Ayala Land Inc. will develop tourism complexes and hospitals as one of the Philippines’ biggest builders expands beyond housing, malls and offices to boost profit that rose to a record. Shares rose.

Net income at the developer climbed 30 percent to 11.7 billion pesos ($262 million) in 2013, exceeding its 10 billion- peso target a year ahead of a five-year plan. Sales of homes, offices and commercial properties rose by more than half to 52 billion pesos, accounting for two-thirds of revenue.

“Growth will have to be more balanced,” President Antonino Aquino, 66, said in an interview at his office in Manila on Feb. 26. “We’ve laid down the foundation for future growth, while at the same time growing at a 30 percent rate. Now, there’s going to be a lot of investments on the recurring- income side of the business,” which refers to earnings from rentals of offices and commercial spaces, and revenue from the company’s hotels and resorts business.

Record-low interest rates and increasing remittances from the nation’s 10.5 million citizens living overseas have helped increase home sales at Ayala Land and supported spending at its malls. The Philippines’ $250 billion economy expanded 7.2 percent in 2013 after gaining 6.8 percent the previous year, the fastest two-year pace since the 1950s, and is expected to grow between 6.5 percent and 7.5 percent this year.

Securing Growth

Ayala Land will start developing this year a 300-hectare property in El Nido town in Palawan, a province facing the South China Sea where the company already operates four island resorts, into a mixed-use tourism complex, Aquino said. The development will include hotels, restaurants, shops and residential properties.

It will spend about 5 billion pesos to build 10 new hospitals and the same number of clinics over a five-year period, Vice President David San Pedro said on Feb. 19.

Tourism accounted for 6 percent of the economy in 2012 and employs more than a tenth of the nation’s workers, according to government statistics. Foreign tourist arrivals rose about 10 percent to 4.68 million in 2013. Revenue from inbound visitors rose 15 percent to $4.4 billion, according to the Department of Tourism.

“There will be periods when the property sector wouldn’t be as strong,” Richard Laneda, an analyst at COL Financial Group Inc., who has a buy rating on the stock, said. “Building their recurring businesses will get them through the economic swings and ensure sustainable growth.” Higher interest rates would be a challenge for builders as they could damp demand, he said.

Infrastructure Projects

Shares of Ayala Land rose 1.7 percent as of 10:24 a.m. in Manila, poised for the highest close since Oct. 30, while parent Ayala Corp. advanced 2.1 percent. The builder’s stock has risen 20 percent this year after a 6.4 percent drop in 2013.

Profit may rise to 14.4 billion pesos this year, according to the median estimate of 14 analysts surveyed by Bloomberg.

“You will always see us in industries that are a priority of the government and will have a very good tailwind coming from the economy,” Aquino said. He cited the company’s mixed-use developments in Cavite and Laguna, provinces near the capital where a 35.4 billion-peso, 47-kilometer expressway will be built. “We’re focusing on areas that will benefit from major infrastructure” projects.

Landbank Increase

Ayala Land spending will rise about 5.6 percent to 70 billion pesos this year from 66.3 billion pesos in 2012 to complete developments and start 78 projects worth 142 billion pesos. Residential units to be sold this year will rise to 30,000 units from 28,482 units in 2013.

The company, which has about 8,000 hectares in its landbank, mostly near Manila, is adding more locations and is scouting for large holdings, Aquino said. It is also open to joint ventures with property owners.

“We’re about 70 percent there, there’s still 30 percent to go,” he said. “If you truly believe the country has good economic prospects, the time to do your landbanking was yesterday.”

No Bubble

Land values in Makati City, where the main financial district is, rose 5.9 percent in the fourth quarter from the previous three months to an average 341,505 pesos per square meter and are forecast to increase 8 percent this year, broker Colliers International said in a report released this month.

Competition among Philippine builders has kept home-price increases at “mid-single digit levels,” Aquino said.

The residential market should be watched closely as low interest rates may spur demand, Michael Wan, an analyst at Credit Suisse Group AG, wrote in a Feb. 12 note.

“There’s no price bubble because competition keeps everybody honest,” Aquino said. “I am not discounting the point that there could be some market segment in some locations that all of a sudden may have an oversupply situation. It’s not what I call a price bubble.”

With assistance from Norman P. Aquino in Manila. Editors: Andreea Papuc, Tomoko Yamazaki. To contact the reporter on this story: Cecilia Yap in Manila at cyap19@bloomberg.net. To contact the editor responsible for this story: Chua Baizhen at bchua14@bloomberg.net. 

Photo Credit: Development in the Makati City sector of Manilla. Jun Acullador / Flickr