STAYING AHEAD OF THE CURVE

By JJ Atencio, CEO of 8990 Holdings, Inc.

3rd Annual Shareholders Meeting
July 25, 2016
Our Board of Directors led by my business partners Luis and Marin, Datuk Ben Chan of
Kazannah and TPGs Dom Picconne, the senior executives and staff of 8990, Mr. Mike
Cosequien, Megawide CEO, our media friends, PSE analysts, and our valued
shareholders here and everywhere in the world, good afternoon. THANK YOU ALL
FOR COMING.
Welcome to the third ASM of HOUSE.
Id like to start by saying, that thanks to your support, the hard work of our management
and staff, and the trust of our homeowners in the DECA Homes Brand, we are now
regarded as a largest and most innovative mass housing developer in the Philippines
today.
Weve built more than than 43,000 homes in 12 years for the average, working class,
lower-middle income Filipino and his family that includes government workers, private
employees, BPO workers and OFWs that form the backbone of our countrys business,
commerce and government. We have consciously made our prices affordable: from
450 thousand to 1.4 million pesos. Its like a brand new home for the price of a good
second-hand car, or a monthly amortization equivalent to two cups of coffee everyday at
Starbucks.
Now, to continue growing and moving forward, any enterprise, whether it be a country
or a company or an individual, must have a sense of history. I am often intrigued by the
question: 500 years ago, where did we live? How did property ownership evolve to
what it is today: a 5.5 million housing backlog, growing by 5% each year, and how does
an affordable homebuilder like 8990 respond to this phenomenon I describe as
modern-day middle-class homelessness?
Weve done so much in the past 50 years, from President Marcos up to President
Aquino III, and yet, the basic issues surrounding homelessness and affordability and
housing supply are still the same issues we continue to talk about today. Weve done
so many reforms and counter reforms, the question is not anymore, What can we still
do, but rather, what havent we tried?
For 8990, it has always been a case of flexibility, adaptability and creativity to brave the
challenges that come from a constantly changing environment.. The ability to always
stay ahead of the curve by innovation, education and customer service, gives us the
winning edge to maintain leadership in the industry.

Ive always believed that in order to be successful in mass housing, youve got have a
sense of mission. When we started 8990 12 years ago, my partners and I wanted to
have a business that was not only profitable, but also had tremendous social impact.
We are driven by the idea that housing is not about houses, its about people, and how
we can use housing as a vehicle to transform peoples lives for the better.
In order for our business to continue with its success, it must first be grounded on the
realities of how ordinary working class Filipinos live, earn and spend their money, if it is
to be truly effective and meaningful today. Once upon a time, it was enough for us to
know the customer. Today, it is beyond knowing. Its about a mindset that is anchored
on accepting who our market is, trusting his capabilities and working with his limitations,
help him become who he wants to be.
This is what we found out: our buyers are deeply aspirational they want to move up
from being renters into property owners. But they are practical they want value for
money. And they are optimistic. Not only about their own future, but the future of their
country as well. They are young, college educated, have stable jobs augmented by
informal income. But they have no savings and therefore cannot pay rent and an equity
downpayment at the same time.
Knowing this, our business model had to emphasize three things: construction thats
fast; housing finance thats cheap, and a collection platform thats good.
Fast, Cheap and Good. Have you ever heard about that Rule? It goes like this. There
are three desirable characteristics in anything: fast, cheap and good. But the rule is
you only get two out of three. Meaning, if you want it fast and cheap, it wont be good.
It you want it cheap and good, it wont be fast. And, if you want it good and fast, it
certainly wont be cheap. But just what if, we can design our business, and break the
rule, to have all three?
In 8990, we adopted Pre-cast technology that gives us the capability to build strong
houses in as fast as eight days.
In 2004, our Chairman Emeritus made the major decision to use pre-cast wall panels in
when the industry was still building houses made of hollow blocks. Through trial and
error, many mistakes and discoveries later, we were able to scale up our technology
that produced so far 43,306 solid pre-cast houses in 39 completed projects since we
started 12 years ago. By the end of 2015, we had a capacity of 14,880 units. In 2016,
this will ramp up by an additional 56 forms with a new capacity of 28,320.
In 2015, we delivered 8,077 DECA Homes to homeowners, compared to 7,150 a year
ago, with audited gross earnings P9.3 Billion, a 21% increase from 2014s gross of P7.7
Billion. Net earnings increased by 13% to P3.7 Billion from P3.3 Billion in 2014.

On a five year track record since 2011, we see our Compounded Annual Growth Rates
on a steady rise. 41% for Gross, Revenue, 50% for gross Profit, 72% for EBITDA and
71% for net income, making us one of the fastest growing real estate companies in the
Philippines today.
I am often asked, what is the simplest way to cure the housing backlog? Well, just build
more houses. And use pre-cast wall panel technology if you want to build it fast.
Then, we innovated our housing finance. In addition to growing our business with the
Pag-IBIG Fund, we created our in-house CTS Portfolio by offering a down payment of
only 5%, a lowest in-house rate of 9.5%, and the longest terms of 25 years. Because of
this, we were able to lower our buyers monthly amortization to make it easier for our
buyers to continuously pay their cheap amortizations long-term.
In 2015, we delivered 4,341 accounts to Pag-IBIG Fund, of which 2,610 accounts
valued at P2.4 Billion were taken-out. This represents a 28% increase in taken out units
and a 35% increase in value compared to 2014 take-out figures.
Our CTS portfolio has not only given us our recurring income of P1.2 billion in 2015, but
its has become the cornerstone in our efforts to lead the industry into the next wave of
housing finance, mainly: the Purchase of CTS receivables by the banks and
securitization. I sometimes lament that our CTS Portfolio fails to get the well-deserved
respect and good will it deserves.
For 2015, our CTS portfolio increased to 20,093 accounts with a principal value of
P18.8 Billion, or a growth of 33% from last year. In October 30, 2015, on the strength of
a Performing Accounts Ratio of 96%, we were able to sell the first billion of our
receivables to BPI Family Bank, which paved the way for similar arrangements of
Receivables Purchase Without Recourse from BDO and Security Bank for an additional
P5 Billion, as well as the largest securitization effort ever in the history of Philippine
Housing Finance in the amount of P5 Billion underwritten by Chinabank Capital.
In July 2015, we floated 8990 Corporate Bonds of P9 Billion. We were able to move
our short-term debts to long term to properly match our assets with our liabilities, thus
providing us better liquidity ratios. But what is important to note is this: The projected
Interest Income from CTS Receivables alone is sufficiently enough to service all
payments of the corporate bond based on conservative assumptions, without relying on
income generated from sales. That is the magic of CTS Receivables that, while many
people think is a liability, the banks see as a great opportunity to serve the mass market.
What did all our efforts result in? For the first time since we listed two years ago, our
efforts in looking for take-out avenues for our fresh sales and CTS receivables have
resulted in a positive cash flow from operations in the second quarter 2016. From a
negative 2.2 billion cash balance in 2Q15, we are now positive 42 million and if you add
the sale of receivables, we are positive 119 million.

This is the turn-around where we expect more cash flows as we level up our takeouts of
HDMF and Banks CTS purchases in the quarters to come.
Third. Now that we have fast houses and cheap financing, how do we mitigate the
risks? The answer: By creating a good, comprehensive credit scoring and collection
platform that allows us to grow without increasing credit risk or contingent liability.
Our collection platform is a major innovation, whose main objective is not to collect, but
to use education and behavioral modification to form good habits of regular amortization
payments. 8990 is the only developer that requires its buyers to undergo a half-day
financial literacy seminar before they can be allowed to reserve a unit.
Here is an interesting fact: looking at our default statistics, we note that the higher the
income, the greater the default. So, its not about affordability. We have properly vetted
the buyers financial capacity, so we know they can pay. Rather, this market segment is
prone to making poor financial decisions only because they lack the insight and the
information necessary to make wise financial planning decisions.
Our financial literacy seminar therefore seeks to bridge this gap by first telling them
WHAT to pay: the legal, financial and banking implications of home ownership.
Next, we make them realize WHY they need to pay. That property is not only shelter
today, but also a basic real investment whose price appreciation guarantees financial
security overtime.
Finally, we teach them HOW to pay, through a family budgeting exercise that teaches
them how to classify expenses and prioritize investments like home they live in.
If we can make Filipinos more financially literate, we would all make correct and
intelligent expenditure decisions all the time. Think of the progress we can have. This
mindset has provided us with a stable 96% performing accounts ratio every year since
our in-house financing program started in 2011.
When armed with a proper mindset that we are able to put in these three components
together, the result is exponential growth. The track record of this business model from
2011 should speak for itself.
As far as dividends are concerned, we have consistently paid out four times in the two
years weve been public: The first in December 2014 and the latest in February 18,
2016 for a total payout of 53 cents. God willing and with your support, you can expect
two dividends a year at a declaration consistent with our dividend policy of 50% of
unrestricted retained earnings subject to available cash.
Before I end, Id like to formally introduce to you the new executives of 8990 Holdings.

Mr. Gerard De Guzman, formerly with Jones Lang Salle and LandCo Pacific, is our
General Manager for Luzon Operations. Mr. Dennis Lim, formerly SVP-Sales of
Federal Land and National Sales Head of the Extra Ordinary Group is our General
Manager of NCR Sales, Mr. Willy Uy, past SHDA President and former CEO of the
Phinma Properties, and Mr. Manuel Crisostomo, past President of SHDA, former
President of Firm Builders Realty and Past President of Pag-IBIG Fund.
Id like to end with my favorite quote from Time Magazines businessman for the 20th
century. A great innovator who said: I will build a car large enough for the family, but
small enough to easily maintain. I will use the best materials, hire the best people, and
use the simplest design that modern engineering can devise. But it will be so low in
price, that anybody earning a salary will be able to afford one.
This is what our company 8990 and what mass housing should be all about: a way by
which people of whatever station in life can own property and finally become
landowners in the country where they are citizens of.
With a new President of the Philippines, focusing on countryside development,
infrastructure and regional economic zones, the future remains bright for 8990 and
mass housing. In the next few years, you will see our expansion in Davao, Ilo-ilo and
Cebu where we have established our leadership position well ahead of the competition,
as well as new areas in Bacolod, General Santos and Marilao. And you will also see
our explosion in Metro Manila where we, in partnership with an outstanding company
Megawide, shall invade the mid-cost condominium space with some 50,000 new low
priced condo homes with our very own DECA Malls as the major amenities.
If we are able to harness the power of a vision, empower an organization through a
deep sense of mission, and use this business model on a grand scale, then fifty years
from now, where will we live?
Sometimes, God gives us the opportunity not just to run a good business, but also, to
solve a great problem.
Thank you very much, ladies and gentlemen!
END.