Happy Tuesday, Barkada --
The PSE gained 10 points to 7134 ▲0.1%
A huge thank you
Financial Meme Medici, today's
Producer-level Patreon supporter. Not only did your name make me laugh, but your support has helped fund an upgrade to MB's market data processing that allows me to inject up-to-date financial data into my writing (instead of stopping to check ticker symbol, current price, daily change, etc). It has literally saved me probably 15 hours of life already, and the script has only been operational since mid-January. Thank you for your generous support!
I must apologize for the abomination that I loosed upon the world yesterday. The "
Xzibit x Manny Villar" mash-up was unnerving, unsettling, unnatural, and, as one Barkadan put it, "simply the ugliest thing I'll see today". Yes, it looked bad and I'm ashamed of what I've done, but sometimes memes transcend what we want, and show us what we need. This wasn't one of those times, but still. Memes can do that. Again, not this meme. But other memes. haha.
In completely unrelated news, I've instituted a 1-week "
No Manny Villar Face Memes" cooling-off period.
Shout-outs to HVC Capital, Stephen Chiong, Joe Latham, synnbudd, meloi, Kaycee Valmonte, mArQo, Palaboy Trader, Lance Nazal, Evolves Capital, Inc., Jose Mateo, Just’n, Chip Sillesa, Rolex Jodieres, psestocktipsdaily, Corgi Buttowski, Jonathan Burac,and Jing for the retweets, and to Froilan Ramos, Marvin Quezon, and Mike Ting for the FB shares.
- Solar Philippines NEC releases stock rights offering plan
- Q&A: Can an OFW buy shares in the VistaREIT IPO?
- Q&A: Do I have to buy IPO shares from one of the underwriting banks?
- PLUS: Quick takes on VREIT, ACEX, PAL, and JFC
▌Top 3 MB indices:
Code:
Fast Food ▲2.59%
MiddleClass ▲1.78%
POGO Gaming ▲0.57%
▌Bottom 3 MB indices:
Code:
Logistics ▼1.75%
Hedgy Metal ▼1.71%
Cement ▼0.69%
▌Main stories covered:
- [UPDATE] Solar Philippines NEC [SPNEC 2.02 ▲1.00%] releases stock rights offering plan... The mini version of the full stock rights offering (SRO) will be priced at between ₱1.60 and ₱1.76 per share, and will feature an entitlement ratio of 1:1.28. SPNEC said that the range represents a 12-20% discount to SPNEC’s “volume-weighted average price over the past two months”. The disclosure didn’t provide any update in terms of the offer date or listing date of the shares, but did say that the SRO is constrained by the PSE’s rule against subsequent equity raises within the first 180 days following an IPO, though SPNEC did say that it would “conduct” the SRO in June of this year. SPNEC will use the proceeds of this SRO to buy land that will be used for 4 GW of developments with Enrique Razon’s Prime Infra and Terra Solar. This SRO is in addition to the larger SRO planned for later in the year to prevent SPNEC’s public float from falling beneath the PSE’s minimum threshold once the shares swap with SPNEC’s parent, Solar Philippines, goes through.
- MB: SPNEC’s IPO was on December 17, so PSE rules prohibit SPNEC from conducting an SRO before June 15th. Looks like we’re looking at a late-June SRO. As for the entitlement ratio, that just tells us how many shares an existing shareholder can buy, based on the number of shares owned by that existing shareholder. In this example, let’s say you own 12,800 shares of SPNEC; the entitlement ratio says that you can buy 1 SRO share for every 1.28 shares owned, so you’ll be able to buy an additional 10,000 SPNEC shares through the SRO. The decimal part can throw people off, so if it’s easier, just move the decimal and think of it as being able to buy 100 new shares for every 128 existing shares owned. It doesn’t look like any of the proceeds will go toward the purchase of shares in the Solar Philippines JV in Indonesia.
- [Q&A] Can an OFW buy shares in the VistaREIT IPO? Do I have to buy IPO shares from one of the underwriting banks?... The Villar Family’s announcement of their plan to IPO VistaREIT [VREIT 2.50 pre-SEC] prompted an unusually large number of questions from Barkadans that I’d like to address all in one “megathread”. To recap the basics: Vista Land & Lifescapes [VLL 2.57 ▼0.77%] is selling 3.66 billion secondary common shares in VREIT for up to ₱2.50/share, to raise ₱9.18 billion in proceeds from the sale. Now, to the questions:
- How do I buy IPO shares? There are two basic ways to buy shares: through PSE EASy, the PSE’s platform for local small investors to participate in IPOs, or through a broker like COL Financial [COL 3.81 ▼2.31%], FMS, AAA Equities, or Abacus. There are literally over a hundred brokers, but if you don’t already have a brokerage account, the brokers that I’ve listed appear to be the ones that have optimized for encouraging participation in the IPO process. That’s not to say that you’re likely to get any kind of allocation with COL or FMS (COL is particularly atrocious at having enough IPO juice to go around), but these platforms make it easy (well, “easier”) to fund an account, make an IPO purchase, and receive an IPO refund (if any is required).
- **Can OFWs buy shares? Yes! And there’s even a [special tax incentive](https:** OFWs are exempted from income tax and withholding tax on REIT stock dividend income until 2027. (I’m not a tax guy, so this isn’t tax/accounting advice; always do your own due diligence.) OFWs can buy IPO shares through Philippines-based brokerages. I’m not sure how hard/easy it is for an OFW to go through the account creation process, but I do know that OFWs that have already set up a COL account are able to fund that account remotely and make IPO stock purchases through that account.
- Is it sketchy if the deal is 100% secondary? No, but let me explain. First, a quick refresher on primary/secondary: primary shares are those that are issued by the IPOing company, and the IPOing company gets to use that money for its own development; secondary shares are sold by existing shareholders, and the existing/selling shareholders get to use that money, not the IPOing company. We also have to make a distinction between a REIT IPO and a “normal” IPO. In a normal IPO, I think there is a problem if the percentage of the shares on sale that are secondary shares is really high. Questions come up, like “Why are the owners selling if the opportunity is so good?”, or “Where is the growth going to come from if all of the proceeds from the IPO flow out to the selling shareholders and not the company?” These are all valid questions, but they don’t apply as cleanly to the REIT IPO, and here’s why: the REIT structure is intended for capital to flow back up to the sponsor. REITs are not scrappy growth stage companies just looking for an infusion of capital to fund some important plant upgrades or massive capex push; they’re a portfolio of mature income-generating assets, all owned by the same ownership group, where that ownership group has been given some nice little tax incentives to bundle up those properties into a REIT, and then sell shares in that REIT to the public. The point of the REIT Law is to give real estate developers and infrastructure companies the ability to sell chunks of fully-developed projects through the REIT structure, and the side benefit that we get is the ability to participate in the fractional ownership of stable, income-generating assets. VREIT is going to sell 100% secondary shares and be born with 10 malls and 2 office buildings, and it will generate cash from rents, and it will distribute at least 90% of its net distributable income to shareholders through dividends. If VREIT was instead going to sell 75% secondary shares and 25% primary shares, it would be born with like 10 malls... and then still buy the 2 office buildings from Vista Land & Lifescapes [VLL 2.57 ▼0.77%], its parent company. In either example, the cash flows up to the parent. The AREIT [AREIT 45.80 ▼2.14%] IPO was similar: there was a modest portion of primary shares, and AREIT used the proceeds from the primary shares sale to immediately buy a building from Ayala Land [ALI 36.00 unch] after its IPO.
- MB: The usual disclaimers go here about how REITs are just one type of investment, that they may not be appropriate for every portfolio, and that even if a REIT investment was exactly what was missing from your portfolio, it’s not necessarily true that VREIT is the particular REIT that would fit your needs. The above questions might have been prompted by the VREIT announcement, but the answers are just as applicable to the VREIT IPO as they are to our entire REIT sector and any subsequent REIT IPO, so I felt it was important to address these questions directly.
- [NOTES] Quick takes from around the market...
- VistaREIT [VREIT 2.50 pre-SEC] [link] REIT Plan projects a 5.6% dividend yield for 2022 and a 6.4% dividend yeild in 2023 based on the current ₱2.50/share offer price. That projected yield puts VREIT in a no-man’s land between the RL Commercial REIT [RCR 7.39 ▲0.14%] and Megaworld REIT [MREIT 18.68 ▼1.37%] 5% yield zone, and the Filinvest REIT [FILRT 7.30 ▲1.96%] 6-ish% zone. As we saw with Citicore Energy REIT [CREIT 2.67 ▼0.37%], a yield closer to 7% drives an awful lot of IPO interest. It will be interesting to see how VREIT prices this offering. Will Manny Villar give us some upside?
- AC Enexor [ACEX 17.50 ▲2.10%] [link] board approves application for shelf registration for the sale of common shares through a follow-on offering, a private placement with its parent company, AC Energy [ACEN 8.38 ▲0.96%], and a later stock rights offering. ACEX has about 250 million shares outstanding, so the shelf registration to sell about 650 million more shares is very significant. If granted, ACEX will have the ability to make these sales over the next three years.
- Philippine Airlines [PAL 6.61 ▲9.26%] [link] VP refers to bankrupted airline as “streamlined to fit the new norrmal”, but still “full-service”. The article calls PAL “[l]ean, mean, but also very nimble”, which is pretty rich to say about the geriatric airline that went bankrupt last year, was able to negotiate sweetheart adjustments to its airplane lease terms, and was able to shed debts in exchange for more of Lucio Tan’s money. Most of those lease terms revert to the old, not-sweetheart, terms in 2023. What happens then? Feels kind of tasteless to hype these attributes that were gained by absolutely nuking shareholder value and laying off thousands of workers. I get it, that’s capitalism, but they haven’t even put out a quarterly report yet and their stock just started trading for the first time since June of 2021.
- Jollibee [JFC 219.80 ▲2.71%] [link] FY21 up 152% to ₱5.98 billion. JFC already reported its annual earnings, but disclosed that its audit determined its net income was actually 0.67% higher than it originally reported in its earnings teaser.
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