October 25, 2021

AREIT

AREIT is going to issue bonds to raise cash. According to banks, it's going to be a 2-year bond with an interest rate of between 2.5% and 3%. The bond is expected to be issued on the 26th of November.

The proceeds of the bond will be used to refinance debt. Many investors use a company's debt to calculate the stock fair value of a REIT. For instance, some investors use Net Asset Value (NAV) to put a fair price on a REIT stock. The NAV/sh is calculated by getting the total value of assets minus the total liabilities divided by the outstanding number of shares. Total debt and the interest to pay for that debt is a liability and applying the NAV formula will decrease the fair value of the REIT stock. However, AREIT is making a new debt to pay an old debt which is not that bad if the new debt has a lower interest rate than the old debt. So this implies that this bond is an attempt to lower the interest rate of their debt. Thus, this could be a positive outlook for shareholders since this maintains the stock fair price value or slightly increase it.

RCR, DDMPR

Among the most resilient BPO industry in the Philippines is the IT-BPM (Business Process Management). According to the forecast, the demand for IT-BPM is expected to grow this year between 8% and 15%.  This is a positive outlook for RCR because the majority of the tenants are in IT-BPM. We should be expecting a stable occupancy rate and dividends. 

LPC (Leechiu Property Consultants) also noticed the demand for IT-BPM. They reported that there were no improvements for POGOs in the business districts of Ortigas, Quezon City, and Bay Area but projected to return to growth by the 2nd quarter of 2022.  Abacus research however does not think so because China is still clamping down on POGOs and the fact that the majority of our POGOs are from China. With LPC not giving enough details and data with their projection makes it not credible enough to believe. The 3rd quarter report deadline is nearing and we'll see how DDMPR is fairing with its occupancy rate since the majority of the tenants are POGO-related businesses.

AREIT, RCR, MREIT, FILRT

Abacus recommends REIT investors lessen their exposure in Office REITs because of the following facts: 

(1) The average vacancy rate as of the 3rd quarter increased to 17% from the low of 11%. This could mean that many tenants are not renewing their leases. It could also mean that additional supply of offices are being added but are not being rented.

(2) The BPO industry is appealing to the government to make work-from-home setup permanent. Once approved, many BPO will vacate office spaces.

(3) Interest rates are rising. Some investors will divest on REITs and move their capital in less risky investment assets like high-interest-rate bonds.

These however are all speculative at the moment but something to keep an eye on. Average vacancy rates might have increased but we have to note that most of our REIT tenants have 3 to 5 years contracts. Meanwhile, interest rates from fixed income investment assets might be increasing but not as high as the dividend yields being given by REITs. I have recently observed that most bonds are still below the 4% interest rate. For now, Tonik's time deposit rate is the highest I've seen which is at 6%.  Meanwhile, many preferred shares, which also can also be considered as fixed income, have dividend yields between 4% to 7%.

MREIT

MREIT declared its first quarterly dividend at 0.24 PHP/sh, as earlier claimed by MREIT's Kevin Tan. If we put an assumption that 0.24 PHP/sh is the quarterly dividends, then we should be getting a dividend yield of 5.96% at the IPO price of 16.10 PHP/sh. The projected dividend yield of MREIT for 2021 is supposed to be around 5.50% and the projected dividend yield of 5.90+% is expected to be on the year 2022 onwards but it came earlier. At the current trading price of 17.82 PHP/sh, the dividend yield is around 5.34% which is still attractive to some investors. They find the current price undervalued because it is trading below MREIT's Net Asset Value (NAV) of around 20 PHP/sh.

BRN

Another much-awaited preferred share has now been approved by SEC. There are no final details yet but according to news sources, the dividend yield is between 6.5% and 7% redeemable after 5 years. 

BRN will be using the proceeds for their real estate projects, land banking, funding projects from a subsidiary, and other general corporate purposes. 

BRN might not be as big as MWIDE or JFC who earlier offered their preferred shares earlier but looking at their balance sheet, they currently have good financial standing, the assets are multiple times higher than their current liabilities, and are earning thus giving confidence to some investors lending money to the company.

We have to note that preferred shares are not formally considered liabilities in the balance sheet but in reality, they are liabilities because they are obligated to pay back investors. Considering that BRN has no other preferred shares offered makes it easier to read their financial standing.

AP, SCC, SPC

A week ago NGCP raises a yellow alert in Luzon because the demand for power was fluctuating at 10,514 MW and yet the available supply is 10,935 MW. The good is that the demand slowly decreased but it could've been worst if it went over the available supply. Around 1,366 MW of power has been shaved off because of forced outages of power plants and some of these are from AP and SCC.

This unfortunate turnout of the event is evidence that our supply is slow in meeting up the demand. As most of us already know in economics, anything that is high in demand but low in supply leads to increased prices. Some power companies might not be affected because their production loss of a down plant is offset by the sale from their other operating plants. Meanwhile, other power companies that are fully operating can gain more. In the end, consumers will eventually suffer and the government has always been intervening with forced outages because it can be some act of price manipulation in the market. The Energy Regulatory Commission (ERC) is strict that it is difficult to satisfy them even for valid reasons why a plant is down. However, the intervention might not much have an effect. For instance, SPC who had one of their plants down for 98 days has only been fined 4.25 million PHP which is a negligible amount to the business. If the ERC however puts heavier penalties on power plants, the company might just decide to permanently shut down the plant. In effect, the overall power supply will be reduced, price increases, the grid situation will get worse, and consumers still lose.

We're currently at the cold season in which power is supposed to be cheaper because demand usually slows down. If supply is not improved when summer comes, we should be expecting a red alert, rotational power cuts around the country, and a high electricity bill.

GMA7

The report states that GMA7 is now covering 97% of television households nationwide with 82 million viewers. It's something that many expects since it's a monopoly. However, this doesn't mean much for some investors because they will be looking at the financial statements on how effective is the business in monetizing viewership. ABS-CBN is already a content company and without a franchise is earning almost equally with GMA7. In digital platforms, Both GMA7 and ABS-CBN are making their respective claims of being dominant based on the number of subscribers.

For a dividend investor, for sure many are speculating a better dividend since GMA7 earnings might have increased, we just do not know by how much from the previous quarter. However, the stock price is consolidating and it seems like many remain conservative and are not buying at a higher price, not until they see the 3rd quarter financial report. GMA7's current stock price has already priced-in the earnings from the previous quarters and some investors asks what more earnings do they have to grow for this incoming quarter if they have already covered 97% of the broadcasting sector.

TEL, GLO

GLO's Mynt, the company behind GCash is the only Philippine startup that made it to Credit Suisse's Southeast Asia 35 Unicorns list. GCash is currently valued at 1 billion USD. Many analysts forecast that the gross transaction value will reach 3 trillion PHP this year from the low of 1 trillion PHP a year ago. More and more people are using the platform and Mynt's GCash has shown the ability to scale and handle trillions worth of transactions. On the other hand of the business, GLO is continuing to widen its reach among the population by partnering with Asticom Technology to accelerate fiber rollouts nationwide. Recently, they received the Wireless Broadband Alliance for helping bring high-internet speed internet to areas difficult to reach.

TEL on the other hand is continuing to push PayMaya. Orani, a town in Bataan with a population of at least 70,000 wants to become a "digital-first community" in which they want their transactions such as social service programs, tax payments, cash-aid distribution, consumer-to-merchant payment, and other financial related services to be done online.  They are tapping TEL's PayMaya to make this a realization. 

Ookla's 3rd quarter report showed that TEL is still leading the speed score in the mobile and broadband segment. The report also showed that cities like Caloocan, Quezon, Manila, Cebu, and Davao have the fastest speed. It shows that GLO and TEL are pouring more of their resources where they can make more money thus the battle of Telcos within these places is the speed and reliability of their network. It might not be practical for a telco to widen its coverage by building infrastructure in places where there is only a small population because the operational expense is more expensive than the income they get in those places. A report from World Bank's Philippine Digital Economy stated that 57% of households in the country do not have access to the Internet.

October 18, 2021

TEL

PLDT continues to up its data center business this pandemic. We do know that many businesses are shifting to work-from-home setups and this has disrupted how employees communicate. Traditionally, companies have on-premise phone systems in which they maintain and house it in their building. This traditional phone system allows offices and departments to communicate with each other through calls and video conferencing. For a business, maintaining the hardware and software for a phone system is expensive and this is where PLDT is going to give value. PLDT partnered with AudioCodes, an IT company that offers cloud-based phone systems. PLDT's data center will host the cloud-based phone system of AudioCodes. This will help businesses reduce costs and save from the headache of phone system configuration and maintenance as these will all be done by PLDT and AudioCodes through their data centers. A cloud-based phone system relies upon a solid Internet connection thus a fitting business for PLDT. Yet we indeed have freely available tools for online communication such as Skype, Google Meet, Facebook, Viber, Slack, and the like, but having customized communication protocols specific to a business is another level in which PLDT and AudioCodes can offer.

MWIDE

MEG's MWP4 preferred shares is finally out last week. The final dividend yield is 5.30% at 100 PHP/sh. The offer will end on October 19 though I am afraid institutional investors have gobbled up most of the shares. Though formal subscription will take a week, however, due to demand, brokers gave retails investors a 1-day subscription deadline. The proceeds of MWP4 will be used to redeem their MWP preferred shares which used to have an approximate 7% dividend yield. They're technically re-rolling their debt but this time with a disappointing lower dividend yield. Still, it's quite amusing that many investors remain interested in such an offer.

EEI

If you were interested in MWP4 preferred shares and missed the subscription, then wait for EEI's preferred share which is already close to being approved by SEC. EEI, a known construction company is going to offer Series A and Series B preferred shares in which they will use the proceeds to pay some of their loans to avoid paying further interest rates and to have cash on hand because their income is "receivables" from existing projects. They probably need the cash now in advance through preferred shares offering rather than waiting for the cash receivables since they might have found new business opportunities to use it on. Whatever receivables they receive in the future would probably be used to pay back the preferred shareholders.

According to banks, the offer price is 100 PHP/sh with a dividend yield of 5.14% to 5.79% for Series A and 6.47% to 7.12% for Series B. Both series will be optionally redeemed in 3.5 years and 5.5 years respectively. The dividend yields are not yet final and the banks are usually the first to know the initial details so they can prepare and offer them to their clients. The fact that banks already have these details means that EEI preferred shares will likely proceed this December.

AREIT

Another infusion of an asset has again happened between AREIT and its sponsor ALI. Many investors were unaware and were not able to position earlier now that AREIT is trading at an all-time high of 41.80 PHP/sh. AREIT admitted that this additional asset is the reason why they have released the 3rd quarter dividends at an earlier date. In the whole of the 4th quarter, the dividend income from this new asset will be realized. This technically means that the 0.44 PHP/sh quarterly dividend will increase further.

With that said, investors who are already tired of waiting for AREIT to dip for a chance to buy at a discount might probably give up. One thing I noticed consistently with AREIT is that Omar Cruz,  an AREIT director, usually buys before positive things happen. He started buying AREIT shares at 26 PHP/sh before new assets has been infused. It then happened again for the 2nd time when he bought at 30 PHP/sh. For this time, he bought at 38 PHP/sh before this new asset has been announced. The current price of AREIT right now is high such that the projected dividend yield is not attractive. However, I might just buy when Omar buys and won't wait for the dip to happen.

SCC, DMC

It's been all over the news a week ago. They gave out special dividends in which they have reached an all-time high dividend payout this 2021. Many dividend investors were expecting a special dividend because their earnings this 2021 are higher than their earnings last 2018 in which was the year they gave out special dividends too. Those who have been accumulating SCC and DMC at a low average cost might have probably reached more than a 20% dividend yield. A legitimate too good to be true investment indeed. 

As the term implies, it's a special dividend. It won't probably happen again next year considering the fact that the earnings are due to coal which happens to be in demand because of the shortage of power supply both locally and globally.  Conservative dividend investors will still peg the dividend yield of both DMC and SCC based on their regular dividend payouts.

The 3rd quarter report hasn't been released yet but investors and traders have been pushing both DMC and SCC stock prices up. It has reached a point that some dividend investors are already holding more than 100% capital share appreciation in which is more than 5 times worth the dividend yield. Some dividend investors started selling SCC shares and moved the funds to other dividend stocks because they're seizing the opportunity right now especially that coal is not the future. Other dividend investors plan to keep holding for dividends and as long as coal is still in demand and sell when coal prices start to stabilize. The rest would still keep SCC and DMC for the purpose of dividends.

GLO, TEL

The Mobile Number Portability (MNP) is finally out in which we are allowed to change network between GLO, TEL, or DITO without changing our phone number. TEL has been accusing GLO that they are not properly implementing the MNP compliance. There are approximately 1 million GLO subscribers that are wanting to go to TEL but in the process of doing so, they were not able to. GLO in their defense said that it should be expected since the MNP is still in its early stages and mistakes happen. TEL made complaints to NTC to look at the matter since TEL and DITO have been doing their part and find it unfair that their customers can go to GLO but not the other way around. A survey a week ago however stated that most customers remained loyal to their respective telcos but if they were given the choice to move, they would prefer GLO. The result of the survey is understandable since GLO is more active in giving value to the common population while TEL gives more value to enterprises.

SPC

Last week, 90% of the investors have voted to amend the primary purpose of the company. They are now adding renewable energy as part of their business in addition to the production and sale of electricity. There are no specific plans yet for how this will work out but they have been looking into it since 2017. The decision to pursue it this 2021 is most probably because the Philippines is joining other countries whose aim is to shift to clean energy. 

SPC venturing into the renewable energy space is not going to be a problem since they have a lot of cash and little to no debt. Unlike other power sectors, SPC is just adding renewable energy to the portfolio. ACEN is ditching the traditional way of producing power and going 100% on renewables. Meanwhile, AP is slowly reducing the traditional way and replacing it with renewable energy.

Last time, our government has the goal of having a mix of energy by the year 2030 where 50% of it will be coming from renewables. That goal however has been reduced to 35%. The goal to reach 50% has been moved to the year 2040. This is probably because going all-in renewable is not sustainable which has already happened to other countries. Other countries that made an aggressive move to renewable felt the power crunch and had to go back to using the traditional source of energy. 

With those said, SPC's move to renewable might not be a risky decision but rather more of a preparation in the future. They're not ditching any of their current business and they even bought ACEN's power barge previously, a floating power plant used by ACEN when it was not yet into renewables. The regular dividends given to investors might be reduced since SPC might need the cash to venture out into renewable energy. These are all speculative at the moment and developments we need to keep an eye on.

GMA7

GMA launched their 10th regional TV station in Zamboanga which will serve audiences in  Zamboanga, Basilan, Tawi-Tawi, and Sulu. With all the digital advances we're going through, sometimes it doesn't make sense to roll out a regional TV station. However, here in the Philippines, the digital gap does exist especially in areas where it is difficult for our telcos to expand due to terrain, security, and sometimes political issues. Moreover, them having access to the Internet is not going to be enough because of the language gap. Places from afar have difficulty in reading and comprehending the English language in which is the usual language when using tech. There are places in our country too that do not have a solid grasp of the Filipino language. These regional TV stations bridge those gaps in the meantime. Media companies are obsessed in coverage expansion. The wider their the audience, the more opportunity to make money.

AP, SPC, SCC

It's been 18 days since the Malampaya has been shut down and is expected to be operational again on the 22nd day of this October. The average price of power has doubled to 6.29 PHP/kWh from a low of 3.30 PHP/kWh last month. That is a dramatic increase considering that Malampaya only serves 30% of the country's energy needs. Independent Electricity Market Operator of the Philippines (IEMOP) clarified that 27 power plants had unplanned outages which too contributed to the increase of price.

With that said, we should be expecting our electricity bills to go up this October and the possibility of an increased inflation rate. Investors of power-related stocks might be gaining from this event but might break even with the inflation rate. What about the population of those that aren't investing in anything at all? Well, investing does have risks but not investing is riskier since inflation will eat up the monetary value of our savings in the bank. The population who aren't capable of investing because of our poor economic situation is a different story.

MREIT

News claims that MREIT revenues are up by 6% this 3rd quarter. They are expecting to release a dividend of 0.24 PHP/sh this October. There are no dividend declarations in sight yet but something to keep an eye on.  Investors are bullish on this stock. Many are buying even at an all-time high price and this is because of the additional infusion of assets that are expected to happen next year and the few more years after that until they attain the biggest office REIT in Southeast Asia. The 0.24 PHP/sh dividend will further increase in the next quarters as long as the majority of rental offices are fully occupied.

October 11, 2021

GMA7

When Bong Bong Marcos submitted his certificate of candidacy for the presidential seat, I have already expected Leni Robredo to file hers as well. She kept telling previously that she will run for president if Bong Bong decides to run as well. Now that it happened, this is a potential risk for GMA7 since Leni is not against the approval of the ABS-CBN franchise.

The following are politicians that many GMA7 and ABS investors are watching out that are not against the ABS-CBN franchise: (1) Franklin Drilon, (2) Panfilo Lacson, (3) Sonny Angara, (4) Nancy Binary, (5) Sherwin Gatchalian, (6) Richard Gordon, (7) Lito Lapid, (8) Manny Pacquiao, (9) Joel Villanueva, (10) Risa Hontiveros, (11) Francis Pangilinan, (12) Ralph Recto, (13) Isko Moreno, (14) and (15) Vicente Sotto.

Among the government seats, GMA7 and ABS investors are more concerned with regards to who wins as president since it holds a larger influence on approving the ABS franchise.  Currently, we have the following known personalities running for president: (1) Leni Robredo, (2) Bong Bong Marcos, (3) Manny Pacquiao, (4) Bato Delarosa, (5) Panfilo Lacson and (6) Isko Moreno. Out of these 6 candidates, 4 are not against the ABS franchise. The probability of ABS having their franchise after the election is high. It has been claimed in a report months ago that ABS-CBN leads in terms of viewers, especially in the news and TV series section. They hold 45% of viewers higher than the 31% of GMA7. What remains speculative is if ABS would be able to bring back its days of glory after obtaining the franchise since many things have already changed internally in the company. 

SCC

Coal prices are still peaking but SCC's Isidro Consunji forecasted that it may remain elevated until the first half of the year 2022. SCC exports 50% of their coal and 90% of these export goes to China. Even so, it is not enough to meet China's energy. Ever since China lost Australia as their coal supplier because of soured relationship, they have been tapping neighboring countries for coal. Nevertheless, Australia, a global leader in coal, is still not enough to fill the gap of coal demand even if they continue supplying China with coal. Consunji however expects that many will overproduce which eventually causes the prices to drop. He expects an additional supply of coal coming from competitors in the next few months that will ease the coal prices. Countries like Colombia and Kazakhstan which is rarely tapped for coal, are now gaining in the market. However, when coal prices remains expensive, many power plants will shift to less expensive fuel or would remain shut down for the mean time if they're not profitable anymore. 

SCC claimed that their coal has doubled in price in the 2nd quarter of this year. Being the major player in coal in the Philippines, they are expecting their revenue to rise more than 50% in the fourth quarter in which it could reach their pre-pandemic profit levels. Some brokers have adjusted their fair value of SCC's stock price to as high as 30+ PHP/sh. SCC regularly gives a dividend of 1.25 PHP/sh but due to their profitability levels, equity analysts like Abacus speculates a dividend of 2.50 PHP/sh such that even if you buy SCC at 25 PHP/sh would still give an attractive dividend yield of 10%.

In my previous writeup, China is going to stop funding 44 of their coal projects overseas which already is an advantage for SCC since it lessens global competitors. It turns out there are 5 coal facilities here in the Philippines where Chinese companies are involved. However it is not clear yet which of them are going to be affected by China's move. SCC holds 90% of market share in the coal business here in the Philippines, with more coal plants being suspended, this further increases SCC's market share.

TEL, GLO

It seems like the Internet is now becoming a commodity in our country. This is due to the pandemic which had accelerated our digital transformation. Fitch Solutions, a data research and analytics entity expects our telcos to be investing more into digital infrastructure and data centers in which they are right because it's what TEL and GLO have been doing lately. Both telcos have been expanding more towers ever since the government reduced the paper requirements for building towers. 

I've been writing about GLO and TEL for quite a while now but let's try to summarize some facts on what these two companies have been doing lately besides expanding their broadband and mobile business:

• There are already close to a million Filipinos using 5G and projected to double in the next few years. GLO has over 1,800 5G locations in the country while TEL has 4,099 5G sites nationwide. Both telcos have started to test and deploy commercial 5G Stand Alone as most of the 5G they have right now are non-standalone.
  
  
• Many companies are now complementing their business with digital products such as e-commerce sites, digital app for banks, solutions for work-from-home setup, solutions for schools needing an online learning platform, and many more. They will likely be going to need data centers. TEL, a major player in the data center business, is going to introduce hyper-scaler data centers in which they claim is more powerful than the 10 of their current data centers combined. They have just been given by the government the go signal to build the hyper-scaler data center.
  
  
• GLO's GCash is now profitable and is the household name when it comes to a digital wallet. Meanwhile, TEL is venturing out to building a digital bank called Maya. Benjamin Diokno, chief of the Central Bank of the Philippines, claimed that there is an accelerated rate in the use of digital payments. One out of five payments is done online. On a year-on-year basis, payment-to-merchant increased by 47.8% while person-to-person increased by 18.1%.
  
  
• TEL has just invested in underground sea cable lately in which they called the project Apricot. Recently they are looking to investing in another one that would supplement the Philippines-US route. TEL currently has 14 other international submarine cable systems installed. All these cables are contributing to improving the Internet's performance in our country.
  
  
• The e-commerce and e-sports business is becoming profitable and is now partnering with telcos. Unipin for instance which serves 7 million users across 30 countries is partnering with TEL so they can use their digital distribution platforms such as when purchasing for game credits, availing vouchers, discounts, and the like. Statista, a statistic portal for market data, shows that online gaming has been flourishing in the Philippines and expected to grow in the next five years. Meanwhile, many e-commerce are utilizing GLO's GCash and TEL's Paymaya for electronic payments. GLO recently announced its partnership with PayMongo to implement the "Buy now and Pay Later" scheme. Other businesses on the other hand registered online to adopt e-commerce. There was a surge of 88,575 registered e-commerce in the year 2020 from the low of 1,663 in the year 2019. This 2021, an additional 19,673 more registered as of August. Brain & Company, a management consulting firm, projected that 78% of our population will be into e-commerce transactions. Consumers are forecasted to grow by 60% by this year alone and would probably double in the year 2026. 
  
  
• Internet-of-Things (IoT) is now becoming more accessible and viable in our country. TEL partnered with Nokia to build the country's first IoT platform for the benefit of businesses that are going to take advantage of IoT to supplement their business operations.

We that said, notice that the reason why   GLO and TEL are banking on their infrastructure is that many consumers and businesses are now relying on the Internet for their day-to-day operations thus becoming a commodity. 

CNVRG

There was an interview between COL financials and CNVRG a few days ago and one of the interesting questions asked was about dividends. Unfortunately, they're not seeing themselves to be giving any dividends soon and would focus the use of their earnings to expand fiber in the country. They do however projected that they're going to have more cash flow by the year 2023 and onwards but it is not an assurance that they would be giving dividends. Depending on the market condition and opportunity that will arise, they will continue and prioritize to be a growth stock. In their defense, CNVRG said that the shareholder returns are better to look upon because they can  potentially reach a 100% or more share price appreciation in which dividends of 5% to 6% are just peanuts.

MWC

In addition to the 25-year franchise they have just been awarded a month ago, they again bagged another 6-year contract outside the country. This time they will be operating water services in some cities in Saudi Arabia. This assures that MWC will have profit for the next 25 years which attracts dividend investors. MWC has a dividend policy of paying out 35% of its net income to shareholders. However, their last dividend payout was in the year 2019 and there have been no dividends released since then. They have been busy using their resources to fix their operations to get franchise approval which has been revoked previously because of soured turnout of event with the government. Dividend investors have high hopes that the dividends would continue next year since this new franchise and contracts are now in place. The question is what would be the projected dividend yield. MWC stock price has been flying high recently but with no projections or financial data that shows their possible future earnings making it difficult whether buying at the current price gives an attractive yield. Conservative dividend investors will probably wait for at least a year of profitability and stability before jumping in.

FILRT

Similar to AREIT a few months ago, FILRT has also obtained the safety seal certificate for most of its buildings. This seal is awarded by DOLE indicating that they have met safety health standards amid the pandemic. With that said, their tenants will not need to entirely shift in a work-from-home setup which some of their tenants see as a threat that disrupts their business. They would be able to send at least 10% of their employees on-site, a requirement for PEZA for BPOs to avail of the tax break incentive.

October 4, 2021

DMC, MWC

The senate granted Maynilad Water Services (MWSS) along with Manila Water (MWC) a 25-year franchise that allows them to continue and operate within their areas of responsibility. MWSS will operate in the west zone of the metro including the province of Cavite and MWC, on the other hand, will operate in the east zone of the metro including the province of Rizal. Moreover, MWC recently bagged a new 25 year contact for supplying water in the province of Pangasinan. The franchise of both MWSS and MWC however will be revoked if they fail to operate for 2 years straight or goes into bankruptcy.

This would add income stability for both MWSS and MWC for the next 25-years. However, this is not much of a catalyst for DMC since they only have a 27.19% stake of MWSS but an income is still an income. 

AREIT, RCR, FILRT, MREIT

BPO is a lucrative tenant for PEZA accredited properties. This is because BPOs can avail of tax incentives as long as they are in the ecozone.  Recently, however, the government is requiring the BPO to have at least 10% of the workforce to be in the office otherwise they will lose the tax break incentive. This ruling will apply until March next year. BPOs are calling for fair treatment because there would be cases that it is impossible to comply with such requirements, and most especially that it would put the employees' health and safety at risk. 

RCR is making ways for the hub and spoke model. This model allows BPO to have its base in the metro and office stations in the provinces. Meanwhile, MREIT has township models in which there is an ecosystem where the town has everything the employees need such as amenities, housing, food market, and so on all in one place. These models brought by RCR and MREIT are technically moving the office closer to BPO employees within the comfort of a home making it safer for employees to move around, comply with PEZA requirements, and for their BPO company to avail of the tax incentives.

RCR

RCR claimed a report a month ago that they will be infusing around 442,000 square meters into their portfolio. They will acquire these assets from their sponsor RCL. A week ago, RCR gave more details on these assets through a disclosure. They stated that Cyberscape Gamma in Ortigas and Robinsons Cybergate Center 1 in Mandaluyong are potential properties that can be added within 18 months or less. Both properties mentioned do not complete the 442,000 square meters thus more assets will be added with no definite timeline. RCR however mentioned that RLC has existing office BPO spaces in various commercial centers that are being constructed which could be added later on. Though no timeline is mentioned, the memorandum of understanding between RLC and RCR stated that there will be an infusion of 1 to 2 assets annually subject to market conditions.

MREIT

After the MREIT IPO debut a week ago, ANC and Kevin Tan had an interview. Kevin mentioned that MREIT currently only has 16% of the assets and more will be added later on. They are committed to putting around 100,000 square meters by next year in 2 tranches. One of which will be in the 1st quarter and the other in the 2nd quarter of 2022. These properties will be coming from Eastwood, Mckinley Hill, and Iloilo Business park. By 2023, assets around 300,000 square meters from Uptown Bonifacio will be infused.

Kevin claimed that MREIT is going to be an 80%-90% pure-play office REIT. By 2030 they aim to have infused a million square meters of assets and is one of the largest office REITs in South East Asia. With the pandemic going on, Kevin said that the office is the most resilient and they are already seeing a rebound in demand. 99% of their offices are leased out and investors should expect an upside on dividend yield in the 4th quarter of this year and 1st quarter of next year. What makes MREIT special from other office REITs is its Township Ecosystem which includes housing, convenience, security, and amenities to employees.

AP

AEV, the parent company of AP decided to sell 25% of AP to JERA, a big company in Japan known for liquefied natural gas (LNG). The stock price of both AEV and AP slumped because of the deal. Some investors find this a negative sentiment and this is because selling large portions of shares to another company means giving more control to plans and the future of AP. Lack of investor confidence in AP might have happened. Nevertheless, AP is still holding 50%+ of the shares and there is no change in management.

AEV defended the deal stating that AP and JERA will collaborate for potential projects so that AP will achieve its vision of having 50% of its portfolio be renewable energy by 2030. There would be projects such as taking advantage of JERA's LNG sourcing and production expertise and offshore wind projects that can supplement AP's mission for the next decade. These are all speculative and there are no concrete plans. What AP has right now is a partner who has the skills and resources that they can tap anytime when the opportunity arises.

The AP and JERA deal made sense however what did not make sense to some investors is that the sale proceeds are going to be used by AEV to grow other companies it holds and refinance existing debt. It would've made more sense if the sale is re-invested back to AP for its growth since the money came from it anyway. Some investors are speculating that "that" is the primary reason why AEV had to so sell AP shares to JERA. During my last writeup, AP had plans to loan money from the public through bonds to grow their portfolio. Wouldn't it made more sense if they just use the proceeds from the AP-JERA deal instead? I don't know either, only AEV knows.

GLO, TEL

It is undeniable that 5G is the future and it is where TEL and GLO are pouring their resources. A 5G connection reaches a speed 20 times faster than 4G. However, the benefits of 5G can only be realized if the device supports 5G as well. In our country, we're mostly using 4G but telecoms like TEL, GLO, and DITO TEL are already adding the support for 5G. TEL and GLO have already deployed 5G support in some places. What makes 5G special is its network slicing technology in which dedicated connections are created depending on our use of the network. For instance, separate connections are made for broadband, mobile, streaming, gaming, and the like. Every use case has different needs such as the amount of bandwidth and speed to name a few. 5G handles these connections at the same time without disturbing one another which is typically a problem that we experience when our 4G towers are servicing too many users that are pulling network resources from each other. To achieve such a feature, telcos deploy many distributed small cell 5G towers that operate at a limited radius. These towers are where 5G devices connect and are given a dedicated network connection depending on their use case.

Recently GLO announced that they are already testing a 5G Stand Alone (5G SA). TEL on the other hand has already deployed a commercial 5G SA in Makati. The thing about 5G in our country is that they're all 5G Non-Stand Alone (5G NSA).  A 5G NSA relies on the infrastructure of 4G. Whenever a 5G device performs transactions in the network, they will still have to initiate the process first through the 4G network and then the actual transmission is done in the 5G network afterward. On the other hand, a 5G SA eliminates the need for the 4G network thus it makes the overall process 10 or more times faster. The problem however is that 5G SA is going to be a separate infrastructure from 4G. This means that if GLO and TEL will expand 5G SA in the country, it will take a lot of work and network configuration. It is more practical to use 5G NSA at the moment because it will re-use the existing 4G infrastructure. We won't be seeing 5G SA anytime soon and most probably it will be used only in special locations. 

TEL remains to hold the most reliable and widely available 5G mobile operator in the country. In terms of consumer sentiment, GLO is leading according to research conducted by an international market research firm. The study has its focus on digital products and solutions of companies. The market research in consumer sentiment showed that 4 out of 10 chooses Globe as their telco. This is mostly due to the fact of their GCash is widely used in this pandemic. While GLO reaches more to consumers, I noticed that TEL is geared more to enterprises.

On the other hand, GlobalData, a UK-based data analytics firm mentioned that revenues from mobile services here in the Philippines are to reach 5.4 billion USD over the next 5 years because of the increasing demand for data most especially on video services and social media content. Revenue is expected to increase at an annual rate of 5.6%. GlobalData claimed that this would be due to the growing 4G subscriptions and the rollout of 5G services.

TEL

TEL will be the first to pioneer in building an Internet-of-Things (IoT) platform in the Philippines through the partnership with Nokia.  This is probably because IoT devices are becoming more accessible and practical.

IoT devices are technically any object that can connect through the Internet and be able to collect and transmit data. This can be as simple as a light-bulb, a refrigerator, a speaker, a doorbell, a clock, and anything that you can imagine. Data has always been an important aspect to businesses because they use it to support their operations such as gaining ideas on trends, minimizing costs, maximizing productivity, and so on. Businesses can deploy their IoT devices within their offices, employees, warehouses, cars, and anywhere they need to gather data from day-to-day operations. With that said, an IoT platform is needed to manage these devices. Depending on the features, IoT platforms can collate data, programmatically control devices based on conditions, make another IoT device communicate to another IoT device, and many more just to name a few.

IoT is great but requires a solid and reliable Internet connection otherwise it will greatly affect the timeliness and accuracy of data. With TEL's excellent network infrastructure, they are inviting businesses through digital conferences how IoT can help their business and how their IoT platform would give value. If things go well, businesses will subscribe on using TEL's IoT platform, and eventually more money for TEL.

SCC

SCC stock price has soared and is already at the overbought level. China is going through a power crunch and is in need to produce coal at all costs even if they have exceeded their annual quota. Coal is used for around 70% of China's electricity. Meanwhile, in Europe, Germany is running out of coal and had to suspend its coal-fired power plant. They claimed that there is a strong demand for coal and it is difficult for them to get supplied. Coal is used for around 26% of Germany's power generation. The UK on the other hand is a country that is phasing out coal had to activate its coal-fired power plants to meet electricity demands. Then here is India, the 2nd largest importer of coal is now scrambling to secure coal supplies because power demand surged. The report stated that half of 135 coal-fired power plants of India have fuel stocks of less than 3 days. Coal is used for around 80% of the country's production.

These countries are competing for coal which is why the prices have gone up in the market. With that said, SCC's coal business is here to stay in the meantime. Analysts stated however that if these coal-fired power plants find the prices to shoot up higher and them becoming non-profitable anymore, then they would probably just shut down the plants instead. Meanwhile, China which is known as a place for mass-production might probably pass on the cost to companies that are using their services, and in effect, the prices will increase on products that are labeled "Made in China".  In the long run, everybody is affected at some point.

JFC, DD

There is a demand for e-commerce in the Philippines and modern warehouses are needed. The demand is due to the problems brought by the pandemic where movements are restricted within the population because of lockdowns. These warehouses are usually distributed all around the country. When a customer orders products online, it is more convenient to grab the products from the closest warehouse to get them delivered. This saves time and resources for the company. Having many warehouses, however, is not as easy as buying/renting a building then dump all products there. Management is difficult and there are many challenging factors to consider such as the logistics, distribution of products based on demand, supply of workers that can deliver to the customers, security, and management of the warehouse, and many more and just to name a few.

Joey Bondoc, a director of the real estate firm Collier, stated that these warehouses are more likely going to be part of a REIT since they are generating recurring income. Warehouse lease rates have been increasing due to high demand for the past few quarters. Meanwhile, JFC and DD are planning to offer the country's first Industrial REIT in the year 2022 in which the asset is Central Hub, a warehouse complex. Currently, CentralHub has 39.8 hectares of land in its portfolio used as a warehouse for commissaries, cold storage facilities, and logistics distribution centers.

CREIT

Citicore Energy REIT (CREIT) has released its IPO draft preliminary plan. This is an energy REIT in which the portfolio consists of power generation, freehold land, and leasehold land. The company is focused mostly on the production of solar energy setup in various solar farms around the country. The IPO proceeds are going to be used to acquire 2 solar assets from their sponsor Citicore. CREIT shares are offered at a maximum price of 3.15 PHP/sh with a projected dividend yield of 5.8% for the year 2021 and 6.1% for the year 2022. The offer period will start on November 15 and ends on November 19 of this year.

As stated, the information is all preliminary and might change at a later time. The IPO is close and, unusually, no media is talking about it. Basing on speculation and the provided CREIT portfolio, investors are going to earn dividends from a selected solar plant and lease rentals in which the lessee is their sponsor Citicor. We investors are technically funding the real estate where Citicor, an energy company, will do their business. It's not a pure-play energy REIT but with a mix of rental REIT.