Happy Tuesday, Barkada --
The PSE gained 38 points to 6738 ▲0.6%
PSE STAR starts TODAY! This is a direct-to-investors event where executives and corporate officials from 15 PSE-traded companies will be on-hand to openly discuss their Q2 results, and take questions and inquiries from the general public. It's a three-day event.
Click here to see the register, and see the schedule of events!
Here's the schedule of events for today:
- UBP: 10:25 AM
- DD: 11:15 AM
- CEB: 1:30 PM
- PX: 2:15 PM
- SCC: 3:10 PM
These are not do-nothing shell companies, and there is a LOT going on under the surface of each of these companies that is worth talking about. If you hold any of these companies for the long term, you should definitely take the time to register (it's free) and hear the company's executives give a run-down of what's happening.
Shout-outs to Jupitel Thunder, Mike Tan, YR1, The Financial Engineer, Jules Alviar, Bebe,Palaboy Trader, Regie Dall, Makisig Tan, Stephen Chiong, Corgi Buttowski, Pao, Dividend Pinoy | PGG, LanAustria, Pao, Just’n, leaf, meloi, mArQo, Lance Nazal, Rolex Jodieres, Jonathan Burac, arkitrader, Chip Sillesa, and Jing for the retweets, and to Marvin Rodriguez Gonzaga, Evolves.co, Marvin Quezon, and Mike Ting for the FB shares!
- JG Summit Q2 profit
down 95% up 335% y/y, but and up 190% q/q
- VistaREIT declares first div, still waiting on clarification
- DDMP REIT declares a slightly smaller Q2 dividend
- PLUS: Quick takes on AC, FRUIT, SPNEC
▌Top 3 MB indices:
Code:
NEET ▲1.01%
REITs ▲0.79%
Fast Food ▲0.38%
▌Bottom 3 MB indices:
Code:
Cement ▼0.83%
Connectivity ▼0.61%
Hedgy Metal ▼0.53%
▌Main stories covered:
- [Q2] JG Summit Q2 profit
down 95% up 335% y/y, but and up 190% q/q... JG Summit [JGS 55.05 ▲1.38%] [link], the Gokongwei Family’s diversified conglomerate, posted a Q2 net income of ₱44 million down 95% ₱2.5 billion, up 335% y/y from Q2/21’s ₱81 ₱815 million in profit, but and up 102% 190% q/q from Q1/22’s net loss of ₱2.79 billion. Here are the net incomes attributable to each of JGS’s main business units from best to worst: Robinsons Land [RLC 19.06 ▲1.38%] (₱3.3 billion; +154% q/q), Universal Robina [URC 124.90 ▼0.79%] (₱2.7 billion; -23% q/q), Cebu Pacific [CEB 45.35 ▼0.66%] (-₱1.9 billion; +75% q/q), and JG Summit Olefins [JGSO] (-₱3.2 billion; -52% q/q). While CEB continues to (predictably) drag on JGS’s profitability, the reopening of the economy has bumped passenger volumes and allowed it to slash the loss to the point where it wasn’t even the largest money-loser in the stable. That crown now belongs to JGSO, which actually saw losses accelerate in Q2 due to the near-doubling of input costs, and the shutdown of its petrochemicals plant in late May due to “high customer inventories going into 2Q22”, “weak overall demand”, and “bearish margins“. JGS doesn’t plan to reopen the facility until sometime in September.
- MB:
Yikes. That’s a real “dog’s breakfast” of a quarter for one of the country’s leading conglomerates. It’s easy to look past the JGSO result because that’s the only major private subsidiary that contributes materially to JGS’s earnings (all the rest are public companies), but it’s lost ₱5.3 billion so far this year, and the plant is going to be closed for the majority of Q3, so the losses aren’t going to stop any time soon. Even if the plant were to re-open for Q4, their own outlook for this business is bleak; low demand, high competition, expensive inputs with volatile pricing. RLC and URC are doing fine, but the conglomerate’s overall exposure to first-order inflation risk through JGSO, and second-order inflation risk through CEB and RLC, make the next few quarters crucial to a broader understanding of the medium-term JGS narrative. When will inflation peak? What will the peak look like? What policy moves will we have made to address that peak? How will those moves change demand for housing and travel? What will happen to commodity prices that will rise and fall independently of those moves? EDIT: Corrections applied. My script read the report wrong, and I was in a rush and I didn't catch it at all! My apologies. I think that my analysis on JGS's exposure to inflation still stands, though.
- [Q2] VistaREIT declares first div, still waiting on clarification... VistaREIT [VREIT 1.75 ▲0.57%] [link] declared a Q2 dividend of ₱0.021/share, payable September 20 to shareholders of record on August 30. This is the retail REIT’s first dividend, though the REIT Plan provided by the Villar Family said that investors should expect to see a full-quarter dividend that is around ₱0.036/share.
- MB: We’ll have to wait for VREIT to publish its Q2 earnings report to understand this div. Considering VREIT only conducted its IPO in the middle of June, just two weeks before the end of Q2, we need to know the amount of Q2 this distributed income represents to figure out the annualized yield of this dividend. For example, if the dividend only represented the final two weeks of the quarter, we’d “quarterize” the amount of the dividend by dividing it by two (to find the weekly dividend rate), then multiplying that figure by 13 (the number of weeks in a quarter). Doing that gives us a quarterized div of ₱0.1365/share, which would provide an annualized estimated yield of 7.80%, which is about 5% lower than the projections provided in the plan. There’s nothing stopping the family from declaring a dividend for income earned prior to the IPO, since the IPO itself was just the first time that the company’s stocks were widely traded on a public market, not the first day of the company’s operation. Barkadans might remember how Citicore Energy REIT [CREIT 2.49 ▲1.63%] declared a special dividend just after its IPO in February, from income generated in the previous year. So, this div could be anything; let’s wait for clarification.
- [Q2] DDMP REIT declares a slightly smaller Q2 div... DDMP REIT [DDMPR 1.54 ▲1.99%] [link] declared a Q2 dividend of ₱0.027299/share, payable September 26 to shareholders of record on August 31. The Q2 div is 2% smaller than its Q1 div, and 2% smaller than its Q2/21 div from the same period last year. Based on DDMPR’s share price of ₱1.54/share, the slight change in the div didn’t have any material impact on the annualized estimated yield, which held firm at 7.24%. The dividend bumped DDMPR’s total return, a combination of its stock price movement plus all dividends relative to its IPO price, to -23.6%, up from -24.8%.
- MB: It feels like the market wasn’t sold on the stability of this REIT’s portfolio, but despite everything that has happened in the commercial leasing market, DDMPR has delivered roughly the same quarterly dividend for the past year. There were whispers that the POGO exodus had hurt DDMPR disproportionately, or that the BPO work-from-home problems were causing particular problems for the company, and it felt like investors might be waiting for another data point (this dividend) to gain some confidence in the company’s ability to continue delivering that same dividend quarter after quarter. Well, here it is. Yes, the div is slightly lower when other commercial REITs have been able to marginally grow (except for Filinvest REIT [FILRT 6.50 unch], which completely face-planted in a way that I don’t think the market has truly digested yet), but, like I just mentioned, this is no FILRT. At the same time, I know I speak for many DDMPR investors when I say that I want to see more from this REIT in terms of growth. Not so much organic growth (increasing rents, decreasing expenses), but regular inorganic growth in the form of acquisitions. DDMPR’s parent, DoubleDragon [DD 7.51 ▼1.05%], has been around town checking out some prospects, and while I don’t think it’s important to close a deal just for the sake of pushing assets down into the REIT, I would like to see something happen just as a “proof of concept” for the REIT’s growth potential.
- [NOTES] Quick takes from around the market...
- Ayala Corp [AC 750.00 ▲2.32%] [link] President and CEO, Fernando “FZA” Zobel de Ayala, has taken temporary medical leave. While he will still retain his position on AC’s board of directors, FZA stepped down from his position as President and CEO, and also resigned from his membership on two of AC’s key board committees (executive and finance). In an unplanned meeting, the board elected Cezar Consing as “Acting President and CEO and member of [AC’s] Executive Committee.” MB: I don’t like to speculate on the health and welfare of anyone, though there are some concerning messages that we could infer from some of the circumstances of this announcement. The board seems to have been forced to act quickly, and FZA’s brother, Jaime, was the one who needed to speak to the public on FZA’s behalf through Facebook to say that FZA was in “high spirits”. FZA also resigned from his board committee posts, which to me suggests a longer leave than most might reasonably assume when first reading the “temporary” characterization. Best wishes to FZA.
- Fruitas [FRUIT 1.05 ▲1.94%] [link] Q2 profit of ₱22.9 million (▲232% y/y, ▲259% q/q), with H1 profit of ₱29.3 million (▲440% y/y), driven by a 50% increase in revenues and a simultaneous (but slight) growth in gross margin. FRUIT credits its results to “business expansion” and a “leaner cost structure”. On the balance sheet, FRUIT recorded a massive increase in cash in Q2, from ₱318 million at the start of Q1 to ₱609 million at the end of Q2, due mainly to the equity raised through the listing of Balai Ni Fruitas [BALAI 0.88 ▲3.53%] on the last day of the quarter. This was FRUIT’s best quarterly performance since its IPO in 2019. MB: It’s interesting to see FRUIT expand its margins at a time when its food input costs should have increased dramatically over the first half of 2021. I’ve often praised FRUIT’s execs for their quick forward thinking in response to the onset of the pandemic, and it would be great to see their moves begin to bear fruit (sorry). We’ve seen several confirmation points to this broader economic/retail recovery with Jollibee [JFC 233.20 ▲0.52%], 7-Eleven [SEVN 69.00 ▲3.76%], and Shakey’s [PIZZA 7.80 ▼1.89%] all showing similar turnarounds.
- Solar Philippines [SPNEC 1.81 ▲0.56%] [link] confirms plans to maintain its minimum public float by using private placements, instead of conducting a second (larger) SRO. Originally, SPNEC planned the current (mini) SRO to purchase a smaller sub-portfolio of projects from its parent company, Solar Philippines, to accelerate their development through joint venture with Enrique Razon’s renewable energy companies. Then, SPNEC planned a second (larger) SRO to raise its public float back up above the minimum 20% level once the share-swap with its parent company to bring the rest of the planned portfolio over to SPNEC dilutes existing public ownership down below the acceptable threshold. MB: SPNEC could sell a minority stake to any investor, privately, to sell enough shares to satisfy the minimum public ownership requirement. There’s going to be a market for those shares, but it will be interesting to see what price they’ll be able to command for a large block. PSE investors have reacted nervously to large block sales, with negative stock performances following even some sales that were executed at a premium. This doesn’t change much, since dilution is dilution, but it does remove the chance for existing shareholders to get a second kick at the can to acquire additional shares at a discount.
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