation’s operation. Likewise, risk management is an essential
part of the Company’s business strategy in order to meet effective corporate governance
and achieve the set goals. Thus, instead of responding to crisis and to need for
compliance, the Corporation is evaluating possible risks exposures proactively.

2. Increase existing coverage and expand geographically.

The Company intends to further grow its existing Mass Housing revenue base. To
accomplish this, the Company intends to (1) increase the number and variety of projects
in the cities in which it currently has existing developments, as well as to (2)
geographically expand into new cities. For example, the Company plans to bring to
Metro Manila the Urban DECA Homes low-cost MRB concept that they were able to
successfully launch and implement in the Mandaue City, Metro Cebu urban environment.
The Company is also currently in the process of identifying sites for projects targeting
Metro Manila commuters.

3. Continue to support Mass Housing home ownership via innovative financing

products.
The Company seeks to promote increased home ownership in the Mass Housing segment
in part by continuing to develop financing products tailored to the specific needs,
requirements and financial situation of Mass Housing customers. In particular, the
Company intends to seek ways to improve on and further provide flexibility to its CTS
Gold financing program, an innovative product developed using the Company’s
experience in the Mass Housing segment, which allows home buyers to move into their
chosen homes after a low down payment and provides affordable monthly amortizations.

4. Continue to replenish land bank for development.

The Company plans to continue to explore opportunities to replenish its land bank for
future developments, selectively acquiring parcels and properties that meet its
requirements for potential projects. The Company aims to seek out properties located in
close proximity to public transportation terminals and major thorough-fares in cities, and
also seeks to locate suitable project sites near developing business centers and high
growth communities across the Philippines.
5. Continue to diversify into new product types.
The Company plans to supplement its subdivision and MRB offerings by launching two
high-rise condominium projects under the brand “Urban DECA Towers” in the highest
density urban areas of Metro Manila. This concept involves the construction and sale of
condominium units that are half the size (i.e. approximately 13 sq. m.) of typical studio
apartments. This project is envisioned to provide a weekday lodging for low-to-mid-
income commuters who typically have to endure two to four hours of daily travel time.

6. Attain increased efficiencies in all facets of its operations and processes.

The Company will seek to improve its construction efficiencies in part by adding more
mechanization and by standardizing the sizes of its building components. The Company
will also seek to further improve collections by updating its customer qualification
process and improving its delinquency remedial measures. In pursuing these items, the
Company believes that it will be able to lower operating costs even further and improve
its operational efficiency.

o Ratio Analysis

To perform ratio analysis, first industry competitor for comparison and analysis is
Millenium Housing Developers. MHDL is also under in real estate industry. It engages in
residential property development. It manages houses, apartments and land. The company
was founded on July 28, 1998. Another competitor is Suntrust Home Developers Inc., it
is also under in real estate industry. SHDI engages in the real estate development. It
operates through the Property Management, and Rental and Others segments. The
Property Management segment involves in the operation, control of, and oversight of
commercial, industrial, and residential real estate. The Rental and Others segment
includes rental from leasing activity of parent company and transportation services of
Citylink. The company was founded on January 18, 1956 and is headquartered in Makati
City, Philippines.

Credit analysis ratios are tools that assist the credit analysis process. These ratios
help analysts and investors determine whether individuals or corporations are capable of
fulfilling financial obligations. These ratios can be separated into four groups; (1)
Liquidity (2) Leverage (3) Coverage and (4) Profitability ratios.
 1. Liquidity Ratio

Liquidity ratios indicate the ability of the companies to convert assets into cash. In terms of
credit analysis, the ratios show a borrower’s ability to pay off current debt.

 Current Ratio

2018 2017 2016

4 The current ratio of 8990
3 Holdings Inc. through 2016-2018 8990 2.93 2.9 1.1
2 have resulted to an increasing path, MHDL 1.39 1.84 2.49
1 comparing the result of ratios from SUN 2.35 2.09 1.96
0
2018 2017 2016
2016, with the ratio of 1.1, it
increased to 2.9 and slightly increased to 2.93 in 2018. This
8990 MHDL SUN means that the company was able to liquidate its current assets to
cover their short-term liabilities. Looking at the results of its industry competitors, it shows that
8990 Holdings Inc. acquired the lowest ratio among the companies in 2016 however, the
company was able to improve their current ratio and ranked as highest ratio in 2017 and 2018. It
means that the company is capable to meet its obligations that are due within the year.

 Quick Ratio
2018 2017 2016
Through 2016-2018, the 8990 0.78 0.59 0.42
1.5 quick ratio of 8990 Holdings Inc. MHD 0.28 0.61 0.79
1 efficiently increasing from 0.42x, L
0.5 0.59x, 0.78x, respectively. It SUN 1.22 1.34 1.26
0
indicates that the company can cover
2018 2017 2016 its immediate liabilities without illiquid assets. Based on the
results of its industry peers, Suntrust Home Developers Inc., is got
8990 MHDL SUN the highest quick ratio among the companies in 2016 to
2018.With this, it indicates that the company has more capability
to pay its short-term liabilities with assets readily convertible into cash. 8990 Holdings Inc.
acquired the lowest ratio in 2016 however, the company was able to improve their current ratio
in 2017 and 2018.
 2018 2017 2016
8990 0.16 0.12 0.07
 Cash Ratio MHD 0.02 0.04 0.07
L
SUN 1.22 1.34 1.26
1.5 8990 Holdings Inc. managed to pay its current
1 liabilities with its cash-on-hand throughout year 2016-
2018. Nevertheless, looking at the results of its industry
0.5
competitors, it is obviously seen that Suntrust Home
0 Developers Inc., got the highest cash ratio with a large gap
2018 2017 2016
between the companies which indicates that the company
8990 MHDL SUN has the capacity to pay-off short term obligations with its
cash and cash equivalents. The position of 8990 Holdings
Inc. was also able to increase their cash ratio in 2017 and 2018.

2. Leverage Ratios

Leverage ratios compare the level of debt against other accounts on a balance sheet,
income statement, or cash flow statement. This helps to gauge the ability of a business to repay
its debts.

 Debt-to-Assets Ratio

60% Based on the results 2018 2017 2016

50%
40% shown, 8990 Holdings 8990 40% 41% 50%
30% acquired the highest debt-to- MHDL 35% 31% 21%
20%
10% assets ratio in year 2016-
0% 2018 which indicates that the SUN
2018 2017 2016
company’s operations are funded by debt. Looking at the
8990 SUN results, the ratio have resulted to a decreasing path from
2016 with 50%, decreased to 41% in 2017 and slightly
decreased to 40% in 2018, a high leverage ratio is also indicative of a higher degree of
financial risk, since a company that is heavily leveraged faces a higher chance of
defaulting on its loans. With the results of its industry peers, it is obviously shows that
Suntrust Home Developers Inc., doesn’t have a debt-to-assets ratio since the company has
no long term and short term debts. The debt-to-assets ratio of Millenium Housing
Developers have resulted to increasing path, however, 8990 Holdings Inc. still got the
highest ratio even the company was able to decrease their ratio which also means that the
company is also legally obligated to make periodic debt payments regardless of its sales
numbers since it has a high leverage ratio.
 2018 2017 2016
8990 82.76 84.49 124.38
MHDL 763.11 906.53 787.58
 Debt-to-Equity Ratio SUN

1000% The debt-to equity ratio of 8990 Holdings Inc.

800% has its peak in the year 2016 with 124.38% indicating
600% that during that year, the company has been aggressive
400% in financing its growth with debt and it took advantage
200% of the decreased profits that the leverage brought. While
0%
2018 2017 2016 in the year 2017 it declined to 84.49% and decreased to
82.76% in 2018. It indicates that during 2017 and 2018,
8990 SUN
the company was using less leverage and has stronger
equity position. Looking at the results of its industry peers, Millenium Housing Developers
PLC acquired a largest ratio, indicating that the company uses debts to finance its assets
relative to the value of the equity.

 Debt-to-Capital Ratio

60.00% Based on
50.00%
the results shown, 2018 2017 2016
40.00%
30.00% 8990 Holdings 8990 45.28% 45.80% 55.43%
20.00% Inc. have resulted MHDL 57.04% 47.20% 30.78%
10.00%
0.00% to a decreasing SUN
2018 2017 2016 path of debt-to-
8990 SUN capital ratio from 2016 to 2018. In 2016, it has a
ratio of 55.43%, which means that this proportion
of debt a company uses to finance its operations as compared with its capital. A high ratio
indicates that the company is extensive using debt to finance its operations. However, in
2017 it decreased to 45.80% and slightly declined to 45.28%. A low ratio means that the
company raises its funds through current revenues or shareholders. With the results of its
industry competitors, that the ratio of Millenium Housing Developers PLC continuously
increasing from 2016 to 2018 and eventually has a higher ratio compared to 8990
Holdings Inc.

3. Coverage Ratios
 A coverage ratio, broadly, is a group of measures of a company's ability to service its
debt and meet its financial obligations such as interests payments.

 Interest Coverage Ratio

2018 2017 2016

100 For the past three years, 8990
80
3.72 3.72 3.72
8990 Holdings Inc. has a stable
60 MHDL -4.95 35.80 89
interest coverage ratio of 3.72x.
40
The company maintained its SUN 23.24 0 0
20
steadiness, which proves that the company can pay the interest on
0
2018 2017 2016 its outstanding debts 3.72 times fixed over the years. Looking at
-20
the results of its industry peers, Suntrust Home Developers Inc
8990 MHDL SUN escalated from 0 in 2016 and 2017 to 23.24x in 2018 and
acquired the highest ratio among other companies.

4. Profitability Ratios

Profitability ratios measure the ability of the company to generate profit relative
to revenue, balance sheet assets, and shareholders’ equity. It also help lenders determine
the growth rate of corporations and their ability to pay back loans.

 Gross Profit Margin

60.00% 2018 2017 2016

50.00% The gross 8990 54.40% 55.03% 53.34%
40.00% profit margin of
MHDL 19.12% 31.01% 33.78%
30.00% 8990 Holdings
20.00% Inc. experienced SUN 47.96% 44.25% 41.45%
10.00% an unstable movement from 2016 to 2018. In year
0.00% 2016 it started with 53.34% and jumped up to
2018 2017 2016
55.03% during year 2017 but it slightly dropped to
8990 MHDL SUN
54.40% on year 2018. This shows that in 2017 the
company improved in terms of profitability comparing from the previous year’s gross
profit margin ratio. 8990 Holdings Inc. produced greater profit over its cost in 2017 but
showed a lower percentage the next year. This shows that the company’s profit on 2018
didn’t surpass the previous year profit indicating an underpricing. Comparing it to its
 competitors MHDL and SUN, 8990 Holdings Inc. has the highest percentage of gross
profit margin showing greater revenue and efficiency. 2018 2017 2016
8990 38.75% 39.81% 36.65%
MHDL -9.46% 14.55% 11.59%
SUN 26.03% 25.05% 18.53%

 EBITDA Margin

50.00% The Earnings Before Interests Tax

40.00%
30.00%
Depreciation and Amortization of 8990 Holdings
20.00% Inc. had an unsteady movement for three years.
10.00% Comparing from 2016 it rose from 36.65% to
0.00%
2018 2017 2016 39.81% in 2017 indicating lower operating expenses
-10.00%
-20.00%
during that year. A year after, the EBITDA margin
lowered down to 38.75% in 2018. The company
8990 MHDL SUN could possibly experience slight profitability
problems during 2018. Comparing it to its competitors MHDL and SUN, it still has
higher EBITDA margin, implying that 8990 Holdings Inc. generates higher profit
compared to the two companies.

 Operating Profit Margin

50.00% The 2018 2017 2016

40.00% Operating Profit
8990 38.13% 43.37% 36.13%
30.00% Margin of 8990
20.00% Holdings Inc. MHDL 13.40% 13.71% 10.85%
encountered SUN 22.79% 22.09% 16.92%
10.00%
0.00%
fluctuating percentage from 2016-2018. They started
2018 2017 2016 with having a 36.13% of Operating Profit Margin in
8990 MHDL SUN 2016 and improved in 2017 with 43.37% this shows
that its operations are running smoothly, and this
income supports the company. The company’s Operating Profit Margin for the following
year fall to 38.13% this could possibly cause by operating inefficiencies or lower
productivity of the company. Compared to its competitors MDHL and SUN, 8990
Holdings Inc. is above among them showing that the company is managing its costs
efficiently and increasing its profits. But comparing the movement of percentages per
year, 8990 Holdings Inc. has the most unstable movement among the three, this shows
that the other two companies has more control in their operating costs.

 Return on Assets 2018 2017 2016

8990 8.14% 7.54% 7.48%
15.00%
The Return MHDL -3.58% 5.63% 5.26%
10.00% on Assets ratio of SUN 12.55% 6.90% 5.44%
5.00%

0.00%
2018 2017 2016
-5.00%

8990 MHDL SUN

 8990 Holdings Inc. through 2016 to 2018 shows an increasing movement with the ratios
from 2016 having a 7.48%, it increased to 7.54% in 2017 and moved up to 8.14% in
2018. This means that 8990 Holdings Inc. experienced an increase of profitability from
its assets through the years. Comparing 8990 Holdings Inc. to its competitors, SUN
clearly shows a high increase of ROA in three years showing a good sign of profitability
than 8990, however, MHDL falls behind among the three as it experienced a drop of
percentage on 2018.
 Return on Equity

30.00% The 2018 2017 2016

20.00% Return on 8990 16.80% 15.50% 18.56%
10.00% Equity ratio of MHDL -13.66% 16.35% 11.18%
0.00% 8990 SUN 20.85% 11.63% 10.11%
2018 2017 2016
-10.00% Holdings Inc.
-20.00% shows an unstable percentage from 2016 to 2018.
8990 MHDL SUN
Starting with 2016 having a 18.56% it fell by
3.06% resulting to 15.50% of ROE in 2017 this
could possibly be a result of investing earnings into unproductive assets or inefficient use of
equities. In 2018 it grew to 16.80% showing improvements in profitability. Comparing to its
competitors, SUN showed a great increase of ROE from 2016 to 2018 indicating a good
measure of profit and can turn equity capital into net profit. MHDL on the other hand showed
an increase of percentage in 2017 comparing to 2016 but experienced a massive downfall in
2018, making 8990 has better control in its equities than MHDL.

8990 HOLDINGS INC.’S CREDIT RATING FOR CAPACITY

Looking at the financial statements of 8990 Holdings Inc., for the latest year, it shows
that the current assets has greater amount with P39,704,000 compared to current liabilities with
P13,537,000 which means that the company has a positive working capital. Having enough
working capital ensures that a company can fully recover its short-term debts as they come due
in the next twelve months. This is a good sign of a company’s financial strength, since the
company did not exceed their borrowing capacity. Moreover, looking at the ratios performed that
is shown above, the current ratio of the company have resulted to 2.93x which means that the
company was able to liquidate its current assets 2.93x over to cover their short-term liabilities.
Another ratio performed was quick ratio with 0.78x which suggests that the company has enough
liquid assets to cover upcoming liabilities without illiquid assets 0.78x over. Using the Standard
and Poor’s credit rating, the credit rating for short-term obligations of 8990 Holdings Inc., has
earned a rating of AAA since the company considered as having very low default risk and the
company has the capability to cover their short-term obligations.

In terms of long-term obligations, the leverage ratios shows that 8990 Holdings Inc.
depends more on debt financing since the company has a high debt-to-equity ratio which
indicates that the company has been aggressive in financing its growth to debt. Nevertheless, the
profitability ratios shows that the company has a higher margins including the gross profit,
EBITDA, and operating margins which suggests that the company has a greater ability to pay
back debts or loans. In addition to that, the financial statements also shows that the non-current
assets has a larger amount with P20,065,000 compared to non-current liabilities with
P17,282,000, this means that the company is also having a positive working capital in terms of
long-term obligations since the company did not exceed to borrowing capacity and the company
can fully recover its long-term debts. Using the Standard and Poor’s credit rating, the credit
rating for long-term obligations of 8990 Holdings Inc., has earned a rating of AA+ since the
company has enough resources to cover their long-term obligations.

B. COLLATERALS

Statement of Financial Position – 2018

All values are in PHP Millions
ASSETS
Cash & Short Term Investments 2,144
Cash Only 2,144
Cash & Short Term Investments Growth 55.63%
Cash & ST Investments / Total Assets 3.59%
Total Accounts Receivable 4,675
Accounts Receivable, Net 1,872
Accounts Receivables, Gross 2,280
Bad Debt/Doubtful Accounts (408)
Other Receivables 2,803
Accounts Receivables Growth 40.88%
Accounts Receivable Turnover 2.51
Inventories 29,131
Finished Goods 20,633
Work in Progress 8,498
Other Current Assets 3,753
Prepaid Expenses 3,741
Miscellaneous Current Assets 12
Total Current Assets 39,704
Net Property, Plant & Equipment 826
Property, Plant & Equipment – Gross 1,095
Buildings 609
Land & Improvements 118
Machinery & Equipment 74
Construction in Progress 19
Transportation Equipment 140
Other Property, Plant & Equipment 136
Accumulated Depreciation 268
Buildings 35
Land & Improvements 19
Machinery & Equipment 56
Transportation Equipment 88
 Other Property, Plant & Equipment 70
Total Investments and Advances 1,625
LT Investment – Affiliate Companies 91
Other Long-Term Investments 1,533
Long-Term Note Receivable 17,269
Intangible Assets 1
Net Other Intangibles 1
Other Assets 219
Deferred Charges -
Tangible Other Assets 219
Total Assets 59,769
Assets – Total – Growth 8.82%
Asset Turnover 0.20
Return On Average Assets 8.14%

LIABILITIES & SHAREHOLDERS’ EQUITY

ST Debt & Current Portion LT Debt 7,243
Short Term Debt 5,582
Current Portion of Long Term Debt 1,661
Accounts Payable 3,000
Accounts Payable Growth 47.29%
Income Tax Payable 66
Other Current Liabilities 3,228
Miscellaneous Current Liabilities 3,228
Total Current Liabilities 13,537
Current Ratio 2.93
Quick Ratio 0.78
Cash Ratio 0.16
Long-Term Debt 16,716
Long-Term Debt excl. Capitalized Leases 16,716
Non-Convertible Debt 16,716
Provision for Risks & Charges 3
Deferred Taxes 201
Deferred Taxes – Credit 326
Deferred Taxes – Debit 124
Other Liabilities 237
Other Liabilities (excl. Deferred Income) 237
Total Liabilities 30,819
Total Liabilities / Total Assets 51.56%
Preferred Stock (Carrying Value) -
Non-Redeemable Preferred Stock -
Common Equity (Total) 28,950
Common Stock Par/Carry Value 5,568
Additional Paid-In Capital/Capital Surplus 9,304
Retained Earnings 13,142
 Unrealized Gain/Loss Marketable 937
Securities
Other Appropriated Reserves 0
Common Equity / Total Assets 48.44%
Total Shareholders’ Equity 28,950
Total Shareholders’ Equity / Total Assets 48.44%
Total Equity 28,950
Liabilities & Shareholders’ Equity 59,769

1. Value and Quality of the Asset

For the year 2018, 8990 Holdings Inc. has no goodwill declared under their intangible assets
which means that it is better than having a goodwill. For the reason that, goodwill refers to low
quality.
The standards of intangibles like goodwill have a large difference from different companies. It is
because they do not produce cash flows instantly. On the other hand, tangibles are the opposite
of them because it can be easily bought and have the ownership of it.
The intangibles have an amount of ₱1,000,000. That amount is just a small part of the assets to
have a huge effect on the company.
In case default happens in 8990 Holdings Inc., the creditors can pursue other assets such as
Accounts Receivables, Inventories and Property, Plant & Equipment (PPE). It is because they
obtain more value.
Furthermore, the table shown below is the competence of the company to generate profit, sales
and net income by using its assets.

Assets – Total – Growth 8.82%

Asset Turnover 0.20
Return On Average Assets 8.14%

2. Investing in the Business

Capital Expenditures Depreciation
2016 ₱6,881,000,000 ₱48,000,000
2017 ₱71,000,000 ₱55,000,000
2018 ₱42,000,000 ₱74,000,000

As seen from the table above, 8990 Holdings Inc. has been continuously decreasing in their
capital expenditures for the past three (3) years. On the other hand, the company’s depreciation
has been consecutively increasing for the past three (3) years. Thus, 8990 Holdings Inc. does not
invest much on fixed assets. They neither spend greatly on fixed assets nor buy new ones.
Because of that, it decreases compared to previous years.
In 2018, 8990 Holdings Inc.’s net operating cash flow increased to ₱3,661,000,000 from
negative amount of ₱875,000,000 in 2017. On the other hand, the net investing cash flow in 2018
collapsed with an amount of negative ₱1,152,000 compared to 2017 which has negative
₱407,000,000 and was an improvement from 2016 from negative ₱6,879,000,000.
 3. Market-based Signal
Book Value
Total Assets – Total Liabilities
₱59,769,000,000 – ₱30,819,000,000 = ₱28,950,000,000
Market Value (Market Capitalization)
(Cost per share) (Number of shares)
(₱8.40) (₱5,391,399,020) = ₱45,287,751,768 as of December 30, 2018 which was the last
transaction date of the year.
At the end of 2018, the market value is higher than the book value. Thus, the stock market is
giving an additional value for the company since they are able to generate profit from their
operations.
8990 Holdings Inc. is one of the large-cap companies in the country. They are known to be
provider of low-cost mass housing developer. Moreover, they are well recognized and because of
that they are less risky in comparison with companies that are small and mid-cap that makes
them earn more.

8990 HOLDINGS INC.’S CREDIT RATING FOR COLLATERALS

To sum it up, the capability of 8990 Holdings Inc. to produce adequate cash flow is an element to
evaluate the credit rating of it. Based on the cash flow, the company can suffice to repay their
debts with sufficient resources in order to meet their financial obligations. In case a default takes
place, assets will be assessed. Since the company has favorable assets, then the creditors can go
after them. However, assets such as accounts receivables are uncertain. Since the market value is
high, the company as a low chance of having a default. It also depicts that there is future growth
on the company the fact that the book value is lesser over the years.
 C. COVENANTS

Subject to limitations set forth in the Prospectus, the Company will be permitted to incur
additional indebtedness in the future promising to pay the principal of a loan with maturity. The
bonds provide for the Group to observe certain covenants, including, among others, maintenance
of financial ratios (such as a maximum debt-to-equity ratio of 1.5:1.0, a minimum current ratio of
1.0:1.0, and minimum debt service coverage ratio of 1.25:1.0), incurrence or guarantee of
additional debt, encumbrance for borrowed money, and other covenants.

The terms of the Bond as detailed in this Prospectus may, among other things, restrict the
Company’s ability to:

· incur or guarantee additional indebtedness;

· create or incur certain liens;
· prepay or redeem subordinated debt or equity;
· make certain investments and capital expenditures;
· sell, lease or transfer certain assets, including stock of restricted subsidiaries;
· engage in certain transactions with affiliates;
· enter unrelated businesses or engage in prohibited activities; and
· consolidate or merge with other entities.

The Company is subject to restrictive debt covenants that may limit the Company’s ability to
finance the Company’s future operations and capital needs and to pursue business opportunities
and activities. In addition, certain of the Company’s other indebtedness provide for restrictions
and limitations on the Company’s ability to pay dividends or make other distributions on the
occurrence of certain events. 

These covenants could limit the Company’s ability to finance its future operations and capital
needs and their ability to pursue business opportunities and activities that may be in the
Company’s interest. Following the said covenant, 8990 Holdings’ credit risk won’t be affected as
long as they continue to stick with their obligations.

A Trust Indenture Agreement in relation to the Bonds was executed on June 25, 2015 and
entered into between the Company and BDO Unibank, Inc. – Trust and Investments Group, as
trustee, (the “Trustee”, which term shall, wherever the context permits, include all other persons
or companies for the time being acting as trustee or trustees under the Trust Indenture
Agreement). The Trustee has no interest in or relation to the Company which may conflict with
the performance of its functions. A Registry and Paying Agency Agreement in relation to the
Bonds was executed on June 25, 2015 and entered into between the Company and the Philippine
Depositary and Trust Corp. as Registrar and Paying Agent. The Registrar and Paying Agent has
no interest in or relation with 8990 Holdings, which may conflict with its role as Paying Agent
and as Registrar for the Offer. 8990 Holdings has no ability to control or direct the affairs of the
Registrar and Paying Agent

D. CHARACTER

A corporate strategy is hierarchically the highest form of strategic plans for an

organization or company that defines its overall goals and directions, in which it will be achieved
within strategic management activities. Its results should be able to help a company yield profit
and growth as well as attain its main set of objectives. In 8990 Holdings, their mission is to be
the most admired company in terms of industry leadership in price, quality and service. With
that, the corporate strategies 8990 Holdings have done in the past have generated them to
implement more company plans in the future through the following outcomes.

In the past, 8990 Holdings came up with a growth strategy that aimed to solve the country’s
housing backlog. It involved a “halfway house” concept that pursued to uplift the living
conditions of working people in Metro Manila who are either renting bed spaces, living in
dormitories, or sharing apartment rooms. This was during the same time their earnings grew by
74 percent from P580 million to P1.02 billion. The gain they accumulated allowed them to
expand their strategies and work on projects that would give them great results. From this point
on, 8990 Holdings has targeted to surpass their annual revenues by venturing into new projects.

Starting with the prior year, 8990 Holdings debuted into high-end property development with a
deal to acquire Genvi Development Corp., one of Cebu’s top developers of upscale property.
This deal allowed the company 8990 Holdings to have inventory of residential homes in Cebu
priced at P6 million to as much as P14 million. Prior to this, 8990 Holdings also acquired new
technologies to be used in developing Monterrazas de Cebu and its future projects. It also
explored architectural designs seen in the top cities around the world that will be adopted in the
next phase of the Monterrazas de Cebu. During the same year, 8990 Holdings also expanded its
partnership with Megawide Construction Corp., one of the leading engineering and infrastructure
firms in the Philippines, to build its newest housing project in Meycauayan, Bulacan. This
project produced approximately 5,000 townhouses within 8990’s 41-hectare property in
Barangay Saluysoy, Meycauayan, Bulacan. In addition, 8990 Holdings was also seen on track to
deliver P5 billion in net profit this year after posting an 18-percent net income growth in the first
semester. The company’s full-year net profit reached to Php5.06 billion based on their net
margin target of 35.5 percent and the projected revenues of Php13.5 billion, which is up by 8.35
percent compared to the prior year.
As the year of 2019 drew nearer, 8990 Holdings hit its full-year revenue target after registering
double-digit growth in its topline figures in the first nine months of 2019. The company’s
revenue increased by 22 percent to P10.5 billion in the January-to-September period from P8.6
billion the prior year. Their revenues are also reported to reach P20 billion the following year
with Urban Deca Home Ortigas. Currently, as of March year 2020, 8990 Holdings is planning to
create its biggest project to date. This is their newest 22-tower condo residential development,
Urban Deca Homes Ortigas, which is in the heart of Pasig City, and is said to be completed by
2024, with a total of 19,046 units.   

Despite the company’s growth, they were fined during the same year by the Philippine
Competition Commission (PCC) for abuse of dominance, which is a first in the country. The
company was said to be taking advantage of its dominance due to imposing an exclusive internet
service tie-up on its property in Tondo, Manila. Moreover, due to the company imposing a sole
internet service provider (ISP) on its residents and tenants, it resulted in preventing them from
availing alternative fixed-line ISPs. According to PCC, the existing provider that 8990 Holdings
offers is a slower internet speed with a price that should have afforded residents with better
service from other ISPs. This issue involves Urban Deca Homes Manila, which is part of 8990
Holdings’ property portfolio. The PCC also stated that Urban Deca had an exclusive deal with
ISP iTech-RAR Solutions Inc. There were numerous complaints filed by unit owners and tenants
of Urban Deca Homes Manila, claiming they were prevented from applying for other ISPs when
the in-house “Fiber to Deca Homes” service was slow, expensive and unreliable. Over P27
million was fined to 8990 Holdings and Urban Deca Homes Manila by the PCC. The company
then opted to settle and pay the said fine within 30 days and comply with the modified terms and
conditions of their agreement, which is also applicable to eight projects under Urban Deca
Manila in Mandaluyong, Muntinlupa, Bulacan, Cavite, Iloilo and Cebu. However, this did not
generate an effect on their market, in fact there was no reaction from the investors at all. The
company’s shares even surged by 2 centavos or 0.13 percent to P15.04 apiece from the previous
day amid the 2.11-percent rise for the benchmark Philippine Stock Exchange index.

8990 HOLDINGS INC.’S CREDIT RATING FOR CHARACTER

From the previous year to the current, 8990 Holdings’ performance have been positive
and beneficial to their company, especially in terms of their profit, as well as finished and
upcoming projects. They were able to meet their targeted goals, and venture into new projects
which in return, generated them profit. Despite the case filed against the company for abuse of
dominance, there was no effect nor reactions from their investors, the company’s shares were
stable, and it even increased during the time. The company was able to settle the issue by settling
with a P27 million fine, along with modified terms and conditions. Even though they were cost a
hefty fine, they incurred a minimal impact to the company when comparing it to the P4.7 billion
consolidated net income registered last year. Hence, using the Standard and Poor’s credit rating,
the credit rating for 8990 Holdings Inc. is AAA based on the given reasonings.