Deca Homes fuels 'masa' housing market race

Q2/21 profit of P1.9 billion, up 1,272% from Q2/20 profit of P1.4 billion, and up 23% from Q1/21 profit of P1.6 billion. 8990 Holdings [HOUSE 7.28 0.55%] is a low- to mid-market housing developer that does businesses under the “Deca Homes” brand. HOUSE sold 56% of its total units in Luzon in 1H/21, with Visayas accounting for 27% and Mindanao the remaining 16%. HOUSE said that its big Q2 and 1H numbers are not just due to the “low-base effect” since its performance is approaching parity with what it was doing pre-COVID in 2019.

HOUSE’s total revenue for 1H/21 of P10.0 billion is only 5% lower than its 1H/19 revenue, and HOUSE’s management thinks that the company will “perform well for the remainder of the current fiscal year”. HOUSE said this in full acknowledgment of the “lingering effects of the pandemic” and the possibility of more lockdowns.

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HOUSE’s earnings reports are usually pretty dry in terms of analysis from management, but their numbers are hard to argue with, and they are one of the few companies that are actively measuring its current results against 2019 numbers. I’m a big fan of that. Perhaps it’s only the companies that are close to their old selves that feel comfortable drawing attention to their 2019 numbers. Either way, the continued surge in the “masa” housing market has filled HOUSE’s sails in a way that other developers, bogged down by commercial real estate development or high-end luxury towers, are having a hard time matching.

That HOUSE could actually be on-pace to meet or even exceed its 2019 numbers for the full 2021 period should give HOUSE (and its investors) a great deal of swagger. I’m more interested to see how HOUSE will use its continued outperformance to its advantage, or to its shareholders’ advantage. The HOUSE stock price has basically been melting or going sideways since Christmas (down 20% since then), and has not really recovered at all from its pre-COVID high of around P14/share (down 50% since then).

Shareholders have reason to be excited, but they also have (ample) reason to be concerned with the stock’s continued sluggish performance. Management says that recovery is close at hand, but for those just looking at the stock price, full recovery is almost as far away as it’s ever been.

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