Happy Wednesday, Barkada --
The PSE lost 157 points (!!) to 6405 ▼2.4%
Shout-out to
Shehana Jean loves LK and Funko Collectibles for wanting more CREIT upside from the sale of shares to SM, to
CHARToons for noting all the pumping and dumping that was done in AR's name (and in APL's name), to
anonymous for calling for criminal justice for the AR fraud, to
Rat Race Running for separating the family from the stock (Villars from PREIT), to
Jing for watching this KEP thing with me from the sidelines, to
Atot for wanting more exposure for the "AR fiasco", to
Ken Chua for noting the spelling mistake in my meme (and here I was worried about "inevitable"), to /@victor15 for wanting some KEP strategy analysis (I don't really have any), and to
arkitrader for the perfect "basura" meme.
Yesterday was a brutal day on the market. Who really knows exactly why millions of people do what millions of people do, but the PSE wasn't dealing from a position of strength (failed 7k psychological barrier test) when risks pumped over the weekend, and for now it seems like we're still just stuck in 2nd gear.
Oh look, the Peso just crossed P57:$1. Remolona said that he wouldn't defend that line anymore, but let's see if he gets pressure from anyone if the peso's value slips any further.
- PSE to AR bagholders: lawyer up
- VREIT Q4 div up 34% q/q
- DDMPR Q4 div down 10% q/q
▌Today's sponsor: Brankas
▌Main stories covered:
- [FOLLOW UP] PSE to AR shareholders: get a lawyer and explore your legal options... Yesterday I wrote about the SEC’s finding that Abra Mining [AR suspended] and its directors and officers defrauded the public when ghost shares were sold to certain shareholders by way of private placements and then flipped to unwitting public buyers. This update is about the PSE’s statement, released yesterday, which advised the victims of the fraud, the AR stockholders, to “consult their counsel and seek legal advice on available remedies under existing laws”. The PSE noted that AR’s minority stockholders might do this legal exploration “individually, or as a group”, and that the SEC has “authority to adjudicate complaints under the Financial Products and Services Consumer Protection Act such as damages not exceeding Php 10 million.” The PSE said that it will “proceed with the initiation of delisting proceedings pursuant to its Involuntary Delisting Rules.”
- MB: Before we all get pissed off at the PSE for this statement, I think it’s important to remember that the PSE is not in charge of policing the market for this type of behavior, nor is it the PSE’s role to investigate or prosecute violations like what we saw with AR. Broadly speaking, that’s the SEC’s job. So to expect the PSE to somehow be more involved is a little bit like expecting a mall security guard to audit the receivables of the stores in the mall and bring perpetrators to justice. That said, given what’s happened, it doesn’t appear as though the current distribution of roles between the SEC, the PSE, and the Capital Markets Integrity Corporation is sufficient to prevent this particular thing from happening and this particular damage from being done. The massive fines levied by the SEC will be paid to the SEC as a penalty, not to the minority shareholders who are the actual victims of the fraud. From that perspective, at least investors can look at a fine of that size and think of it as a reasonable deterrent for this type of bad behavior, but has this process actually been that effective? The amount of the fine is 27% smaller than the market value of the ghost shares that were sold to the public on the day that AR was suspended. So, from a really high level, what happened here was a transfer of half a billion pesos in value from minority shareholders to the SEC, with the fraudulent scheme as a middleman. Minority shareholders are left to fend for themselves and attempt to recover against the violators on their own. Again, I don’t think the PSE had a greater role to play here given my understanding of its mandate within the SEC’s framework. From my memory, the PSE acted fairly quickly. Did it say weird things about finding a “white knight” to help shareholders? Sure. Were those comments appropriate? Probably not. But I think the fact that the PSE felt obliged to say something like that underlines the good intent of the PSE and the need for there to be a more effective system for monitoring and policing the markets, and handling the violators in a way that doesn’t just feel like a “gg” to minority shareholders who are left holding the worthless bag.
- [DIVS] VistaREIT declares chunky Q4 div... VistaREIT [VREIT 1.74 ▲0.6%; 0% avgVol] declared a Q4/23 dividend of ₱0.0538/share, payable on May 28 to shareholders of record as of May 7. The dividend has an annualized yield of 12.37% based on the previous closing price, which is much larger than VREIT's pre-dividend annualized yield of 9.2%. The total amount of the dividend is ₱404 million, which is 74% of the ₱546 million in distributable income that VREIT reported for the quarter in its dividend disclosure. Relative to VREIT's IPO price, the dividend increased VREIT's total stock and dividend return to 15.62%, up from its pre-dividend total return of 12.55%. The Q4 dividend is 34.5% larger than VREIT’s Q3 dividend. Cumulatively, VREIT will distribute 88.2% of its FY23 distributable income through its four FY23 dividends.
- MB: Surprise! What’s even more surprising is that (according to my records) the size of this dividend was insufficient to drag VREIT across the 90% threshold of dividends relative to distributable income as required by the REIT Law. All of the Q1 through Q3 data I’ve taken directly from the Quarterly Reports for the distributable income, but perhaps the amount recorded on VREIT’s dividend declaration is a little bit understated and the discrepancy will be resolved by the release of VREIT’s Annual Report. Either way, I’d love to hear more from VREIT about whether this is some kind of one-off windfall, or something that investors could reasonably expect to continue going forward. VREIT’s price would have to rise to rise to around ₱2.34/share (a 34% increase from its current market rate) to bring the stock back closer to its previous 9.2% annualized yield. I’m not saying that’s what should happen, just what would need to happen if this Q4 dividend represents some New Normal and not just a Christmas treat.
- [DIVS] DDMPR Q4 dividend fell 9.9% q/q... DDMP [DDMPR 1.17 ▼0.8%; 111% avgVol] declared a Q4/23 dividend of ₱0.023137/share, payable on May 31 to shareholders of record as of May 7. The dividend has an annualized yield of 7.91% based on the previous closing price, which is significantly smaller than DDMPR's pre-dividend annualized yield of 8.78%. The total amount of the dividend is ₱412 million, which is 163% of the ₱253 million in distributable income that DDMPR reported for the quarter. Relative to DDMPR's IPO price, the dividend increased DDMPR's total stock and dividend return to -33.38%, up from its pre-dividend total return of -34.41%. The Q4 dividend is 9.9% smaller from DDMPR’s Q3 dividend. Cumulatively, DDMPR will distribute 99.5% of its FY23 distributable income through its four FY23 dividends.
- MB: DDMPR is the forgotten son of the Injap Sia empire. Unlike so many other REITs that have hit the sector since AREIT [AREIT 32.70 ▼0.8%; 210% avgVol] started it all in August 2020, DDMPR has not taken any public steps to increase its dividend by downloading mature projects from its parent. Even more alarming is that, unlike many of the other REITs that entered the market as commercial-only lessors, DDMPR hasn’t taken any public steps to diversify its holdings to protect its shareholders from the deterioration of the commercial property sector or to insulate its shareholders from the potential damage that a full POGO ban might cause to a commercial property sector that is already so vulnerable. Any shareholders that are still holding on here are probably desperate for some guidance.
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