Okay. Ladies and gentlemen, good afternoon and welcome to Ayala Land's briefing on its first quarter 2024 results. We are certainly very excited to share with you our performance. Allow me to introduce our panel, led by our President and CEO, Ms. Meean Dy, our Chief Finance Officer, Mr. Toti Bengzon, Head of our Leasing Hospitality Group, Ms. Mariana Zobel de Ayala, and Head of the Premium Residential Business Group, Mr. Mike Jugo. To start off our presentation, and by the way, we have 70 participants on the line, and we would like to remind everyone that copies of the press release and the presentation are available on our website, ir.ayalaland.com.ph. To start off our presentation, let me turn over the floor to Mr. Bengzon.
Good afternoon, everyone. Allow me to present our financial and operational highlights for the first quarter of the year, after which we have a few key messages coming from our President and CEO. The company delivered significant earnings growth in the first quarter of the year, supported by healthy property demand and consumer activity. We posted total revenues of PHP 41 billion. This is 33% higher year-on-year. Our net income came in at PHP 6.3 billion, up 39% year-on-year. CapEx totaled PHP 18.8 billion, while we sustained a net gearing ratio of 0.74:1 , with the support of higher operating cash flows as we prudently managed our debt funding requirements. Turning to our segment revenues, our property development revenues increased by 47% to PHP 25 billion, driven by robust residential and commercial lot bookings.
Residential revenues surged by 51% to PHP 21.4 billion, while combined office and lots-for-sale revenues grew by 26% to PHP 3.6 billion, mainly from higher commercial and industrial lot sales during the quarter. Meanwhile, our commercial leasing segment increased by 8% to PHP 10.9 billion, owing to higher mall occupancy, increased mall, office, and hotel rental rates, and the contribution of new set of hotel rooms at Manila Bay and Nuvali. Shopping center revenues grew by 9% to PHP 5.5 billion, while office leasing improved by 5% to PHP 3.1 billion. Furthermore, hotel and resort revenues accelerated by 8% to PHP 2.3 billion. Our services businesses composed of construction, property management, and airline, among others, registered a 42% growth to PHP 4.2 billion. Our net construction revenues reached PHP 2.6 billion. This is a 75% surge on account of additional contracts from external projects.
Meanwhile, our property management, AirSWIFT, and retail electricity supply companies generated total revenues of PHP 1.5 billion. This is a 7% increase year-on-year, mainly from higher parking and airline passenger revenues. Moving on to our income statement. Real estate revenues reached PHP 40.1 billion. This is a 33% increase from last year, driven by robust residential and commercial lot bookings and additional external construction projects supported by stable leasing operations. Interest and other income reached PHP 889 million. This is 13% higher year-on-year, driven by higher management fees and interest income from short-term investments and cash deposits. Our equity and net earnings of associates and JVs declined by 2% to PHP 414 million, as higher earnings from FBDC companies and the ALI Eton joint venture were offset by the absence of the contribution coming from AKL Properties Inc., which is our joint venture with the Kuok Group.
We consolidated AKL as part of real estate revenues beginning the fourth quarter of 2023 upon establishing control. On the other hand, interest and investment income more than doubled to PHP 184 million due to higher yields from short-term investments and cash deposits. Our other income amounted to PHP 291 million. This is a 7% increase year-on-year from higher management fees driven by FBDC companies and our ALI Eton JV. Meanwhile, expenses grew by 29%, amounting to PHP 31.8 billion. Real estate expenses came in at PHP 26 billion, up 34%, while general and administrative costs increased by 16% to PHP 2.3 billion. Our GAE ratio settled at 5.5%, lower than the 6.3% in the first quarter of 2023 and lower than the full year GAE ratio, full year 2023 GAE ratio of 6%. Our EBIT margin came in at 30.7%, higher than 30.6% in the same period last year.
Interest expense, financing, and other charges totaled PHP 3.5 billion, 11% more than last year due to the higher average borrowing rate and daily loan balance. Deducting expenses from revenues, income before tax grew by 45% to PHP 9.2 billion. This increase translated to an income tax provision of PHP 1.8 billion. As a result, income before non-controlling interests totaled PHP 7.4 billion. This is 43% more than last year. Netting out non-controlling interests of PHP 1.1 billion, net income attributable to ALI equity holders grew by 39% to PHP 6.3 billion. Allow me to go into details on revenues by our business lines. Robust residential and commercial bookings and additional external construction projects, supported by stable leasing operations, drove our revenue growth during the quarter. Property development increased by 47% to PHP 25 billion. Breaking down property development revenues, residential revenues surged by 51% to PHP 21.4 billion from higher bookings across all segments.
On the other hand, our office for sale revenues registered a 26% decline to PHP 826 million due to lower incremental percentage of completion as the projects near completion. Revenues from commercial and industrial lots jumped by 59% to PHP 2.8 billion, coming from lot sales at our Laguindingan Technopark, Evo City, and Laguna Bel-Air. Turning to the commercial leasing and hospitality segment, revenues increased by 8% year-on-year to PHP 10.9 billion. Shopping center revenues amounted to PHP 5.5 billion. This is 9% better than last year from higher occupancy and rents. Office leasing grew by 5% to PHP 3.1 billion, mainly due to higher rents. Meanwhile, hotel and resort revenues accelerated by 8% to PHP 2.3 billion from higher room rates and the contribution coming from our new set of hotel rooms at Manila Bay and Nuvali.
Our service businesses, this is MDC, Ayala Property Management Corporation, and AirSWIFT, among others, registered a 42% growth to PHP 4.2 billion. MDC posted net construction revenues of PHP 2.6 billion. This is 75% higher than last year due to additional contracts from the 50 MW ePLDT data center project in Santa Rosa, Laguna. Ayala Property Management Corporation's property management revenues, combined with AirSWIFT and retail electricity supply companies, generated revenues of PHP 1.5 billion. This is a 7% increase year-on-year, mainly from higher parking and airline passenger revenues. Summing up the top line, real estate revenues amounted to PHP 40.1 billion. This is a 33% growth from last year. Coupled with interest and other income of PHP 889 million, total revenues grew by 33% to PHP 41 billion. Let's look at the operating statistics of our businesses and starting with property development. Residential reservation sales totaled PHP 33.3 billion.
This is 20% higher than the first quarter of 2023 and 19% higher than the previous quarter, led by the strong demand for products in the premium and vertical segments. This quarter's sales performance translated to a monthly sales average of PHP 11.1 billion. This is an acceleration from PHP 9.5 billion in the last quarter of 2023. Ayala Land Premier's Park Villas in Makati and The Courtyards Phase 3 in Vermosa, Alveo's Park East Place in BGC and Sereneo in Nuvali, and Avida's Verge Tower 1 in Mandaluyong drove the sales performance during this period. 60% of our sales reservations came from the premium segment composed of ALP and Alveo, while 40% was from the core segment of Avida, Amaia, and BellaVita. 60% were vertical and 40% were horizontal projects. In terms of buyer profile, 71% of our sales went to local Filipinos, and this was 27% higher than last year.
Sales to overseas Filipinos were the same as last year, while sales to other nationalities grew by 17%. They account for 16% and 13% of the total, respectively. On other nationalities, 66% were sales to Americans, 12% higher year-on-year, while the sales to Chinese buyers comprised less than 1% of total sales. We launched four projects in the first quarter with a combined value of PHP 13.7 billion, composed of horizontal developments such as Alveo's Sereneo in Nuvali and Caleya in Vermosa, and Amaia's Scapes Rizal and San Fernando Sector 2 in Pampanga. We will be ramping up our launches in the succeeding quarters in line with our budget of PHP 100 billion worth of launches for the whole year. Turning to the operating statistics of our leasing and hospitality business group, higher occupancy and rents boosted our leasing revenues. For malls, our total malls GLA stands at 2.1 million sq m.
The lease out rate of our portfolio is currently at 89%, higher than 87% last year, while total GLA under construction is 194,000 sq m. We look forward to the opening of an additional 68,000 sq m of leasable space at Ayala Malls Vermosa, Evo City, and Park Triangle, all within this year. For offices, our total GLA stands at 1.4 million sq m. This is more than double the 610,000 sq m we had 10 years ago in 2014. The lease out rate of our portfolio stands at 90%, a slight improvement from 89% in the same period last year. The total office pipeline stands at 297,000 sq m, and for the rest of this year, we will be opening 98,000 sq m of leasable space at One Ayala, Park Triangle, our Atria Technohub in Iloilo, and our Nuvali Technohub.
As far as our tenant mix is concerned, 78% of the portfolio is leased to BPOs, 10% to corporates, and 1% to POGO back offices and less than 1% is occupied by our co-working spaces. Our vacancy rate currently stands at 10%. This is significantly better than the industry average of 19%. For hotels and resorts, we have a total of 4,491 rooms in our portfolio. The average occupancy for all hotels stands at 65% and 56% for all our resorts. Total hotel and resorts rooms in the pipeline is at a little over 1,000 rooms. Our average hotel room rates grew by 11% to PHP 5,470, while resorts were 17% lower at PHP 12,273. As a result, total RevPAR of hotels slightly declined by 3% to PHP 5,385, while resorts increased by 8% rather, to PHP 14,841 per night.
Our CapEx in the first quarter stood at PHP 18.8 billion, of which 49% went to the completion of our residential projects, while 11% went to the completion of our commercial leasing projects, 9% for continuing payments on our land acquisition, a significant 30% went to our estate development initiatives, and the remaining 1% for other general uses. As you know, our CapEx spend is typically back-ended. Our budget for the year remains at PHP 100 billion. We have a well-managed debt portfolio with 91% contracted in long-term tenors, 75% of which is locked in fixed rates, while our average borrowing cost ticked up slightly to 5.2%, and an average maturity stands at 4.1 years. The balance sheet remains strong with a net gearing ratio of 0.74: 1. Cash stood at close to PHP 21 billion.
Total borrowings of PHP 265 billion, which is an increase of PHP 6.8 billion or only 3% from the end of last year, while stockholders' equity ended at PHP 328.5 billion. This is 3% higher from the end of last year. Our current ratio is at 1.79: 1, and the total debt-to-equity ratio stands at 0.81. Interest coverage stands at 4.6x within the S&P's prescribed range for investment-grade property companies. Over to the summary. For the first quarter of 2024, total revenues of PHP 41 billion, 33% higher year on year, net income of PHP 6.3 billion, up 39% year on year, CapEx of PHP 18.8 billion, a net gearing ratio of 0.74: 1. In terms of segment revenues, property development revenues increased by 47% to PHP 25 billion. Residential revenues surged by 51% to PHP 21.4 billion.
Combined office and lots for sale revenues grew by 26% to PHP 3.6 billion. In the commercial leasing segment, the segment increased by 8% to PHP 10.9 billion. Shopping center revenues grew by 9% to PHP 5.5 billion. Office leasing improved by 5% to PHP 3.1 billion, while hotel and resort revenues accelerated by 8% to PHP 2.3 billion. Our service businesses grew by 42% to PHP 4.2 billion, and this was driven by MDC's net construction revenues reaching PHP 2.6 billion. This is 70% higher. Property management, AirSWIFT, and our retail electricity supply companies generated revenues of PHP 1.5 billion, a 7% increase year on year. Before we go into the Q&A, allow me to turn over the floor to our CEO for her key messages.
Thank you very much, Toti, and good afternoon to everyone. Our CFO has discussed our financial performance for the first quarter. Allow me to give you a flavor of our assessment of the health of our business beyond the financials and the groundwork we are doing, including investments in our organization to get us to our long-term objectives. Our businesses continued their upward trajectory with the property development segment leading the most remarkable improvements. Despite the elusiveness of interest rate cuts, the various health metrics of our residential business are all moving in the right direction. At PHP 33.3 billion gross take-up, or GTU, sales were at their highest quarterly level since the pandemic. To put that in context, gross take-up in the first quarter of 2019 before the pandemic was at PHP 34.1 billion, and in 2018 first quarter, it was at PHP 31.5 billion.
Months inventory continued to decline to 21 months from 24 months in the first quarter of last year, and cancellations as a percent of revenue remain at single-digit levels, 9% for overall property development and 7% for residential products only. We attribute this performance to the strong product lineup we have ready for our premium segment, where we saw a 34% year-on-year increase in gross take-up and a disciplined and focused selling of our existing inventory in the core segments. We are set to launch PHP 100 billion in launches for the year, with 80% coming from the premium segments. Meanwhile, we continue to complete project plans for the core segments, and we have identified several projects in key Metro Manila sites that we can pull forward if our sales performance continues at this trajectory in the second quarter, even without interest rate cuts.
We started the reinvention of our shopping malls. You can see by now that Greenbelt 1 has been closed for demolition. Board ups are in place in Greenbelt 2, Glorietta 3, and Ayala Center Cebu in preparation for construction works. Next in the pipeline would be Trinoma. You may have also noticed that some very prime spaces in Glorietta are undergoing merchant replacements. This is part of our merchant mix refresh, which we are undergoing as an integral part of our mall reinvention. We are positioning to grow our hospitality portfolio, and we are investing in building our capabilities and repositioning our assets. We welcome George Aquino as our incoming Vice President and Head of Hospitality.
He is a Fil-Am with 35 years of experience in the hospitality segment in the U.S., and with his experience and passion for service, George is tasked to bolster our hospitality business by strengthening the distinctiveness of our very own Seda brand, optimizing asset returns, expanding our portfolio of brands and products, and leveraging our hospitality expertise in other business lines. George will lead the reinvention of Seda hotels and our El Nido resorts. We will start with Lagen, which will close its doors momentarily in June to commence the most comprehensive renovation it has ever undergone. We are confident of the growing international leisure market and aim to be the country's preferred provider of globally competitive leisure destinations. We took advantage of the depressed stock market conditions to return capital to our shareholders.
Year to date, we have repurchased PHP 2.6 billion worth of shares, and so far we have used PHP 12 billion of the PHP 28 billion budget our board has approved for this purpose. This PHP 2.6 billion in buybacks plus the PHP 3.1 billion in first-half dividends paid, or PHP 5.7 billion in capital returned to our shareholders, equivalent to 23% of our PHP 24.5 billion net income in 2023. All told, ALI continued to demonstrate impressive financial performance for the quarter, even without interest rate cuts, and even as we embark on the reinvention and transformation of our organization and businesses. I thank and congratulate the team for successfully keeping all the balls in the air and making it look so easy. Thank you.
Thank you very much, Meean and Toti. We now have 133 participants on the line. Before we proceed with the Q&A, I would just like to remind everyone that you can use the chat box function on the screen. Please remember to state your name and organization to be recognized appropriately. Or you may also use the raise hand function, and we will unmute your line. Thank you. Any questions? Go ahead, Mr. Raffy Mendoza from Maybank.
Hello. Okay. Thanks very much for the presentation and the strong results. I guess I just wanted to get your comments on, I know reservation sales have been the strongest, I guess, versus your competition. Can you shed some light on what you think were the competitive advantages for the first quarter versus, I guess, the slump in reservation sales from the industry at large?
Well, I guess we've always been fortunate to have a portfolio of brands that caters to the widest range of markets. This has enabled us to, I guess, go into segments where the opportunities are. In this case, the premium residential segment has remained most robust since the pandemic. So we've been focused on catering and ensuring we have the right products for this segment. Last year, 80% of our launches were in the premium segment. I think a good percentage of those happened in the fourth quarter. So this year, we really just focused on selling to that segment and focused on moving our product. We have a very good set of projects that, I guess, the market really appreciated, starting off with Park Villas, Park East Place, our developments in Nuvali, and in the south.
I think it's really the focusing on that right segment, capitalizing on our capabilities in that segment, and having a good lineup of projects.
And if I can add, I would like to do a shout-out to the best sales force in the country today. For our premium segment, we have strengthened the selling team. We increased the number of sellers by 22%. This is just for our premium segment. We had about 1,500 sellers in 2022. As of last year, it is close to 1,900 sellers. Similarly, for our international sales team, we have also increased the capabilities there. We grew that sales force by 18% from just about 300 in 2022. Now they stand at 360. Overall, we have increased our selling force to over 8,600 personnel. I think this sales force is probably a very formidable power in this segment in the residential market.
Thank you for that. Can I just add another question? This time on the mall segment. I know Ayala Mall is undergoing various changes the past few months and in the coming years. Can you just give some color also on the merchant mix, or at least the split between food and beverage with the merchants?
I think across the board, we are looking to increase, and this has happened, I think, prior to even the renovations. I think the idea is that at minimum, we should have roughly about 30% food at minimum. For some of our malls that are more entertainment and experiential in nature, that will be even higher.
Okay. Do you have a follow-up question? Okay, thank you, Raffy. Now let us move on to Ms. Jelline Gaza of JP Morgan. Go ahead, Jelline.
Good afternoon. Can you hear me?
Loud and clear. Go ahead.
Thank you. My first question is on the absorbed inventory. Would you be able to give us the peso value of absorbed inventory as well as mix between premium and core brands as well as vertical and horizontal, if you have that?
Hi, Jelline. In terms of inventory, I cannot give you the split right now between premium and core, but in terms of value, it is roughly a little above PHP 200 billion.
Okay. In terms of the malls, I noticed that mall revenue growth was still decent at 9% despite the renovations. Is this something that we can expect as we still go through these renovations with actually almost no disruption?
Yeah. I don't think we speak to future forecasts on a per sub-unit basis. We have mentioned in the past that our president has committed to a 15% growth over the next five years, and we will continue to work through that. I think opening of new. We've seen some increased rental rates specific to Greenbelt, so rental revenue from Greenbelt has increased, and also Manila Bay. We've seen improved occupancy for both Manila Bay and Central Bloc. Our existing malls are helping us maintain continued sales and revenue growth despite the renovations.
Thank you for that color. My last question is on the profile of new launches. You stay committed for the PHP 100 billion target for the year. Can you give us more clarity as to what type of brands, of product positioning, and the increasing mix of residential malls? How are those trends going to impact your reference for new project launches for the rest of the year? Thank you.
We are still planning on the PHP 100 billion in residential launches for this year, 80% premium, 20% core, and roughly 50/50 horizontal and vertical.
Okay. Do you have any follow-up questions, Jelline?
I'm good. Thank you so much.
Okay. Thank you. Now let's move on to Ms. Joy Wang of HSBC.
Hi. Thank you for taking my question. Just to follow up on the question on the new launches, can we get a sense in terms of the distribution for the PHP 100 billion? We've seen PHP 14 billion being launched in the first quarter. Shall we expect evenly distributed, and could you share a bit in terms of how market responds to some of the new launches as well? Thank you.
Our launches are typically back-ended. Last year, for example, close to 50% was launched in the fourth quarter. I don't think this year it will be that extreme, but the majority will still happen on the second half of the year. Was that the question? Was there something else?
Yep.
That was the question.
Just to follow up, is your launch plan based on assumption of interest rate cut or not?
No, we're not assuming interest rate cuts for these launches.
Okay, cool. Thank you. Can we just get a bit of guidance in terms of your margin for residential segments as well?
Joy, we will give you an idea of our margins in our first half briefing. We release a margin analysis for our business lines during the first half review and full year. But suffice it to say, for residential, our target margins remain the same. We want to see 35% GP margins for vertical projects and mid-40s for our horizontal projects.
Thank you. One last question from me, just on capital management and ROEs. We have seen quite a bit of capital returns. I think when you took over, you also talked about faster asset turn. Could we get a sense as to the progress and the initiative on faster asset turn? Thank you.
We said about an average 800 hectares per year. I think we are still set to do that. Use of land bank.
Oh.
800 hectares of land bank per year.
Okay. Can we get the sense, first quarter year to date, how much have we done?
We have only launched PHP 14 billion, four projects this year. Not yet significant, but if you think about our PHP 100 billion of launches this year, 50% would be horizontal. Those would all be heavy users of land bank.
Got it. Thank you.
Thank you.
Okay. Thank you, Joy. Now let's move on to Mr. German dela Paz. He asks, "May I ask again for more color on the consolidation of previously equitized earnings? May I ask the reason for the quarter-on-quarter decline in lease out rate for both malls and offices?"
I'll take the consolidation first. To the first question, the consolidation. This was the consolidation of AKL Properties, our joint venture with the Kuok Group. As you know, we launched a pretty large estate in Carmona, Cavite called Ciela at Aéra, and we launched our first horizontal subdivision there two years ago, which is selling out very quickly. That subdivision is called Ciela. It's a 50/50 joint venture, but given that management is primarily vested in Ayala Land, then we deem it fit to consolidate that entity.
In terms of revenue pickup for the first quarter of this year, it added PHP 1.5 billion to our top line. We took it out from equity net earnings, and because it's consolidated, then you'll see the number in our top line. For revenues, it added PHP 1.5 billion.
On the decline in the lease out rate. On the office segment, there was a 2 percentage point decline in our lease out rate, largely because of a major tenant not renewing an expansion area. But suffice to say that we are talking to warm prospects to cover any of the vacancies. In fact, I think the vacancy is roughly about 20,000 sq m GLA. We're talking to tenants worth about 40,000 GLA. So we're quite confident that we will be able to replace this tenant. On the mall, I think we are 1 percentage point down, and partly because we've started our merchant replacement programs. This will just become part of our business. There will be quarters wherein you will see fluctuations in our lease out rates as we undergo our merchant replacement program.
Yeah. Thank you, Meean. The next set of questions comes from Mr. Russ Toribio of BofA. The first one is can you provide the breakdown of your inventory in terms of the RFO and under construction? The second question is, what is your unbooked revenue?
I'll answer the second question first. Russ, it's roughly about a little over PHP 150 billion. For the first question, RFO is three months' worth.
Thank you, Russ. Let us know if you have any follow-up questions. Let's entertain the question from Ms. Jelline Gaza. What are the recent pre-sold levels for Park Villas and Park East Place?
Park Villas is around 40%, and Park East Place is a little more than 50%.
Okay. Thank you, Mike. The next question comes from Mr. Paulo Gabriel D. Garcia of ATRAM. For the mall segment, can you provide more color on what tenants are performing well as of late, especially as consumer spending normalizes, F&B and/or retail shops?
Yes. We are still seeing a continued growth in the food segment in terms of productivity. Also, essentials continue to be quite strong. But I think what is probably different for us compared to some of our competitors is that fashion and retail continues to be relatively decent in terms of growth, given that I think the market that we cater to is a little more shielded from inflation.
Okay. Thank you, Mariana. The next question comes from Ms. Xuan Tan of Goldman Sachs. Go ahead, Xuan.
Hi, good afternoon. My first question is on the launch pipeline. I recall there was another PHP 15 billion of launch target for this year for commercial and industrial. Is that still the case, and also what is the timing on that?
Sorry, did I hear correctly commercial and industrial?
PHP 15 billion budget.
PHP 15 billion is our budget, and yes, that is still on the table.
Okay, got it. My second question is on the new space. 68,000 for malls and 98,000 for office. What is the pre-commitment rate there?
Can you repeat that, please?
What is the pre-commitment rate for the new area?
What is the pre-commitment rate on the new GLA to be developed for malls and offices?
Yeah.
We do not usually disclose that at this stage.
Thank you, Meean.
Got it. Okay, thank you.
Thank you. Any questions from our live audience? Mr. RJ Aguirre of UBS, go ahead.
Hi. Thank you, Mike. Thank you, Meean, Mariana, Toti, and Mike. For residential, just a follow-up from earlier questions. Unbooked revenues in terms of the billion number, would you have that?
PHP 150, RJ.
PHP 150. Okay, thank you. In terms of pre-sales, how much is Metro Manila versus ex-Metro Manila? That might be a factor.
We will probably get back to you on that, RJ.
Okay. In terms of launches, I noticed that it is horizontal for the first quarter. Is this a signal that high-rises or vertical is not conducive for launch at the moment? Or for the fourth quarter, you have a lot of launches?
Yeah. We launched a lot of verticals in the fourth quarter. This year, our plan is 50/50. Of the PHP 100 billion, about 50% is vertical and 50% is horizontal.
Thank you, Meean.
For the location-
Yeah, I think it's 50%. 50/50. Metro Manila versus-
Metro Manila, 53%, provincial, 47%.
Thank you for that. Okay, that's it for now. Thank you.
All right. Thank you, RJ. Let's have Mr. Carl Sy.
Hi. Carl Sy of Regis Partners . I'd like to ask about the residential segment. You have one high-end project each in BGC and Makati. I just want to check when the time comes and these are well sold or all fully sold, do you still have land bank for more such projects?
I think we're the largest landowner in Makati and BGC, so I think we should have land beyond these two projects in Makati and BGC.
Got it. With respect to the mall business this time, you have a lot of space being reinvented. Can you give us an idea of what that percentage is relative to the entire portfolio?
The main reinvention is happening in our four flagship malls, which accounts for about 30% of our in-line GLA.
That's over the next six to nine-
Yeah, but we're not going to do all of it at the same time. It will probably take us two to three years to complete, so that we don't close all that space in one time.
Okay. Understood. Thank you.
Okay. Thank you, Carl. The next question comes from Mr. Marco Mauleon of BDO. Thank you for the briefing. Are you also keeping your previous growth target of 15% this year?
CEO said we got to meet 15% growth year-on-year, so yes.
I wanted to give a different answer. Let's have Mr. Wilson Ng of Morgan Stanley. Go ahead, Wilson.
Hi, good afternoon. Just a few questions from me. Firstly, on the earnings, the first quarter's EBIT margin, 30.7%, seems a bit lower than the full year EBIT margin for last year of about 34%. Is there a reason for this? Is it seasonality? Do you expect margins this year to be similar to where it was last year?
Yes, Wilson, the margins we will target to keep our EBIT margins within the mid-30s level. We continue to be very disciplined about our margins. I did talk about our target GP margins for residential, and similarly, we have our target EBITDA margins for leasing. Overall, EBIT margin should be around between 30%-35%.
Thank you, Toti. Second question is on the cost of borrowings. I think it went up a little bit to 5.2%. How do you see it trending for the rest of the year?
We will be implementing our borrowing program towards the latter part of the year. Hopefully, we'll see some rates subsiding a bit. But given the fact that close to 90% of our debt is fixed, the incremental bump up in our overall cost of debt is pretty manageable. So maybe it comes up by about 40 basis points for the year. It's not going to be a sharp increase in our cost of debt. And as you've seen, our overall cost of debt remains lower than the central bank's policy rate.
Okay, that's very helpful. Just one last quick question from me on the residential pre-sales target, 15% growth this year. Would that still be your target if there's no rate cut from the BSP this year?
If there's no rate cut, would the 15% still be there?
I think what we've always said is in the next year or two, we will be focusing on the premium segment, which we believe is less sensitive to interest rate cuts. Although after two years or so, we do need this core market to come back. And I think the implication of reduction in rate cuts may not be immediately felt, but we will need to see its impact in maybe two to three years.
Okay. Thank you, Meean.
Okay, thank you, Meean. That's all from me.
Thank you, Wilson. I don't see any questions on the line. Would we have any questions from our audience? Yes, go ahead, RJ.
Sorry, I just remembered. My question is how much of your current inventory, 21 months' worth, is still Avida, middle income or core, if you may? If that's available. Just curious because you launched PHP 4.6 billion last year in Avida, but so far the last few months, the past few quarters, you sold over 100. Or no, sorry, more than PHP 50 billion of Avida.
We don't give the breakdown of our inventory, but maybe let me just describe what's going on in the business. If you've been following us, you know that our launches in the past maybe 12 or 18 months have really been in the premium segment. We've hardly launched, frankly, Avida or some of our core products, and that's because we really wanted to focus on selling existing inventory in that segment. We seem to be over the hump now, but we did have cancellations early last year in Avida, and therefore we treaded very carefully as far as our launches are concerned. We're now at the point where we are more comfortable with the inventory levels of Avida. We're more comfortable with the cancellations that we're experiencing, which is why we can now talk about possibly bringing forward some of our projects for launch in Avida.
I think we are now even. We're lower than 21, right? The average is 21. Avida is actually lower than 21.
That's great. Thank you.
Thank you so much.
Thank you, RJ. Any more questions? Last call for questions before we have some halo-halo. I don't see any more questions. That concludes our briefing on our performance in the first quarter. We hope you found the information very helpful. If you have any further questions, please get in touch with us through investorrelations@ayalaland.com.ph. Additionally, a recording of the briefing will be available on our website at ir.ayalaland.com.ph. Once again, thank you all for joining us this afternoon. We have snacks at the back for everyone to enjoy. Thank you