Happy Thursday, Barkada --
The PSE gained 143 points (!!) to 7453 ▲1.9%
The CREIT IPO has been delayed until at least tomorrow, and at most, Tuesday of next week, due to a processing bottleneck in the infrastructure used by the SEC and PSE to track IPO share ownership. More on this in the Morning halo-halo section below.
Shout-outs to
Jing and
Angry Kitty for supporting my call for improved services to retail investors, and
psestocktipsdaily for the meme love.
Shout-outs to kalel.sol, @vrsxachei, Park_RosieAnne_Chaeyoung, fintastico, Anamay Legani, Jonathan Burac, Bebe, @Donbelle_Forever02, Stephen Chiong, Carl Ambráy, KDLEXBABE, Palaboy Trader, Just’n, mArQo, Chip Sillesa, @khattiyayayaa, Froilan Ramos, meloi, Lance Nazal, ash1eyr10t, Rumaras Musen, ambondoc, Rolex Jodieres, Lysender, Evolves Capital, Inc., and Jing for the retweets, and to Rumaras Musen, Evolves.co, and Marvin Quezon for the FB shares.
- Citicore Energy REIT IPO delayed until maybe tomorrow, or maybe later
- Solar Philippines NEC Q4 profit ▼317% y/y, ▲30% q/q; but it doesn't really matter
- Figaro Coffee Group Q4 profit ▲101% y/y, ▲48% q/q; more detail and analysis needed
- PLUS: Quick takes on BANK, FILRT, and MPI
▌Top 3 MB indices:
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▌Bottom 3 MB indices:
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POGO Gaming ▼0.00%
Hedgy Metal ▲0.26%
Fast Food ▲0.79%
▌Main stories covered:
- [UPDATE] Citicore Energy REIT [CREIT 2.55 pre-IPO] IPO delayed until maybe tomorrow, or maybe later... News broke yesterday around 2pm that the CREIT IPO would be delayed by one day, as the “overwhelming demand” caused a backlog in the behind-the-scenes processing that required a little additional time to get sorted out. The notice of the change was withdrawn just five hours later, with CREIT saying that the IPO date change was still pending with the PSE. Then, around 9pm, a disclosure was posted to say that the IPO would be moved to “no later than February 22, 2022”. Definitely, the IPO is not today. That’s about all we know with certainty. Maybe it will be tomorrow? Well, definitely, for sure, at least we know that it would have to be by Tuesday, at the latest.
- MB: This sort of thing has happened before; most recently with Megaworld REIT [MREIT 20.15 ▲1.26%], but probably most famously with Injap Sia’s MerryMart [MM 2.13 ▲2.40%] IPO, deep in the “heart” of the 2020 COVID lockdown. In both cases, the IPO was oversubscribed (MREIT by 2x, MM by 15x), and that’s roughly the same case here, with the latest rumor being that the CREIT IPO was 2x oversubscribed (in totality, across all tranches). This “problem” (and for CREIT, MREIT, and MM, this was a good problem to have) seems to arise when there is significant retail interest in an IPO from a large number of accounts. Here, CREIT said that there were nearly 20,000 investors (“double that of recent transactions”), and the lodgement of shares with the Philippine Depository and Trust Corporation (PDTC) is yet again the bottleneck that has inserted itself into drama of the moment, exactly in the way that a piece of boring infrastructure shouldn’t. This delay isn’t the fault of CREIT, the same as how the previous delays were not the fault of MREIT or MM, yet just knowing that feels vaguely unsatisfying. This is clearly a problem that needs to be fixed, but I don’t know enough about the situation or the interplay of jurisdictions and mandates to know exactly where to lay the blame for this very foreseeable situation. So, we have a groundswell of retail interest in IPOs that is part of a larger trend of increased retail interest in the stock market generally. The uptick in interest and activity has stretched the system’s infrastructure (PSE EASy refunds, PDTC lodgements), humbled broker infrastructure (COL Financial [COL 4.05 ▲0.25%] server meltdowns over the past couple years), and yet it has also generally enriched both the PSE and the brokers through all the new money these accounts bring into the system, and all the commissions and fees that everyone has been able to earn off the trading activity, and the listing activity that has grown as a result of that trading activity. We’re long overdue for a little of that enrichment to trickle down to the retail investor, in the form of higher expectations on the part of the SEC, PSE, and its trading participants for how retail money is handled and retail investors are treated. I hope the PSE’s interest in reducing the size of PSE EASy program’s total tranche (from 10% of each IPO down to just 5%) isn’t just a short-sighted attempt to solve this “lodgement problem” by limiting the supply of stock available to local small investors.
- [Q4] Solar Philippines NEC [SPNEC 2.10 ▲0.48%] Q4 profit ▼317% y/y, ▲30% q/q... Q4/21 net loss of ₱14.6 million, down 317% from Q4/20 net loss of ₱3.5 million, and up 30% from Q3/21 net loss of ₱21 million. One of the PSE’s best performing stocks over the past couple of months (up 110% since its mid-December IPO) is something of a peculiar case, since it’s actually non-operational. This quarterly report spells that out pretty clearly. SPNEC is using the proceeds of the IPO to build the solar power facility that will provide revenue, starting later this year, but until then, the company will continue to produce quarterly reports that just don’t look that good. Most investors that jumped into this stock during the IPO offer period likely know and understand that the SPNEC story is one of delayed gratification, of future gains (revenue and operating businesses) from current pains (losses and paying a high valuation for a non-operational company). The same might not be said of all the traders that piled into the SPNEC boat as the stock price gains topped the charts over the past six weeks. The point I’m trying to make here is that these financial results are basically just noise, that the real “game” for SPNEC is in the completion of its current project, and in its ability to replicate that land-to-facility transformation to monetize its land holdings and the land holdings of its parent company and affiliates.
- MB: In broad strokes, SPNEC “lost” more money than Q4/20 because it entered into new lease agreements in January of 2021 for 170 hectares of land for development, and that’s exactly the kind of thing SPNEC shareholders want it to be doing. These financial results are just not reflective of what’s really going on under the hood for SPNEC, so my point is that we should definitely follow the plot closely and consume, with great interest, updates on the company’s construction progress, stock rights offering plans, and acquisition plans, but that we shouldn’t pay too much attention to the direction of the net income arrows until the SPNEC plan actually results in a solar power plant in commercial operation. Until then, these quarterly reports are just going to be weird little footnotes that we only briefly glance at for any weird material changes.
- [Q4] Figaro Coffee Group [FCG 0.83 ▲5.06%] Q4 profit ▲101% y/y, ▲48% q/q... Q4/21 profit of ₱107 million, up 101% from Q4/20 profit of ₱53 million, and up 48% from Q3/21 profit of ₱72 million. On a 6-month basis (H2/21 vs H1/21), FCG reported double-digit increases in system-wide sales (+17%), net revenues (+18%), EBITDA (+29%), and net income after tax (+29%). FCG attributes higher revenues in Q4/21 specifically to a 75% increase in royalty and franchise fees associated with the opening of franchise stores during the period, and to an overall increase in sales and revenue, coupled with lower raw material costs, that produced greater gross margins. FCG provided segment analysis of revenues between the two halves of 2021, but that doesn’t tell the operational story that a segmented breakdown of system-wide sales and same-store sales could provide. From what they did provide, revenues from Angel’s Pizza grew 12%, while Figaro Coffee grew 10% Tien Ma’s was flat, and TFG Express had no historical comparison. Angel’s Pizza accounted for over 92% of FCG’s operational revenue in H2/21.
- MB: FCG didn’t provide as much guidance and analysis as I would normally like from a brand-based holdco, which is especially frustrating for shareholders and investors that are trying to evaluate the value of FCG’s future plans (which are super-heavy on its Angel’s Pizza brand) based on data from these reports. A 17% increase in system-wide sales in the second half of 2021, as compared to the first half, is undeniably a great thing, but how does that breakdown for its main brand, Angel’s Pizza, and all of its secondary brands like Figaro Coffee, Tien Ma’s, and TFG Express? Are any of its secondary brands growing at a faster rate that might indicate opportunities? Do any of the same-store sales figures reveal operational opportunities for bottom-line growth? We can’t really tell. To FCG’s credit, as a public company it’s still less than a month old and this is only their first quarterly report. It’s fair to assume that nothing material has changed with the company since we bathed in the hype of the IPO’s sales pitch, but I hope that future reports will be more detailed and transparent to allow shareholders and potential investors the ability to properly evaluate the company’s progress and performance against its projections.
- [NOTES] Quick takes from around the market...
- Bank of Commerce [BANK 12.50 pre-PSE] [link] IPO approved by SEC. Can BANK, a bank, bank on conducting its IPO on March 23, as scheduled? Hard to say, given the PSE’s recent interest in delaying IPOs to avoid “saturation”.
- Filinvest REIT [FILRT 7.43 unch] [link] declares ₱0.112/share cash dividend out of Q4/21 earnings. This is the same dividend that FILRT declared in Q2/21 and Q3/21. We don’t have FILRT’s Q4/21 quarterly report yet, so we will still need to wait to see if it was able to grow net income for a third straight quarter.
- Metro Pacific Investments [MPI 3.69 ▲2.50%] [link] board approves ₱5 billion share buy-back program, with the stated goal of increasing shareholder value and confidence.
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