PSE Points to Ponder

As of the end of first half of 2020, Filinvest Land, Inc. ( FLI ) has debts becoming due in the current period of 9.3 Billion Pesos while cash is only at 3.9 Billion Pesos. As with everyone else, FLI ‘s revenue is down for the first half of 2020. FLI’s revenue from real estate sales went down by 46% but rental revenues held up. Mall rentals may have been significantly affected by COVID-19 pandemi c restrictions but office leasing remained strong. FLI earned around 3 Billion Pesos in the first half of 2020 from office rentals. The office rentals is expected to be the main cash generator for FLI in these times. In the first half of 2020 FLI generated cash from operations of 0.9 Billion Pesos only. Although FLI has an inventory of real estate units for sale of around 65.8 Billion Pesos of 1H 2020, we can not expect for sales of real estate units to be buoyant during these times. Judging of the first half results of FLI, real estate sales have come to a standstill. Thus, ...

In April 2020 at the height of the community quarantine , Shang Properties, Inc. ( SHNG ) distributed a cash dividend of 0.11250 a share. Based on the preceding years, SHNG also distributes dividend every September at a rate of .07 a share. This year SHNG’s second round of dividend amounted to 0.044 a share. In all, the total for 2020 SHNG cash dividend will be 0.1565 a share. With SHNG market valuation slumping, SHNG now yields 5.75%. A very attractive yield for dividend investors. In the first half of 2020, SHNG was able to earn a net income of 700 Million Pesos, understandably that would be down as compared to the same period in 2019. At the height of the community quarantine, SHNG was able to generate cash from operation of 541 Million Pesos. SHNG even was able to pare down debt with its own cash balance. In these times, SHNG’s primary source of cash generation will be the office space rentals from the Enterprise Center, an office building located at Ayala Avenue co...

A Philippine Real Estate Investment Trusts (REIT) is a stock corporation established in accordance with the Philippine corporation code. The present corporation code in the Philippines is Republic Act No. 11232 (RA 11232). For purposes of clarity, a REIT, although designated as a “trust”, does not have the same technical meaning as “trust” under existing laws but is used for the sole purpose of adopting the internationally accepted description of a company owning income-generating real estate assets in accordance with global best practices. A Philippine REIT is not a “trust” created under trust laws of the country but a corporation created in accordance with the corporation code. What make a corporation a Real Estate Investment Trusts (REIT) is governed by the Republic Act No. 9856 (RA 9856) known as “The Real Estate Investment Trust (REIT) Act of 2009.” The law was enacted to to promote the development of the capital market, democra...

AREIT debuted in the market with a 27 per share public offering. At that time we said that buying AREIT at 27 could inflict capital loss as the market will have to price it down to set the appropriate yield for AREIT which could be around 5.5% to 7%. At the time AREIT was listed in the market, dividends were not set, so we anticipated that AREIT will have to move down towards a zero dividend yield until dividends are declared . AREIT indeed plunge to a low of 24.10 a share. AREIT eventually declared dividends and set a dividend policy. At the current level of dividends and at the current price of 25.60 a share, AREIT’s yield is at 4.82%. AREIT may still move downward towards a yield of 6% to 7% inflicting holders further capital loss. Double Dragon Properties Corp. ( DD ) had issued cumulative, non-voting, non-participating, redeemable at the option of DD, convertible at the ratio of 1 preferred share to 1 common share, perpetual Preferred Shares now trading as DDPR . D...

No doubt the COVID-19 pandemic has wreaked havoc on the real estate industry. The pandemic has put to test the strength of the finances and operating capabilities of the real estate companies. Pandemic distinguishes the strongest from the rest. The biggest real estate company, SM Prime Holdings, Inc. ( SMPH ) is seen to weather the storm. SMPH has a fortress balance sheet. It can generate at least 60 Billion Pesos of revenue and cash flows without spending capital as they have an inventory of built units of 12,000. This was have discussed earlier. Meanwhile ALI ‘s best and the brightest are hustling to crystallize the values of ALI’s assets. They have just raised 13.6 Billion from the AREIT public offering. In Rockwell Land Corporation ( ROCK ) we saw vulnerability. As of end of June 30, 2020 (1H 2020) ROCK had a cash balance of only 3.1 Billion Pesos after borrowing 4 Billion Pesos. ROCK is facing debt repayment in the next 12-month period of 7.1 Billion Pesos. And t...

We have reported earlier that AREIT may have to sink further until it finds the yield. In the said report we said that all the talks about its yield are all based on speculations from brokers, analyst, and commenters. We said at that time that AREIT’s yield is zero until AREIT declares dividend and it is going to sink because the yield is zero. It will sink further until it finds the yield. We feel that we have been heard by AREIT and the Ayala group. Just today AREIT declares a dividend. This was announced in an emergency disclosure today. Please see attached copy of the disclosure below. AREIT-08172020-Material-Information-Transactions Download In the trading today, AREIT attempted to rally but towards the end it lost steam to end at 25.95. With the cash dividend the market will now have a clear guide on how to price AREIT to get the yield it desires. Finally, the day of reckoning for AREIT holders has come. We will now see how the market will price AREIT. The dust wi...

MM and AREIT are two different public offerings, thus, the difference in results. Holders of AREIT may have missed the difference of the two public offerings. MM is a pure initial public offering. It means shares offered to the public comes from the unissued shares of MM or the so called “primary shares.” All the proceeds of the MM initial public offering went into the coffers of MM. The proceeds of the public offering more than doubled the size of MM’s balance sheet. From 0.9 Billion prior to the IPO to around 2.4 Billion post-IPO. Because the proceeds of MM’s IPO went to its coffers, MM will be able to utilize the proceeds of its IPO to grow the business and create more value to its shareholders including those who participated in the IPO. The more value a company creates the more the market rewards, thus, the rise in value of the company’s shares. In AREIT, the total proceeds of around 13.5 Billion Pesos of the public offering went to Ayala Land,...

Just January of this year (2020) SMPH hit a high of 43.35, now it is at 29. It is down some 33%. It shed almost a third of its high. The COVID-19 pandemic exposes the qualities of every company listed in the stock exchange. The pandemic highlighted SMPH as a money printing machine. With the economy mostly shuttered, SMPH was still able to generate 10.4 Billion Pesos of net income and 9.4 Billion Pesos of cash flows from operations. Although, it is facing a 43.8 Billion Pesos of current debts payable within the next 12 months. There is no doubt that SMPH will be able to refinance the same given its still strong cash flow generation despite all the pandemic restrictions. To illustrate its financial strength, SMPH can generate revenue and cash flows of at least 60 Billion Pesos in the succeeding periods without even spending a single peso for capital expenditures to conserve cash. At the end of June 2020 it has available inventory units of 12,000 units that could easily translate t...

SM Prime Holdings Inc. (SMPH) – Real Estate Domination Posted on  March 4, 2018  by  ideasprime In 2017 SM Prime Holdings (SMPH) reported an impressive 15.8% growth in net income.   The reported net profit results show SMPH domination in Philippine real estate. The growth came mostly from the expansion of malls/retail space for rent and the consistent 7% annual growth in same-mall-sales.  In 2017, it opened 6 new malls adding a gross floor area of around 377,000 square meters. Same-mall-sales represents the growth of consumption spending of the Filipinos.  It is a reflection of the growth in spending power of the population as a result of the growth in the over-all economy. SMPH  as of year-end 2017 has 67 malls in the Philippines and 7 malls in China.  The malls lay the “golden egg” for SMPH.  The malls are cash gushers creating money year after year after they have been established.   The more mature the mall is, the more it is pr...

The replacement of a lost owner’s duplicate Certificate of Title of a parcel of land is governed by Section 109 of Presidential Decree No. 1529 (PD 1529) known as the Property Registration Decree. To sum it up the following are the requirements: The owner’s duplicate Certificate of Title must have been actually lost. This is the most important thing. If the owner’s duplicate Certificate of Title has not been lost but in the possession of some other person then the replacement owner’s duplicate Certificate of Title is void. The person in possession of the owner’s duplicate Certificate of Title can petition the court to have the replacement Certificate of Title be void from the very beginning. This is undisputed and held by the Supreme Court as a well settled rule. The Supreme Court has enunciated this rule in the case of Straight Times, Inc. versus the Court of Appeals wherein it said that when the owner’s duplicate certificate of title has not been ...

The market sell-off on the first day of the re-imposition of the Modified Enhanced Community Quarantine (MECQ) had Robinson Land Corporation down by 7.15% the most on that day with a volume of 3,110,220 above the 65 day average volume of 2,573,380 that made us wonder if RLC was in danger. As of the end of Q1 2020, RLC had a cash balance of 6.3 Billion Pesos while total debts falling due before the year 2020 ends is at 11 Billion Pesos. With limited cash flows due to the COVID-19 pandemic shutdown, this looks worrisome. But this is where the quality of of the Board and the top management comes in. You got to have experienced bankers in the Board and in the top management. On July 17, 2020 RLC quickly raised 13.2 Billion Pesos of mostly 3-Year fixed-rate bonds. Proceeds of the bond issuance will be used to finance RLC’s capital expenditures and repay short-term loans maturing within the year. The pandemic quarantine restrictions did not completely shut down RLC’s cash flo...

The AREIT public offering showcases the Ayala Corp. group’s ability to create and realize value. The Ayala Corp. group clearly has a roadmap on creating value. It starts with drawing in and employing the best, brightest, and most competent executives to the conglomerate. Then it adopts best-in-class systems and practices. This results to operational and financial excellence which leads to great returns on investments that results to shareholder value. Ayala Corp. group’s value creation process stands true even in this time of the COVID-19 pandemic. Its latest exercise is the AREIT public offering. The first Real Estate Investment “Trusts” (REIT) in the Philippines. The offering will allow Ayala Land, Inc. to raise around 13.6 Billion Pesos out of a roughly 5.4 Billion Pesos of net assets in AREIT. To extract such amount of money out of assets without losing control of such assets is magic. This is just one of the exercise of the Ayala Corp. group’s va...