Merger & Acquisition Deal Analysis: Century Properties Group,

Inc. to Acquire Keppel Philippines Properties, Inc.

Executive Summary
Macroeconomic and Industry Assessment
 We see that the real estate market would probably slow down for a while because of the uncertainty
brought in by the pandemic.
 No real estate market crash in the most foreseeable future despite the current situation.
 We believe that BPO will continue to drive our economy forward by employing more than 1.35 million
Filipinos and generating revenues of about $38.9 billion by 2022.

Overview of the Company

 The company has expanded to commercial leasing as well as affordable housing to complement and
balance its portfolio with urban vertical developments.
 The Company utilizes the group’s local and international marketing network and believes it is one of the
most active industry players when it comes to sales and marketing.

Merger/Acquisition Analysis
 The property industry in the Philippines is a competitive market
 The merge will bring a small yet a significant amount increase in the market share.
 The merge will provide Century properties new construction approach towards a sustainable urbanization.

Evaluation of the Target

 Keppel sealed a project to develop and operates a maiden project in Johor, with a targeted 2020 completion
date.
 Keppel Philippine Properties provides solutions for sustainable urbanization
 The merger acquisition can help Century Properties to expand their market globally.

Assessing the Competitive Environment

 The effect of the transaction will show that the market concentration will be the same
 Century properties’ presence in the NCR especially in the central business districts will be stronger .
 Macroeconomic and Industry Assessment
Current economic environment
The end and the start of a new decade did not go off for a promising one. Instead, it shook off
the world by an unknown enemy and catches everybody unprepared. The COVID-19 pandemic
has led to a catastrophic loss of human lives and showcased an unprecedented challenge to
public health, social and economic difficulties. Although it may seem that the impact of COVID-
19 pandemic is starting to show some decline in number of infections and countries now
adapting to different ways on how to battle with the invisible enemy, the footprints it left will
stay and change the behavior of the whole world on how they deal with things and we as a
growing business striving to provide the best value we can give to our clients, must be well
aware of the changes and act upon them as soon as possible.
It is without a doubt that a lot of industry sectors got affected badly by this pandemic and
property sector is the one that got the most major hit because of the regulations set up by the
government to prevent the COVID-19 from infecting more people. One of these are the hotel and
food and beverages sector, the hotel industry is the first business to be affected and unfortunately
could be the last to recover. Once the situation normalizes, it would take another six to eight
months at least for the industry to recuperate. Even though it’s the current unlocking phase of the
country, the impact has hit hard on the mentality of the people, the demand for tourism and food
and beverages sector may surely take a grip but it will take time for people to accept the new
normal. Food and beverages sector on the other hand already started opening but can’t fully
operate due to the social distancing implemented by the Government therefor imposing another
bottleneck to restaurants.

So where is the real estate market going for the next coming months ahead? We see that the
real estate market would probably slow down for a while because of the uncertainty brought in
by the pandemic, people will hold on to their cash for now and put on hold most of the deals that
were set in place this year. We anticipate that Real estate developers would also take a pause in
their developments to hold on to their cash reserves and to lessen their exposures to liabilities.
On the bright side, we don’t see any Real estate market crash in the most foreseeable future
despite the current situation. This is because banks are stringent in terms of giving out mortgages
to people making them well secured. Also, we don’t see any real estate bubble coming soon just
like what happened to U.S during the 2008-09 real estate market crash.

Property prices for the last 8 months have also been fairly stable and didn’t dip so much that
you can call it a property recession. Developers have good amounts of cash readily available and
they are holding of pretty well because they are well diversified so they haven’t really dropped
their prices either.
COVID-19, just like the Spanish flu pandemic in 1918, will get resolved. The Philippine
economy would come back stronger since we are heavily driven by traditional businesses in a
youthful and vibrant consumer market with ages between 23-24 having high literacy rate and
proficiency in the English language. IMF and the World Bank made a study together quoting the
top 10 countries that would be best to invest in and, unsurprisingly, our country is among the list.
This is because the economic pillars of our country that existed pre-pandemic will remain to be
in place post-pandemic. A great example of this is the BPO sector. We believe that this sector
will continue to drive our economy forward by employing more than 1.35 million Filipinos and
generating revenues of about $38.9 billion by 2022. These numbers are compelling because, in
comparison, one full time BPO employee in the US costs about $70,000 dollars a year compared
to the same employee costing $18,000 here in the Philippines. The huge disparity in costs is
causing multinational companies to always see the Philippines as a potential Investment for
constructing a business. In turn, property sectors like CPG and Keppel must be ready to consider
this opportunity for more growth and development of not just for the company but also to the
overall economic development of our country.

Overview of the Company

COMPANY PROFILE

Century Properties Group, Inc. (CPG) was established in 1986 by CPG Executive
Chairman Jose E.B. Antonio 6 days before the EDSA People Power Revolution. CPG and its
subsidiaries are primarily in the development, marketing, and sale of mid- and high-rise
condominiums and single detached homes, leasing of retail and office space, and property
management. For more than three decades of experience in real estate development, real estate
marketing, and property development in the Philippines, CPG has grown to become one of the
top 10 real estate firms in the Philippines. The company is 61.27% owned subsidiary of Century
Properties Inc., its ultimate parent, and the rest by the public.
CPG, through subsidiary Century Properties Management, Inc., (“CPMI”) also engages
in a wide range of property management services, from facilities management and auction
services, to lease and secondary sales. Through CPMI, the Company endeavors to ensure the
properties it manages maintain and improve their asset value, and are safe and secure. CPMI
manages 50 projects as of December 31, 2019 with 2.44 million sq.m of GFA with parking
spaces under management. Of the total, 74% of the projects CPMI manages were developed by
third-parties. Notable third-party developed projects under management include the One
Corporate Center in Ortigas, BPI Buendia Center and Pacific Star Building in Makati City and
Philippine National Bank Financial Center in Pasay City.
As of December 31, 2019, the Company has completed 28 projects, which include the
following: 25 residential buildings, consisting of 14,362 units with a total gross floor area (GFA)
of 1,147,194 sq.m. with parking area; a retail commercial building with 52,233 sq.m. of GFA
with parking area; a medical office building with 74,103 sq.m. of GFA with parking area; an
office building with 56,284 sq.m. of GFA with parking area. In addition, the Company has
completed a total of 866 homes under its affordable segment. This is in addition to the 19
buildings totaling 4,128 units and 548,262 sq.m. of GFA that were completed prior to 2010 by
the founding principals’ prior development companies, the Meridien Group of Companies
(“Meridien”). Noteworthy developments under Meridien are the Essensa East Forbes and South
of Market in Fort Bonifacio, SOHO Central in the Greenfield District of Mandaluyong City,
Pacific Place in Ortigas, Le Triomphe, Le Domaine and Le Metropole in Makati City.

BUSINESS PORTFOLIO
 CPG has a combined portfolio of 47 buildings as of December 31, 2019, comprising 29
buildings since the company’s listing in the Philippine Stock Exchange in 2012 and 19 buildings
that were completed prior to 2010  by the founding principals’ previous development companies.
This totals to more than 1.8 million square meters of gross floor area of completed projects.

More recently, the company has expanded to commercial leasing as well as affordable
housing to complement and balance its portfolio with urban vertical developments. Through the
brand PHirst Park Homes in partnership with Mitsubishi Corporation, the company has launched
6 horizontal communities in key cities outside of Metro Manila totaling 104 hectares and 9,820
units. These projects are located in Cavite, Batangas, Laguna, and Bulacan.

Under its property management arm Century Properties Management, Inc., the company
has 65 buildings under management as of December 31, 2019 with a gross floor area of 2.4
million square meters.

CENTURY PROPERTIES GROUP INC. AND SUBSIDIARIES

Map showing the relationships between and among the Companies in the group, its
ultimate parent company and cosubsidiaries as of December 31, 2019

Century Properties Group Inc. (CPGI) – incorporated in May 6, 1975, CPGI is the listed
Company of CPI with property development corporations as subsidiaries.

CPGI Subsidiaries

Century City Development Corporation (CCDC) – incorporated in 2006, is focused on

developing mixed-use communities that contain residences, office and retail properties. CCDC is
currently developing Century City, a 3.4 hectare mixed-use development along Kalayaan
Avenue, Makati City.CCDC has fourteen local subsidiaries.

Milano Development Corporation (MDC) & Centuria Medical Development Corporation

(CMDC)
– is a wholly owned subsidiary of CCDC. Affiliated company under CCDC includes CCDC II.

Century Communities Corporation (CCC) – incorporated in 1994, is focused on horizontal

house and lot developments. From the conceptualization to the sell-out of a project, CCC
provides experienced specialists who develop and execute the right strategy to successfully
market a project. CCC is currently developing Canyon Ranch, a 25-hec house and lot
development located in Carmona, Cavite. 100% owned by CPGI.

Century Limitless Corporation (CLC) – incorporated in 2008, is Century’s newest brand

category that focuses on developing high-quality, affordable residential projects. Projects under
CLC cater to first time home buyers, start-up families and investors seeking safe, secure and
convenient homes. It has one internal branch office in Singapore namely CLC Singapore. CLC is
100%owned by CPGI.

Century Acqua Lifestyle Corporation - incorporated on November 6, 2014, a wholly owned

subsidiary of CLC, was organized primarily to acquire by purchase, own, hold, manage,
administer, lease or operate condominium units of the planned Acqua 6 Tower of Acqua Private
Residences for the benefit of its shareholders.

PHirst Park Homes Inc. - PHirst Park Homes Inc. was incorporated on August 31, 2018 and is
the firsthome division and brand of CPGI. Its projects are located within the fringes of Metro
Manila and its target market is first home buyers. Its current projects are located at Bo. San
Lucas in Lipa City and San Pablo, Laguna, which involve a multi-phase horizontal residential
property and offer both Townhouse units & Single Attached units. PHirst Park Homes is a joint
venture project between Century Properties Group Inc. and Mitsubishi Corporation with a 60-
40% shareholding, respectively.

Century Properties Management Inc. (CPMI) – incorporated in 1989, is one of the largest
property management companies in the Philippines, as measured by total gross floor area under
management. 100% owned by CPGI after acquisition of the shares of Mr. Romig.

Century Destinations and Lifestyle Corporation (formerly “Century Properties Hotel and
Leisure Inc.”) - CDLC, incorporated in March 27, 2014, is a newly formed wholly-owned
subsidiary of CPGI. CDLC shall operate, conduct and engage in hotel business and related
business ventures.

A2Global Inc. - A2Global Inc., incorporated in 2013, is a newly formed company wherein CPGI
has a 49% shareholdings stake. A2Global shall act as a sub-lessee for the project initiatives of
Asian Carmakers Corporation (ACC) and Century Properties Group Inc. in the development and
construction commercial office in Fort Bonifacio.
VALUE CHAIN OF THE COMPANY’S OPERATIONS

Land Project Project Marketing Sales and After-sales

Development and
Acquisition Design Construction and Sales Customer Services
Financing
Financing
Identifying

Assessing

Executing

Land Acquisition
The Company sources land for development through joint venture agreements with land
owners, or through direct purchases. Direct purchases can either be paid for in cash or on
installment basis. The land acquisition process consists of three main steps: identifying, assessing
and executing.

First, the Company identifies land with a focus on high growth areas within and outside
Metro Manila. During this time, the Company checks the title of the property to ensure there are
no encumbrances that will prevent development. Zoning and floor to area considerations are also
examined at this stage. The sources of land in the Philippines include privately owned
undeveloped property, government owned property, foreclosed bank assets and redevelopment of
existing properties as certain industries migrate outside of Metro Manila.

Second, the Company assesses the physical and financial suitability of the land. The land
must be topographically amenable to condominium or house and lot developments. The
Company also analyzes the macro demand and competing developments to develop a marketing
plan for the project, as well as run pro forma cash flows and profit and loss statements for the
project.

Third, the Executive Committee of the Company approves the project

internally and commences with the acquisition of the land.

Project Design
The project design process involves the planning of the potential project, including
determination as to the suitable market segment, master planning, design of property and
landscape design. Development timetables vary from project to project, as each project differs in
scale and design.

Project Development and Construction

Once the Company has completed the project planning and design phase, it
obtains the necessary Government approvals and permits to start development and pre-marketing
activities. Typically, permits and licenses are obtained principally from the concerned LGUs,
HLURB, DAR, DENR and other relevant government agencies required for project
development, sales and related activities. Project development and construction work for the
vertical projects is primarily conducted by Century Project Management & Construction
Corporation (“CPMCC”), which is owned and managed by Mr. Ricardo P. Cuerva, who is one of
CPGI’s Directors and, together with members of his family, a beneficial shareholder of the CPI.
CPMCC enters into a construction management agreement with the relevant CPGI subsidiary for
each project, and Mr. Cuerva functions as a construction manager by subcontracting specialty
services to third parties to ensure that prices are competitive, managing construction laborers,
and procuring raw and finishing materials for the project directly from suppliers to minimize
costs.

Marketing and Sales

The Company utilizes the group’s local and international marketing
network and believes it is one of the most active industry players when it comes to sales and
marketing. The local and international marketing and distribution network consists of 197
exclusive agents who receive monthly allowances and commissions, 695 commission-based
agents and 78 brokers as of December 31, 2019. The Company’s advertising and promotional
campaigns include the use of show rooms, print and outdoor advertising, fliers, leaflets and
brochures designed specifically for the particular target market. The advertising and promotional
campaigns are carefully conceptualized and managed by the Company’s Corporate
Communications Department. The Company uses strategic partnerships with prominent
international brands and local and international celebrities to attract interest in its properties. In
addition, the Company also uses non-traditional marketing efforts such as sponsorship of
conventions and other events and corporate presentations. Furthermore, the Company partners
with local TV stations and local artists to further increase brand awareness.

Sales and Customer Financing

The Company normally conducts pre-selling of its property units prior to
both construction and project completion. Customers generally start with the payment of non-
refundable, non-transferable pre-sale fee that is valid for 30 calendar days from the date of
payment. Within this period, the customer is required to submit the complete post-dated checks
covering the monthly amortizations and the final turnover balance. The Company assists
qualified buyers in obtaining mortgage financing from government-sponsored mortgage lenders
and from commercial banks.

After-sales Services
The Company provides maintenance services through its subsidiary CPMI on projects
that are fully turned over to the owners. The Company believes that CPMI’s management of the
completed projects increases their asset value.
The Company obtains feedback from the unit owners in order to provide quality home dwelling
units in the future and to enhance long-term relationships with them. Finally, the Company has
an in-house leasing department to handle the leasing and re-sale needs of its clients.

FINANCIAL PERFORMANCE

Current Ratio remains the same at 2.1 but current assets and current liabilities increased in 2019.

Quick Ratio decreased because of the decrease of inventory at year end.

The company remains to maintain a balance in its sources of capital. While debt increased in 2019, the
borrowings was used in the operations thereby increasing income and thus its equity.

The use of leverage by borrowing as a source of capital was not as efficient in 2019 as it was in
2018 thereby decreasing its debt-to-EBITDA ratio.

Revenue increased significantly in 2019 but costs also increased significantly. As a result, the
company had a decline in its gross profit ratio.
The company slightly maintained its net income margin despite its losses in foreign exchange
and changes in fair value of derivatives because of its increased revenue and the reduction of its
payment in interests and other charges during 2019.

The growth of the company remains robust with consistent increase in its ROE for the past few
years due to efficient use of the capital derived from its shareholders.
Note: For this section, major key movements are construed to mean a change of more than 30%

32.46% increase in real estate revenue

The increase is due to completion of Bahamas and Roxas West, start of recognition of affordable
housing segment and additional substantial progress in construction and sales take up of on-
going projects.
Affordable housing segment’s contribution to the increase in revenue amounted to 1,741.98
million for the year ended December 31, 2019.
75.16% increase in leasing revenue
The increase was mostly due to full of operation and recognition of revenue of Asian Century
Center.
56.32% decrease in interest income from real estate sales
Interest income from real estate sales represents interest accretion from installment contract
receivables (ICR) and contract asset recognized during the year. Discount subject to accretion
arises from the difference between present value of ICR and contract asset and its nominal value.
Income decreases since majority of the projects are already turned over and new sales fair value
upon initial recognition approximates its nominal value.
49.58% increase in Cost of Sales
The increase in mainly due to the increase in real estate revenue.
165.68% decrease in gain (loss) from change in fair value of derivatives
The increase is due to mark to market loss on non-deliverable foreign currency swap entered into
by the Group to hedge its foreign currency denominated debt. Foreign currency denominated
debt was fully paid in 2019.
54.28% increase in Interest and other financing charges
These interests came from bonds and loans that do not qualify for capitalization as borrowing
costs.
The increase was primarily due increase interest corresponding to increase in bonds payable and
other loans related to completed investment properties.
166.48% increase in foreign exchange losses
Foreign exchange gains offsets losses in fair value of derivatives arising from hedging of the
dollar denominated loans.
As a result of the foregoing, net income increased by 32.22%.

105.34% increase in Cash and cash equivalents

Increase is primarily due to collections from matured accounts and net proceeds from loans
during the period.
100.00% increase in Investment in bonds
The Group purchased Philippine Peso-denominated, fixed rate bonds. The bonds have a maturity
of eighteen (18) months from issue date and interest rate of 5.70% per annum. The bonds are
rated “AAA” by Philippine Rating Services Corporation. Investment in bonds is classified and
measured as financial assets at amortized cost since the bonds are held to collect contractual cash
flows representing solely payments of principal and interest.
195.71% increase in Short-term and long-term bonds payable
On April 15, 2019, the Group issued a three-year bonds listed at the Philippine Dealing &
Exchange Corp. (PDEx) amounting to 3,000 million.
100.00% increase in lease liability
This pertains to the lease liability accrued from the lease contract entered by the Group as a
lessee in accordance of with PFRS 16.
73.67% increase in Due to related parties
Due to additional purchases from related parties, which are made at normal market prices.
Outstanding balances at year-end are unsecured, interest-free, settlement occurs in cash and
collectible/payable on demand.
100.00% increase in Deposit for future stock subscription
In 2019, the Group received deposits amounting to 42.48 million from stockholders with the
purpose of applying the same as payment for future issuance of shares of stock. These were
classified as a liability since its application of the increase in authorized capital stock is not yet
filed with SEC and as of December 31, 2019.
132.89% increase in other current and non-current liabilities
Due to the collection of its subscription of preferred shares. Further In 2019, the Group received
security deposits and advance rentals amounting to 35.28 million and 382.84 million classified as
“Other current liabilities” and “Other noncurrent liabilities”, respectively for its lease contracts
from its project, Century Diamond Tower, which is forecasted to finish construction and start full
commercial operation in 2020.

FINANCIAL CHALLENGES AND OPERATIONAL CHALLENGES

 Economy - The economic situation in the Philippines significantly affects the performance of
the Company’s business. For the residential products, the Group is sensitive to changes in
domestic interest and inflation rates. Higher interest rates tend to discourage potential buyers
of residential units as mortgages become unaffordable to them. An inflationary environment
will adversely affect the Group, as well as the real estate industry, by increases in costs such
as land acquisition, labor and material.
 The Company is exposed to geographic portfolio concentration risks due to the concentration
of its property portfolio in Metro Manila. A decrease in property values in Metro Manila
would have a material adverse effect on its business, financial condition and results of
operations.
 Competition - The Philippine real estate development industry is highly competitive. CPGI’s
primary competitors are real estate companies that also focus on developing residential and
commercial buildings in the Philippines. The entry of new competitors could also reduce the
Company’s sales and profit margins. The Company faces significant competition in
connection with the acquisition of land for its real estate projects. Its growth depends
 significantly on its ability to acquire or enter into agreements to develop additional land
suitable for its real estate projects.
 The Company operates in a highly-regulated environment and must obtain and maintain
various permits, licenses and other government approvals.
 Environmental laws applicable to the Company’s projects could have a material adverse
effect on its business, financial condition or results of operations.
 Natural or other catastrophes, including severe weather conditions, may materially disrupt
operations, affect the ability to complete projects and result in losses not covered by
insurance.
 The Company derives a significant portion of its revenue from Overseas Filipino Workers
(“OFWs”), expatriate Filipinos, former Filipino citizens who have returned to the Philippines
(“Balikbayans”) and other overseas buyers, which exposes the Company to risks relating to
the performance of the economies where they are located.

IMPACT OF COVID-19 TO THE COMPANY

 The Company experienced work disruption during the community quarantine in the NCR
enforced by the government.
 The Company experienced supply-chain challenges for its business operations.
 The Company’s sales and collections performance we’re affected by the community
quarantine enforced by the government.
 The Company experienced delays in project completions in because of the enhanced
quarantines enforced by the government.
 All properties are located in the Philippines, exposing it to risks associated with the
Philippines.
 Exposure to geographic portfolio concentration risks as substantial portion of the Company’s
properties are located in Metro Manila.

OPPORTUNITIES

The COVID-19 pandemic has brought dramatic changes to how business

transactions are carried out all over the world. Because of the pandemic, many residential and
commercial property owners are now be looking to sell their properties at a discounted market
price for liquidity. If presented with opportunity, CPG should have readily available cash in hand
to take advantage of chances to negotiate better pricing deals.

Signing of Memorandum of Agreement with Global Development Corp. (GGDC)

On January 9, 2019, GGDC and the Parent Company signed a memorandum of agreement
(MOA) to create a Joint Venture (JV) that will develop 2.6 hectares of the 177-hectare Clark
Global City into a mix of residential and office buildings. GGDC is the owner and developer of
Clark Global City. It is a wholly owned subsidiary of Udenna Development (UDEVCO) Corp.,
the real estate and property development arm of one of the fastest growing holding companies in
the Philippines, Udenna Corporation.
 The MOA provides for mixed use development, i.e. residential and office buildings with
support retail establishments. This project will be the Parent Company's first development in
Clark, a former military base currently being transformed into the country’s next big metropolis
and primed as the answer to Metro Manila’s congestion. The Parent Company is banking on the
phenomenal growth of Central Luzon, which has the highest number of occupied housing units;
and also Clark, which has emerged as the second largest market for office after Metro Manila.
Situated within the Clark Freeport Zone, the development offers an ideal regulatory, economic
and operating environment. It is also poised to benefit from various public infrastructure projects
such as the expansion of the Clark International Airport, NLEX-SLEX Connector Road, Subic-
Clark Cargo Railway and PNR North Railway.

Merger Analysis
The product market is the real estate industry that varies among the residential areas,
(condominiums, and subdivisions) commercial spaces, (buildings for office and administrative
uses) recreational and tourism areas, (hotels and country clubs) land improvement, (developing
areas into smart cities, central business districts or IT hubs) and other services such as REIT
(Real Estate Investment) Funds, storage spaces and more.
Century Property Group, Inc. currently holds 5.63% of the market. The property industry
in the Philippines is a competitive market with more than 30 companies competing in the
property industry. They provide real estate on residential and commercial spaces that are located
in NCR and currently expanding their operations in Region 3 and Region IV-A
With the merger of Century Properties group and Keppel, projects on the condominium
units will have an impact by having an improved sustainable urbanization approach; and having
more presence on the central business districts because of the key locations of Century and
Keppel with their sustainable urbanizations and combined amenities.
Pursuing an expansion on other key areas such as Baguio city, Cebu, Davao City, and
other key areas in Region 3 can be less burdensome due to increase in financial ratios. Current
ratio of Century Property was 2.13 and will increase to 2.14 after merging with Keppel; quick
ratio of Century Property was .96 and will remain the same after merging; debt-to-equity was
1.72 and will rise to 1.73, while asset-to-equity will rise to 2.86 from 2.72.

PESTEL Analysis
Political
The government is currently constructing various infrastructures to ensure that business
transactions are going smoothly by conducting projects that will ease the flow of traffic,
 improve public utilities and provide more public utilities. It was estimated that this will
contribute in the increase of middle class affected by the improved economic conditions that
will create a demand in the real estate sector due to the increase of income.
Also, with the government eyeing to make amendments with the current status of the
Philippine’s offshore gaming sector, this will bring an influx of Chinese investors sector that
are heavily investing in the property industry and will employ a significant amount of
Chinese workers from the Philippine’s offshore gaming sector.
With Century Properties positioning their projects on the key central business districts in
NCR, investors will surely notice their properties and would take their company into
consideration.
Economic
According to PSA, China was the second largest foreign investor in the Philippines, with
the Philippine’s offshore gaming sector now being studied for tax effects that will bring a
significant amount of revenue in our country, Chinese investors will invest on properties that
will help their business to operate here in the Philippines.
OFW remittances are expected to have a quick recovery (V – shape recovery) after the
pandemic; therefore there will be surely a sufficient amount of income for many households
that will satisfy the demand for a low cost to midrange cost of economic housing.
Due to an influx of foreign and local investors coming to the Philippines and with the
help of the Build! Build! Build Program providing more infrastructures to ease of doing
business in the Philippines, more demand in commercial spaces for office use will be created
in the real estate industry.
With more income available in the local and foreign customers of the real estate industry,
Century Properties with one of a high market shares among several competitors in a
competitive industry, they will have an influx of customers.
Social
A rise in the urban population especially in NCR over the past few years will have a
demand of real estate properties. The more population present, the more demand that will be
expected in the real estate industry; whether be it on the low cost housing, to midrange cost
up to the high end specs of the property.
One factor that affects the increase in urban population is due to the job market being
highly concentrated in the NCR where the central business districts are. One industry that has
a significant amount of workers that needs housing is the BPO industry. With the help of
PAG-IBIG some employees are looking for properties to settle in near their jobs.
Although, currently the effects on the pandemic is now recovering, the prices in the real
estate was greatly affected, with real estate dealers giving a more flexible payment schedules
and less amount of down payments that saw a lot of households taking the bait. COVID-19
also saw a lot of foreign investors temporarily halting their business in the Philippines that
 greatly impact the economy of the Philippines; it will be projected that this effect will also be
normalized after the pandemic.
These social effects will have an impact on Century properties pricing on their real estate
expanding their target market to the middle class that will need a more affordable residential
property and a more flexible payment schedules.
Technological
Keppel Philippines Properties is the arm of Keppel Corporation, a multinational company
in Singapore that provides sustainable urbanization. One of their solutions for sustainable
urbanization is that they support safe and efficient harvesting of energy sources. They have
the technology to provide renewable energies, sustainable district cooling systems and an
efficient and sustainable delivery of oil and gas.
With Century properties and Keppel merging, new practices on construction and how
they will provide sustainable urbanization will give Century Properties an efficient and faster
ways of constructing their projects.
Legal
The Tax Reform Acceleration and Inclusion (TRAIN) Law took effect in 2018 had
significant effects on the real estate sector; the estate tax is now at a uniform rate of 6% from
the 5% to 20% on the prior NIRC, it also gave an exemption of properties valued at Php 10
million below. Donor’s tax is also now at the uniform rate of 6% and now ignores the
relationship between the donor and the donee. And properties valued at Php 1.5 million and
higher on vacant lots and Php 2.5 million for house and lots and condominiums are now
subject to value added tax.
Due to the effects of TRAIN law on value added tax, Century properties have properties
that will fall under the threshold for value added tax.
Environmental
Keppel also provides solution to environmental problems; one of these solutions is the
waste-to-energy technology that provides non-recyclable waste materials into usable heat or
electricity through the process of incineration. The recovery of energy from waste generates
renewable energy and reduces reliance on landfills that produce methane. From individual
processes to full-scale plants, the proven and patented WTE technologies have been
successfully implemented in more than 100 facilities globally across Asia Pacific, Europe
and the Middle East. Through the proven technologies, Keppel help cities manage their waste
sustainably.
With the effect of merger of Century properties and Keppel, the projects that they will
undergo will surely adopt the practices of Keppel providing an efficient way to convert waste to
energies.

Porter’s Five Forces.

Competition in the industry
The Competition of the real estate sector in the Philippines is a competitive market.
According to the Herfindahl-Hirschman Index (HHI) the real estate’s summation of the squares
of the individual company’s market share was 31.06; a classified to be a competitive market.
With the Century properties having a market share of 5.63% and Keppel having a market
share of .012%, the merge will give a rise of a total of 5.642% of overall market share a small yet
a significant amount increase because of the number of participants in the industry.
Potential of new entrants in the industry
The Philippines has a lot of lands that has a potential to be converted into residential
areas, commercial areas, or recreational and tourism areas. The new entrants are expected to be
compliant to the environmental requirements of the Philippines and will provide compensation to
the environment. Entering into a competitive market may be a hard time for the new entrant and
if effective, may give Century properties a consideration on how they will react to this new
entrant. With the merger of Century and Keppel, having adopted the sustainable urbanization
practices, Century will have a keen advantage over the new entrants and current competitors.
Power of suppliers
The suppliers of the real estate industry are the raw materials that are needed to construct
residential, commercial or recreational and tourism spaces. With the help of the Build! Build!
Build! Program, the supplies of the real estate industry are surely in demand and suppliers will
keep up to meet this demand and provide the needs of Century properties.
Power of customers
Even though the pandemic has a great impact on the income of the customers of the real
estate in the Philippines, it was expected to have a recovery especially among the OFWs that are
eager to buy properties.
Threat of substitute products
Recreational, tourism and storage real estate will cause an indirect threat to the residential
and commercial projects of Century properties due to the changes in the consumer’s attitude
especially when the pandemic ends; a demand surge on the recreational and tourism real estate
properties will happen due to people being under quarantine under a long time. This will affect
the operation of the Century properties because the consumer’s attitude is not directly in line
with what the Century properties are offering.

Evaluation of the target

Keppel Philippines Properties, Inc.

Overview
  Keppel Philippines Properties, Inc. is a Philippines based Property Company. The
company golds investments in associates involved in property holding and development,
and also offer management consultancy services to associates.
 The company engaged in the acquisition and development of land sites for residential,
office and commercial uses.
 Keppel Philippines Properties, Inc. is a subsidiary of Keppel Land Limited, a property
company, where it is one of the flagship multinational companies with a global footprint
in more than 20 countries.
 Keppel Philippines Properties’ headquarters are in Penthouse Benquet Centre Bldg,
Mandaluyong Central Post Office, Bicol, 1550, Philippines

Project Accomplished
1. Palmdale Heights
 A middle-income residential development located in Pasig City. This is a 10-
storey condominium buildings; fifteen alternative buildings can rise within the
next 2-3 years during this massive complex.
2. The Podium
 An upscale shopping mall in the Ortigas central business district that offers
approximately 150-specialty stores, restaurant and service shop malls designed
with a modern mis glass, curves and green. This was a joint project of Keppel and
a BDO Unibank.
3. Podium West Tower
 The Podium West Tower is a joint venture between Singapore’s Keppel Land and
BDO Unibank. This is regarded by some quarters as a gamechanger that raise the
profile of the Ortigas business district as the preferred office address of many
local firms and multinational companies. The tower was pronounced as the #8
tallest in Mandaluyong City and as the #24 Tallest in the Philippines.

Key Statistics
1. Keppel Philippines Properties Inc. closed at 2.92, 22.18% above the 52 weeks low of
2.39 set on June 25,2020 this October 29, 2020
2. Price moved over 11.01% to 3.07%
3. Market Capitalization
 The current market value of Keppel is P849.80 M. Investing in Keppel does not
necessarily bring in huge return in a short period of time, but on the long run
Keppel generally reward investors with a consistent increase in share value and
dividend payments since Keppel are have been established for so long and there is
a room for expanding and development of the company since it shows potential in
the future basing from the projects done last by Keppel.
4. Earnings Per Share
 EPS of Keppel as of the 2nd quarter of this year valued at -0.32. This shows that
the company’s profitability was greatly affected by the pandemic caused by
COVID19. There are less investors in which are not willing to invest money
 knowing they would loss the money. However, negative EPS is expected knowing
that most operation in the Philippines have ceased due to the government policy
that need to abide for the precautionary in handling the pandemic COVID19 thus,
a negative EPS is not necessarily a reason to panic.
5. Free Float valued
 The shares of Keppel that can be publicly traded and are not restricted valued at
P23.84M. This shows that atleast 30% of the shares are cab be publicly traded.
This is a big free float that increase investors to buy since the free float of Keppel
are not that small in which it is more volatile.
6. Shares Outstanding valued at 299.3M
7. Average Volume 7.57K
8. Return on Investment -2.44%
9. Return on Asset

Key Competitive Advantage

1. Training and Development
 Keppel provide 27.6 Hours Training per employee globally which makes all
employees goal oriented and have global experience that helps build the standard
and performance of the company that contributes to the growth and development
of the company.
2. Employee Engagement
 The overall engagement score of the employees of Keppel are 86% in which it is
higher than the normal average of 76% among the Philippine companies.
3. Safety
 For the 25 years of operation of Keppel, there are 0 casualties reported as of 2019.
4. Social Investment
 Invested in worthy social causes, including caring for the underprivileged,
supporting education, and protecting the environment.
5. People and Community
 People are the cornerstone of the company. Keppel are committed to providing a
safe and healthy workplace, as well as investing in training and developing their
people to help them reach their full potential.
6. Volunteerism
 Of community service achieved by Keppel Volunteers, an increase of over 4,000
hours compared to 2018.
7. Energy Savings
 In estimated cost savings from energy efficiency initiatives implemented in 2019
and from Keppel Land’s Green Mark-certified developments

Significant Milestones
 One of the milestones of Keppel where they seal a project to developed and operate a
maiden project in Johor, with a targeted 2020 completion date.
 Keppel have been partnered with Phu Long to develop 3 land parcels in HCMC’s
Southern corridor.
  Keppel Land and Keppel Urban Solutions celebrated the groundbreaking of
Saigon Sports City in HCMC, Vietnam.
 Keppel Land acquired four properties in China for about RMB1.1 billion, and three land
plots in the Nha Be district of Ho Chi Minh City (HCMC), Vietnam for about $76
million.
 Alpha Investment Partners, on behalf of its funds under management, including AAMTF
III, and Allianz entered into agreements to acquire an 85% interest in a $1.5 billion Grade
A Office complex in Beijing, China.
 It was announced that Keppel Bay Tower would become Singapore’s first commercial
building to be fully powered by renewable energy from 1 January 2020.
 Keppel T&T divested its stakes in Keppel Logistics (Foshan) and Keppel Logistics
(Hong Kong) for about $39 million.
 Keppel Land secured its first green loan facility of $170 million from HSBC Group
China for the development of Seasons City (Phase 1) in Sino-Singapore Tianjin Eco-City
(Tianjin Eco-City), China.
 Keppel O&M signed a memorandum of understanding with the Maritime and Port
Authority of Singapore and Technology Centre for Offshore and Marine, Singapore to
develop the first autonomous vessel for operations in Singapore
 Keppel Land deepened its presence in India with a US$25 million investment in
Smartworks, a leading pan-India flexible space solutions provider and entered into a joint
venture with Rustomjee Group to jointly develop additional homes and retail units as part
of the Urbania integrated township located in Thane.
 Achieve a 28.8% reduction in carbon emissions intensity by 2030 from 2010 levels, in
addition to the target of a 16% improvement in carbon emissions intensity from 2020
business-as-usual levels.
 Achieve a 16% improvement in carbon emissions intensity from 2020 business-as-usual
levels.

Assessment of Target
Keppel Philippine Properties provides solutions for sustainable urbanization, focusing on
energy & environment, urban development, connectivity and asset management in which it boost
to attain the vision and mission of Century Properties Building Passion where there vision is to
be the Philippines’ foremost developer of innovative, well-designed, sustainable residential and
commercial developments, and to be the trusted partner of global citizens in realizing their goals
of owning a home or an investment property in the Philippines. The merger acquisition can help
Century Properties to expand their market globally. Since Century Properties is one of the
leading real estate companies in the Philippines, they need to expand their market globally for
the future growth and development of the company. Keppel Corporation is geographically
diversified in Asia, with Singapore, China and Vietnam as its key markets, while it continues to
scale up in other markets such as Indonesia and India. Keppel Corporation can also maximize of
building the project of Century Properties since they are both focus on Real Estate. Century and
Keppel most project have been in the Ortigas Center where it a central business district located
within the joint boundaries of Pasig, Mandaluyong and Quezon City, within the Metro Manila
region in the Philippines. With an area of more than 100 hectares, it is Metro Manila's second
most important business district after the Makati CBD. This can reduce the lead time of the
project made in the market.

Assessing the Competitive Environment

According to the HHI the real estate market of the Philippines is a highly competitive market before the
transaction. (Table shows the main competitors and Keppel Philippines Properties, Inc.)

Even after the transaction the real estate market will still be a highly competitive market
since it is composing of more than 30 participants.

The effect of the transaction will show that the market concentration will be the same but
Century properties’ presence in the NCR especially in the central business districts will be
stronger since Keppel’s projects are within the heart of the business districts of Makati and
Ortigas.
Sources:
http://www.keppelland.com.ph/AU-Corporate-Profile.asp
https://www.century-properties.com/our-company/
https://www.indeed.com/career-advice/career-development/target-market-analysis
https://en.wikipedia.org/wiki/Century_Properties
http://www.streetofwalls.com/finance-training-courses/investment-banking-technical-training/mna-valuation-
techniques/merger.
https://www.kepcorp.com/en/investors/financial-highlights/
https://app.researchpool.com/provider/marketline/keppel-land-limited-strategy-swot-and-corporate-finance-report/
https://www.energy.com.ph/wp-content/uploads/2009/07/SEC-Form-20-IS-May-2007.pdf
https://datacenternews.asia/story/keppel-dc-developing-its-first-greenfield-data-centre-in-malaysia
https://markets.ft.com/data/equities/tearsheet/summary?s=KEP:PHS
https://business.inquirer.net/307190/prospects-for-real-estate-sector
https://www.dotproperty.com.ph/blog/chinese-investors-returning-metro-manila-property-market
https://www.lamudi.com.ph/journal/issues-affecting-the-philippine-real-estate-sector-this-2018/
https://businessmirror.com.ph/2019/05/14/vibrant-real-estate-sector-propels-growth/
https://oxfordbusinessgroup.com/analysis/new-heights-demand-building-materials-looks-set-continue-after-hitting-five-year-
price-high
https://www.mordorintelligence.com/industry-reports/philippines-building-system-components-market
https://edge.pse.com.ph/companyDisclosures/form.do?cmpy_id=189

By: Team RVE

Abuan, Allen Angelo E.
Gonzales, John Paul S.
Macasieb, Ramir A.
Reyes, Charles Andrew L.