Happy Friday, Barkada --
The PSE lost 48 points to 6567 ▼0.7%
PREIT IPO is done! Thanks to all the Barkadans that entered the PREIT IPO Allocation Poll, and ventured a guess as to PREIT's closing price in the /r/PHinvest thread.
The P500 Grab Food voucher draw has been completed and the winner has been emailed! Check your email!
All of the closing price guesses were negative, so no winners there. Seems like nobody priced-in the last-minute desperation buying that we saw push PREIT up to P1.60!
*** PROGRAMMING NOTE ***
Today is my last MB post of the year before I go on a two-week leave. I wish everyone a Merry Christmas, and a safe and happy holiday season. See you in the new year on January 3!
Shout-outs to Jonathan Burac, Stephen Chiong, Just’n, Palaboy Trader, Evolves Capital, Inc., LanAustria, arkitrader, Lance Nazal, Dividend Pinoy | PGG, Chip Sillesa, Pat Really, and Jing for the retweets, and to Padilla GJ, Genesis Umali, Evolves.co, and Mike Ting for the FB shares!
- PREIT has a weird debut; starts slow, ends in a frenzy
- Aboitiz Power bags emergency contract from Meralco
- Upson International 9M net income up 68%
▌Today's sponsor: [MerryMart Delivery](www.merrymart.com)
▌Main stories covered:
- [UPDATE] PREIT finishes up 6.66% after spending most of the day below IPO price... Premiere Island Power REIT [PREIT 1.60 ▲6.7%] [link] opened for trading yesterday after a very quiet IPO offer period. The stock opened below its IPO offer price of ₱1.50/share, and traded as low as ₱1.40/share, and remained in the low ₱1.40s for most of the morning session. We started to see plenty of memes and taunts from around the community, making jokes about “DNA” of Villar stocks, the (initial) huge red candle “hakdog”, and various iterations of the lonely red candle chart. But then the mood all changed. The super-light volume of the morning gave way to a more persistent volume of buying around mid-day. The price started to lift out of the ₱1.40s and up around the ₱1.50 break-even level. Then, the real “magic” for the Villar Group’s newest REIT came in the final hour, when over 8 million shares were purchased, driving the price up from the ₱1.50-level to where it closed at ₱1.60/share, up 6.66%. At the lowest price traded (₱1.37/share), PREIT’s estimated 2023 dividend yield was 10.5%. At its closing price, the estimated yield is 8.96%.
- MB: What do we make of all this? The honest answer is that it’s too early to tell. The Villar Family’s other REIT, VistaREIT [VREIT 1.6 ▲1.3%], traded loosely around its IPO offer price of ₱1.75/share for its first month on the PSE, but that stability quickly faded once the stabilization fund expired and was no longer around to provide price support. Other “heavy” Villar offerings have shown the same performance tendency, like AllHome [HOME 1.4 ▲1.5%] which also traded loosely around its IPO price up until the stabilization fund expired. Could PREIT be resigned to a similar fate? It’s possible. The tone of the US Federal Reserve’s interest rate raise yesterday was darker than most expected, and that’s not a great sign for REIT stock prices and valuations. But maybe the natural downward pressure on PREIT’s stock price is absorbed by the stabilization fund for long enough that something positive happens at the macro level to naturally provide an upward lift, and this whole period of REIT weakness is side-stepped by PREIT and its IPO buyers. Or, maybe the stabilization does what it can with what it was given, opportunistically picking up shares here and there to give the price a timely boost, only to leave the stock vulnerable to the inevitable once its 30-day lifespan is exhausted? We won’t have long to wait to find out.
- [NOTES] Quick takes from around the market...
- **Aboitiz Power [AP 34.1 unch] [link] bagged an “emergency” power supply deal from Meralco [MER 286.8 ▼0.1%] for 300MW of baseload capacity until January 25, 2023. MER was forced to find an alternative source for the power after San Miguel [SMC 94.1 ▲0.1%] terminated its power supply agreement when its plea for rate relief was denied by the Energy Regulatory Commission.
- MB Quick Take: The ERC is chaired by Monalisa Dimalanta, who used to be AP’s chief legal counsel and compliance officer before her appointment earlier this year. The length of the emergency deal isn’t that long, but the implication that there could be any funny business afoot drives to the heart of what makes regulatory capture a problem, and why it’s important to avoid such blatant conflicts of interest as this. SMC isn’t new to this game, though, but it will be interesting to see how this all unfolds.
- **Upson International (UIC) [link] said that its net income was up 68% over the first 9 months of 2022, to ₱400 million, which the company attributed to higher sales volume and improved operational efficiency. UIC is the parent company of Octagon, Micro Valley, and Gadget King, and recently shelved plans to conduct a ₱5.4 billion IPO until sometime in Q1 of 2023.
- MB Quick Take: Why not? If UIC ever plans to follow through with its IPO plans, it doesn’t hurt for it to loudly advocate on its own behalf. Celebrate the wins. That’s a pretty good improvement for UIC’s bottom-line. I don’t know that it changes much of the math that would have made it a good deal or a bad deal for retail investors, but maybe this print will help UIC’s potential institutional investors come closer to UIC’s preferred valuation. Those institutional investors are the real anchor for any potential deal.
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