September 27, 2021

JFC

JFC's series A and B preferred shares have been finalized and are ready for IPO. Each series is priced at 1000 PHP/sh. Series A will be under the ticker JFCPA with a dividend yield of 3.28% and to be redeemed after 3 years. Meanwhile, series B will be under the ticker JFCPB with a dividend yield of 4.24% and to be redeemed after 5 years.

JFC preferred shares' dividend yields are the lowest as compared to the preferred shares that have been out for the year 2021. I previously speculated in a previous writeup that the dividend yield will be around 4.50% to 5.50% since the proceeds are going to be used to redeem their US bonds which have an interest rate of 4.75%. Moreover, preferred shares are riskier than bonds so it would've been fair to give a more generous dividend yield but it seems like the outcome is the opposite. Anyways, it's not like JFC is on the verge of bankruptcy. They can pay for the dividends. 

The only downside for investors is that the dividends might not be that attractive to hedge the inflation rate. A news report a day ago said that inflation which is around 4% to 5% may no longer ease for the remainder of this year. BSP expects inflation rate to peak at 6%.

AREIT

Last week, AREIT disclosed that they were added to the Financial Times Stock Exchange (FTSE) index under the EPRA Nareit Asia ex-Japan REITs 10% Capped index category. This category represents income-producing real estate equities worldwide. I am not sure of the requirements of FTSE and made them decide to include AREIT in the index. I do not question their process but FTSE is a reputable organization consisting of seasoned equity analysts whose aim is to optimize the index for profitability. They usually see something that a common retail investor doesn't. For instance, Asiamoney, a financial publication entity, awarded AREIT as the Most Oustanding IPO in the country because of their financial performance, management, investor relations, client support initiatives. With that said, AREIT is seen as a reputable company to many and worth adding to the index. Nevertheless, institutions around the world that follow the FTSE will now have to rebalance their portfolio and invest in AREIT. 

With all these positive sentiments coming out from AREIT, chances are, investors who are waiting for AREIT stock price to dip will have to wait longer. Some analysts share the same sentiment and suggest going for other REITs while the prices are stable, dividends are attractive, and haven't yet injected additional assets into their portfolio.

On the other side of the news, AREIT surprisingly declared their 3rd tranche of cash dividends this month at 0.44 PHP/sh. There was no increase in dividends this time and the payout will be at the last week of October in which is supposed to be the month that many investors start anticipating declaration of dividends. AREIT declared their cash dividends too early where in fact they just paid dividends a month ago. Usually, dividends are declared after the consolidation of the earnings of a quarter but since AREIT is in the rental business where rates are mostly fixed for a certain period, there's probably no point waiting for the quarter to finish since the income from rent is predictable. Meanwhile, it's been common that 4th quarter dividends are declared during summer in the following year. We might have to wait that long for AREIT's last tranche of dividends for the year 2021 or they probably might release again at an earlier date.

DDMPR

President Duterte has finally signed the POGO tax bill. Under the bill, POGOs will have to pay a 5% tax from gaming revenues. Meanwhile, foreigners working for POGOs are subjected to 25% withholding tax.

Taxes and such all look negative but this is a step to regulating POGOs. This is an indication that such business is formally legal and accepted in the country. Offshore gaming operators should see this as a sign that their business has a future and stability in the Philippines. Many of our neighboring countries do not allow such business or have unstable regulations. Our government is banking on this new bill with the hopes to attract POGOs to do business in the Philippines instead. 

More than half of the POGOs have already left the country. Those who are left are assumed to be the ones legally operating. Since DDMPR houses mostly POGOs and Gaming-Related BPOs, investors speculate that they have a high market share of these legally operating POGOs because they were able to maintain a 97% occupancy rate. This remains speculative until we see the next quarterly report.

TEL, GLO

Both telcos have 5G scores increased according to Opensignal's global survey. They were scored with emphasis on download/upload speed, and video/gaming experience.

5G and its predecessors use wireless technology to deliver data to consumers but uses an optic fiber between the tower and the main core network. Sometimes tower-to-tower is an alternative routing of data to reach the main core network. The reliability and quality of these wireless technologies relies on the configuration of these optic fibers, strategic placement of towers, and the communication between these towers.

Network configuration and architecture is not as easy as it looks. A network engineer has to consider a lot of factors such as the terrain, limitations of hardware, tower locations, shortest routing paths, and so on. While planning, they have to emphasize the least-cost but optimal quality of service. The job does not end there because, at some point in time, they have to re-configure the network based on market conditions.

GLO upgraded its network by using Infinera's Auto-Lambda solution. This is a new hardware technology to simply plug in the device to their network and it is up to the technology to auto-tune the configuration of the network for optimal performance. Network configuration is a time consuming and costly process and using the auto-tune technology will significantly lower down operational costs and retain more of their income. Meanwhile, TEL has a solid partnership with Cisco, a worldwide leader in IT and networking, that helps PLDT deliver networking architecture solutions. 

With TEL and GLO continuing to strengthen the backbone operations of their network, it is easier for them to improve the quality of their services and offer better technologies like 5G in the market. Moreover, other businesses that they hold such as digital wallet, digital bank, data center, and the like are banking on the reliability of their network.

AP

AP is planning to loan money from the public through bonds. The nice thing about it is that they will use the proceeds as leverage to grow their renewable energy portfolio. Recently many of these new bonds, preferred shares, and IPOs of other companies are using the proceeds to repay debt. AP aims to replace half of its portfolio with renewable energy by 2030. Recently they're planning to build and deploy a floating solar farm in the Magat reservoir of Isabela.

With the output of Malampaya decreasing and the government shutting it down this October for maintenance, the government is looking to AP's Dinginin power plant. It is a critical coal-fired power plant that would give enough supply for the remainder of the year. Dinginin has 2 units, one of which is scheduled to run this 4th quarter. The other unit is delayed due to lockdowns and is expected to run on the 3rd quarter of next year. The projects are being fast-tracked because of concerns with Malampaya and in preparation for the dry season in which power demand is at its peak.

With regards to Malampaya, PNOC, an energy company, thinks that Mindanao is going to be the next potential area to explore for natural gas. Places like Agusan, Cotabato, and Sulu are underexplored and could be the next Malampaya. 

AP, SCC, SPC

The power spot market prices started to decline in the past few weeks and this is because we're already in the cold season and there is enough supply in the short term. However, on a year-on-year basis, prices today are still higher than the previous year. The continuous downtrend of price is uncertain because Malampaya will have to shut down this October. Malampaya contributes at least 30% of the country's energy needs. The operation of Malampaya is scheduled to resume in November but the lifespan is projected to be until 2027. With reduced supply of power, prices are expected to go up. 

AP, SCC, SPC, and other power generation companies failed to fix some of their downed plants within a given time frame last summer. In effect the supply of power was reduced, rotational blackouts happened, and electricity hikes happened. The Energy Regulatory Commission (ERC) penalized these companies. This is by law to avoid price manipulation and possible conflict of interest.

SCC

In a surprising report, China claimed that it will stop funding coal projects overseas. This is to support clean energy. Though this does not imply that China will stop relying on coal because they have projected that consumption will peak until 2025 before gradually reducing its coal reliance. They aim to be carbon neutral by 2060.

China has around 44 coal projects being financed overseas. Once these coal plants cease to operate, then there will be a reduced supply of coal. International Energy Agency (IEA) on the other hand forecasted that coal demand remains to be up. With reduced supply and demand going up, we should expect coal prices to go up.

None of SCC's coal plants is funded by China. SCC will continue and produce coal as long as there is demand. They will benefit further from China's stance because there will be fewer competitors in the coal business.

GMA7

Manila Mayor Isko Moreno decided to run for president this incoming election. His stance with ABS franchise is positive. He will not block any effort to grant a new franchise if he wins the presidency. If it happens, this ends GMA7's monopoly in the broadcasting sector. The last quarter report shows that GMA7's net income is near break-even with ABS' net income only that the latter does not have a franchise. Once ABS gets a franchise, things might go back to the way they used to or maybe not because many personalities have already jumped ship to GMA7 and or another network.

The future of GMA7 is speculative. Conservative dividend investors remain cautious and continue to buy below fair value. The fair value of GMA7 remains the same even though they have significantly boosted their earnings. I noticed that the book value of GMA7 has not changed much in the recent quarterly report as compared to the previous quarterly report.  This means that they have not acquired any assets of value. I am not sure where exactly they're using the earnings. Probably they're using it to recruit personalities from other network jumping ships in which they are an "asset" but cannot formally put it on the balance sheet as an asset because it is absurd to liquidate a person. Whatever the case, investors will base their stock price fair value with what is formally reported in the balance sheet. Meanwhile, investors and traders who want to gain capital appreciation are banking on their presidential bets. The stock price volatility of GMA7 and ABS is inevitable next year.

On the other side of GMA7, they have been awarded their 3rd YouTube Diamond Creator Award. Whenever a channel reaches 10 million subscribers, the Diamond Creator is given. Yet GMA7 is lagging behind ABS when it comes to digital platform and viewership, they're not going down without a fight. For some investors, the number of subscribers is not important because this is not directly proportional to the income. Investors give more emphasis on how much earnings a company can make from these subscribers. 

PLC

The situation in Macau continues to worsen. Their government is making plans to end reliance on gambling as their main source of revenue. Macau is widely known as a gambling destination for more than 300 years as per history and legalization dated back as far as 1847. Many of the casino's licenses are about to expire and need renewal to continue operation. With their government planning to add non-gambling-related businesses as an alternative source of income, some casino licenses might not be renewed to give way to these businesses. The Chinese government has plans on integrating Macau to be part of mainland China. If that happens then many or no casinos will be left since gambling is illegal in China.

With that said, many casino operators and clients will have to move to another location. For instance, Melco which has casino operations in Macau, through the partnership with PLC would probably transfer their resources and clients in City of Dreams Manila.

September 20, 2021

TEL

There was news a few days ago that 3 hyper-scalers seek PH presence. Though it was not explicitly mentioned, I speculate that they will be partnering with PLDT since they are currently the major player in the data center business. PLDT currently operates 10 globally certified data center facilities across the country. With that said, it makes sense to use it for hyper-scale business. PLDT claimed in a news report a few days ago that they are collaborating with Meralco to meet the power grid design requirements of these hyper-scalers.

Let’s try to drill things down for clearer understanding. To simplify things, a data center business has IT facilities and equipment in which they lend it to businesses for their day-to-day operation. Instead of businesses spending money on infrastructure, it is cheaper if they would just rent it out from a data center business provider like PLDT. The data center business will not turn over the physical facility to the business but rather it will be used virtually via the Internet. It is the responsibility of the data center business to maintain and keep the facility running within their end. With that said, engaging with data center business will require a solid Internet connection. It happens that PLDT has the most underground sea cables installed making their data center business a good fit because these cables gives significant network speed, reliability, and resiliency. Having an excellent-grade data center is one of the requirements of a hyper-scaler business in which PLDT is fitting. Hyper-scaler business will utilize the infrastructure of the data center to perform hyper-scale computing. When data traffic is high, the hyper-scaler system will scale up by pulling necessary infrastructure resources that are needed to handle the traffic. When data traffic is low, then it will scale down and free up resources which can be used for other computing needs. That's the gist and everything is done virtually and we can think of this business as a one big IT facility being efficiently and effectively used and shared by many businesses.

I am speculating that hyper-scaler businesses are now looking to enter the Philippines because of the sudden digital transformation we are going through. Our banks are now creating a digital bank counter-part of their traditional brick and mortar, digital wallets are now popularly used, e-commerce is now becoming common, and so on. All these businesses are going to rely on hardware and computing infrastructure and that’s where the data center and hyper-scaler business comes in.

On the other side of TEL’s business, they were able to secure a digital bank license. They will be building a digital bank called Maya but no disclosures yet on its release. BSP has already stopped accepting applications for digital bank licenses and would process only what was only submitted. It was unexpected that TEL is penetrating the banking sector. I am not sure how this will play out in the future but I just speculate that they will use this to make Paymaya relevant to the majority of the population. Currently, GCash is the household name when it comes to a digital wallet.

GLO

GLO which is second to TEL in the fixed broadband segment has hit the target of rolling out 1 million fiber lines this year. Statistics-wise, GLO is not that far from TEL when it comes to fixed broadband market share where GLO holds 32% and TEL has 48%. GLO has been ramping up fiber lines because there is increasing demand in home broadband in which their revenue from it jumped by 16% in the first half of this year. The demand is mainly due to COVID which forces the population to move our day-to-day transactions digitally online.

Nobody knows if GLO will take over TEL in the fixed broadband segment considering that DITO is going to enter the same segment next year. One thing for sure is that GLO and TEL are not entirely focusing their energy on the telco sector but have already started penetrating other sectors such as digital banking and wallets. Who knows, maybe in the future GLO and TEL will be categorized as holding companies in the future.

RCR

Philippine Rating Services (PRS) rated RCR with a triple-A rating. This is the highest issue credit rating being given by PRS. Any company rated triple-A means that they are a low-risk company such that when you lend them money then they will most likely pay you back with interest. Lending institutions like banks are more than happy and confident lending money to triple-A-rated companies. RCR can use the money as leverage to expand its portfolio similar to what AREIT did a year ago when they started acquiring properties from their sponsor ALI. RCR would probably do the same too if they are about to acquire properties from its sponsor RLC.

SCC

Australia has been shamed by the United Nations since they do not want to cooperate with the stand against coal. They claimed that they will continue to supply coal until the year 2030 and beyond since it was forecasted by the International Energy Agency (IEA) that coal consumption throughout Asia (China, India, South Korea) will increase to meet energy demands. Australia's coal business generates billions of cash in royalties and taxes and gives jobs to their countrymen. Even Aboitiz Power who is already making ways for renewable energy projected that the Philippines might rely on coal-fired power plants in the next 25 years. If the IEA and AP forecast is indeed correct, then SCC will continue to compete in the coal business for the next decade. 

DMC, NIKL

ReportLinker, a market research solution reported that nickel will be in demand up to the year 2025. According to their analysis, significant contributions will be coming from Indonesia, the Philippines, and Brazil. If the research is true, then DMC's nickel business is sustained for the next few years. DMC mines their nickel in Berong Palawan in which they were able to extend until the 3rd quarter of this year. For now, there are no new updates on where to get nickel afterward.

When talking about nickel, NIKL is a good dividend stock. They have a dividend policy of giving up to 30% based on earnings however they usually go way above that when nickel is in demand.

On the real-estate business side of DMC, they're planning to build "The Erin Heights". It is a one-tower project located in Quezon City. Despite the real-estate exodus brought by this pandemic, the real-estate subsidiary of DMC managed to profit and contributed 2.3 billion PHP from a low of 32 million PHP on the first half of this year. This is due to construction accomplishments and down payments from new customers.

AP, SPC

AP bagged the 10-year contract to supply Pampanga Electric Cooperative II (PELCO II) with power using renewable energy. This would give added income stability for AP.

SPC on the other hand bought one of the power barges being sold by ACEN. These power barges are being disposed of by ACEN since they are fully committed to producing renewable energy. A power barge is technically a power plant floating in water that can be moved around. With its portability, it is an effective way to deliver electricity in remote areas. SPC operates mostly in the Visayas area where there are many islands. In the Philippines, 10% of the population does not have access to electricity and is mostly in the rural island areas. This makes the power barge purchase a sensible move. However, I am not sure if this power barge will be used to places they are already providing power or will it continue servicing places to which it was being used when ACEN used to own it. Whatever the case, with the lacking supply and high demand of power in our country, the added power plant of SPC will be beneficial for them to increase their income.

PLC, DDMPR

Macau, the capital gambling of the world is being strictly regulated by their government most specifically in the casino business. Macau is a special administrative region of China in which they are pressured by the Chinese government to regulate the casinos because of money laundering.

Reports show that the huge chunk of casino profit is from high rollers that are from China. Gambling is illegal in China and they have to travel to places like Macau if they wanted to gamble. The problem is that China only allows their citizen to carry up to 50,000 USD annually when traveling outside China. To circumvent this limitation, high rollers make special arrangements with casino junkets that are in Macau. The casino junkets will lend money to the gambler once they arrive in Macau. Casino junkets have contacts (mostly Triads) inside China that will collect the debt for them when the gambler goes back home. China realized that a large volume of money is going out of their country and started to scrutinize the casino junket business. Global casino-related stock prices started to fall because their profitability is now in question.

According to Abacus research, some casinos find the event neutral. Some say it could be something positive because high rollers and casino junkets will be moving to other countries like the Philippines and the fact that casino junkets are legally allowed by PAGCOR to operate. However, China is said to blacklist the Philippines for gambling destinations of their citizens. Nevertheless, borders are still closed anyway due to travel restrictions so we won't see immediate effects.

China has been testing its centralized digital currency up to date. They can easily impose China and its special administrative regions to use their digital currency anytime soon. This makes it effective for them to trace the flow of money and detect illegal activities. This too can be a threat to POGOs servicing gamblers from China.

With those said, one would ask why would an investor find these things negative, and yet regulations are supposedly positive things to look at? Unfortunately, a gambling-related business will most of the time have dirty money behind its operations to profit big. With strict regulations imposed, significant profit gets cut.

September 13, 2021

DDMPR

The negative sentiment of POGO is still ongoing. A week ago, Senator Risa Hontiveros has questioned PAGCOR on how did POGO reached 1.36 billion PHP of unpaid taxes in which they have difficulty collecting. She even suggested not to allow the renewal of POGO licenses. In short, she wants to end POGO business in the country because of POGO-related crimes like kidnapping and prostitution. She and few other senators were against the approval of a tax bill last June in which lowers POGO taxes. The bill is supposed to make POGOs stay and pay their taxes however more than half of POGOs have already left the country. On the other hand, some housing landlords are not renewing the leasing permits of POGO-related tenants (Mainland Chinese) for violating rules. They disobey rules like traffic, curfews, noisy parties, and the like. So not only some personalities in the government are against POGOs but starting to include the population as well. The POGO business will surely be in trouble if the next elected President by next year is an ally of the senators who are against POGOs.

This doesn't look well for DDMPR because it has 10% POGO tenants and 50%+ gaming-related BPOs that services POGOs. Without or only a few POGOs, the income of the gaming-related BPOs will decrease and they have to scale down. They would have to vacate office spaces. For DDMPR investors, this is a threat because the occupancy rate will go down and dividend yields are surely affected.

DDMPR's last quarter report showed that they maintained a 97% occupancy rate despite the POGO exodus. DDMPR investors understand the risk but some are still holding and buying it at the lows for reasons that the building is located in a prime location. Even if POGOs are out, DDMPR will not have a hard time to switch to other kinds of tenants. DDMPR has a pending PEZA application and investors see this as a catalyst once approved in addition to the promised infusion of assets. Once it materializes, capital appreciation is expected in addition to the quarterly dividends.

AREIT

A week ago AREIT's stock price has been going up and left some investors puzzled. There were no disclosures released as to what could be the catalyst. It also does not make sense to assume that it is being played by traders. Most of the time, traders enter a trade when there is related news in which they could make quick money from the volatility of the stock price. I speculate that many are preparing to position before the year 2022. Last January of this year 2021, AREIT mentioned that they are planning to do a second equity offer by 2022 to further increase the portfolio. Investors who are buying today are probably not buying because of the dividend yield which is unattractive at the moment. They are probably buying because they expect the stock price to go up further after the equity offer in addition to an increase of dividends once more assets are infused into the portfolio. Investors are buying the speculation which is a risk, but then again if we think about it's an Ayala stock that has a strong commitment to their investors.

MREIT

It's all over the news, the final offer price is down to 16.10 PHP/sh from a high of 22 PHP/sh. The new share price will give a projected dividend yield of 5.65% in which some investors already find attractive. What makes MREIT different is the ambition of adding more office spaces into the portfolio to become the largest office REIT in Southeast Asia. The objective looks good only if the demand is high as well. With low demand, additional office space will just dilute the sector and would probably cause rental rates to go down. 

September 6, 2021

SCC

Many countries have made climate action plans and projections of being carbon neutral within at least 10 years. Majority supports divesting in coal. However, China never sees coal as the problem of climate change and they projected that coal consumption would peak until the year 2025 before gradually reducing its coal reliance and projected their economy of being carbon neutral by 2060. With China's stance in coal and with many divesting/supplying coal will allow more opportunities for SCC to continue supplying coal for China.

We know that renewable energy is the future and our government is looking for ways to reduce carbon footprint in the country. The first step they did was to ban the development of new coal plants. This made SCC monopolize the coal production in the country. 

Recently, our government disclosed that they are working with Asian Development Bank (ADB). They have plans on partnering with investors in which they will raise funds and purchase coal plants around the Philippines. After which, they will continue the operations for the mean time while the country is shifting to renewable energy. They will decommission the plants when clean energy becomes sustainable. This move is questionable because ADB's stance is against coal yet they will share profit with the coal operations for the meantime while the shift to renewable is ongoing. It has been projected that the operation of these coal plants would continue for 15 years.  When buying a money-making product, the cost is usually pegged on how much does it earn annually minus any cost and depreciation. SCC earns billions of PHP from coal annually and that alone will require a large amount of money to buy their plants. Moreover, a business does not want to sell its assets at a loss, and most especially if the business is at all-time-high earnings and has a lot of positive future opportunities.

The government has been recommended on taxing businesses that cause carbon most especially on coal plants. However, they admitted that our country is not ready since our power rates are uncompetitive. Eventually, the taxes will be passed on to consumers, and power rates which are already increasing will increase further.

Renewable energy is indeed the future but it seems like the Philippines will take a while to adapt. The government admitted that they do not want to proceed with policies without securing investments towards renewable energy. The demand for power is projected to increase annually and renewable energy won't be able to handle all by itself. Making it hard for traditional power companies to produce output will not help solve the problem either. The Department of Energy (DoE) projected that by 2027 there is stable supply of power with half of it are coming from coal facilities. DoE however aims to have a mix source of energy by 2030 where 60.8% is from Renewable Energy.

AREIT, DDMPR, FILRT, RCR, MREIT

KMC Savills, a property consulting firm projected that about 1 million square meters of Grade A offices are going to be vacated in  Metro Manila. KMC Savills did not mention any specific company but we all know that big names like Ayala, Robinsons, Filinvest, and Megaworld dominate the metro. The consulting firm noted that there is a supply and demand imbalance. Many tenants are asking for discounted prices otherwise they will pre-terminate their lease and move to a cheaper location. Prime locations like the Bay Area had their rental rates drop from 350 PHP/sqm coming from a high of 1,200 PHP/sqm in just 2 years. BPO sectors are shifting to a spoke-hub model of workspace in which their base will be in the metro but their employees will be located in stations outside the metro. The model makes sense because rental rates in the provinces are cheaper. Meanwhile, Megaworld has this ambition of building more office spaces and they have already claimed the largest landlord title in the Philippines. With many available vacant and the addition of new office spaces that have cheaper rates, then indeed rental rates will go down.

The competition between these landlords lies in the pricing of their leasable spaces. The landlord that gives the best rate wins. Most of these office REITs have a tenant contract wherein there is a 3% to 5% annual rental escalation rate. The problem is that this might not push through if the landlord wants to keep the tenants. It's either the rate remains the same or is lowered down. For an office REIT investor, it wouldn't be much of a problem if we have diversified our funds in all of the REITs. When a tenant leaves another landlord whom we have invested, then most probably the tenant ends up with another landlord whom we are also invested. The diversification plan looks good but since these landlords are competing with lowest rental rate to win tenants, eventually the result overall to our REIT portfolio is  lowered dividend yield.

Disclaimer: These are all speculations based on KMC Savills projections in the office sector and may not hold true. We do not have direct and detailed information with regards to how each of these landlords transacts and keeps their relationship with their tenants. Even though some landlords have properties in diversified locations outside Metro Manila, the majority of them are in the metro that contributes the largest income in which we get our dividends. We'll have to keep an eye on the next quarterly report and by then we can see which landlord remains resilient. Whatever happens, one thing for sure is that REIT investors will still get dividends regardless of the income as compared to other dividend stocks in which they cease to payout dividends if they are operating at a loss.

On the other side of the news, FILRT declared their first quarterly cash dividend amounting to 0.112 PHP/sh which is equivalent to a 6.4% dividend yield and higher than the projected 6.3%. It is amusing that each of these offered REITs gave extra incentives to investors. AREIT after the listing date declared their first quarterly cash dividend in the 3rd quarter and along with it includes the dividends from the 1st and 2nd quarter of the same year. On the other hand, DDMPR gave extra cash dividends that came from the earnings last year when they were still unlisted in the PSE. It would be interesting to see what RCR and MREIT would give to their investors after the listing date.

PLC

During my last writeup about PLC, their subsidiary Pacific Online Systems Corp (POSC) was on the verge of winning the five-year lease of the Philippine Charity Sweepstakes Office (PCSO) lottery system after the only other bidder was disqualified. Just today, it was disclosed that they have indeed won the contract. 

The contract is a joint venture between POSC and Philippine Gaming Management Corp (PGMC) in which POSC has a 50% stake in the said project. That said, PLC will have a 25% indirect stake in the said project since PLC only owns 50% of POSC. It's not much of a catalyst for a PLC shareholder since the income generated from this project might not significantly bump the net earnings or pull it down. Moreover, the net income of the lotto since 2019 is on the negative. We'll have to see on the next few quarterly reports if this new contract will break the negative income trend in the lotto business.