November 29, 2021

DDMPR, FILRT

The news came out a week ago from KMC Savills, a property consultant, that the vacancy rate in the Bay Area increased to 18.15% in the 3rd quarter from the low of 8.2% a quarter earlier. Meanwhile, the vacancy rate in Alabang increased to 18.9% from a low of 17%.

Still, the cause of the high vacancy rate is due to the exit of POGOs and China's online gambling crackdown. DDMPR which is located in the Bay Area has managed to maintain a 97% occupancy rate despite having the majority of its tenants related to POGO. With many property consulting firms consistent in their reports with regards to vacancy rates due to POGO, one would think about how DDMPR can maintain a high occupancy rate. FILRT, which had minor POGO tenants in their portfolio was not spared. So how is DDMPR doing it? I do not know but we can only speculate. Many believe that it has something to do with the contract in a way that DDMPR's POGO might have paid their lease 1 or more years in advance. With that said, their POGOs are probably waiting for clearer skies which is why they are still holding on to their contract even if their operations have been hampered down. So far the only catalyst we have for POGO is with regards to the taxes they have to pay to legally operate in the country. We're not sure if the tax is a positive or a negative catalyst but even so, the POGOs continued to exit the country, and still no signs yet of a comeback. Nevertheless, whether DDMPR's POGO paid their lease in advance or not, the year 2023 is nearing in which around 40% of the DDMPR's tenant is about to expire. When that time comes, we do knot know the current situation but it is something to keep an eye on.

TECH, ALCO

Preferred shares TCB2C and TCB2D were offered a week ago. The dividend yield for TCB2C is 6.59% redeemable after 3 years meanwhile TCB2D is 7.75% redeemable after 5 years.

Meanwhile, I missed to write about ALCO's preferred share ALCPD a week ago. ALCPD gives a dividend yield of 6% redeemable after 5 years.

So far the dividend yields of preferred shares this year are increasing as compared to last year. The dividend yields a year ago is ranging from 4% to rarely 6% as compared to this year that it now reaches 7%. Even Retail Treasury Bonds (RTB) which is usually offered at 2% coupon rate a year ago is now being offered at 4%. It just makes sense that the dividend yield of preferred shares has to increase as compared to RTB or corporate bonds because it carries more risk.

OMICRON

The market started to react when the Omicron variant has been detected. PSEi is down to 7,200 from a high of 7,278. Every time a new variant of COVID is found, the market always dips and usually is the opportunity to buy dividend stocks. What I do have observed ever since the pandemic is that it is mostly these dividend stocks that have been thriving and mostly because the business they provide is essential to the population. 

The following are some consistent dividend-paying stocks that I believe will do well and will  continue giving a dividend yield of at least 5%:

(1) DMC/SCC made good earnings this year because of coal, nickel, and sales from power generation. Coal is still the cheapest and most practical source of energy. Our country's energy mix is at least 60% coal. The export of coal to China remains strong. On the other hand, nickel is in demand for the battery production of Electric Vehicles (EV). 

(2) SGP whose sole asset is NGCP monopolizes power transmission service in the country.

(3) MER continues to monopolize power distribution service in the country.

(4) PLC whose earnings from casino operations have been hampered down during the pandemic. They were however still able to give dividends. This year, their earnings are way better and much convincing that they will be able to give dividends. PLC remains defensive because they share gaming profit with MELCO. They do not pay significant leases, have no capital expenditures, and are not affected by the operating losses of its parent company BEL and losses of MELCO.

(5) NIKL whose earnings are mostly from mining nickel. As stated earlier, nickel is in demand for the production of batteries to be used for EVs.

(6) SPC whose earnings are from sales from power generation mostly in the Visayas area.

(7) FILRT, RCR, MREIT, DDMPR whose tenants are mostly in the BPO sector. BPOs remained resilient and they are forced to lease out PEZA accredited properties to avail tax incentives. Except for DDMPR, IT-BPM has always been in demand in our country even before the pandemic.

(8) PSB whose dividends were not affected and remained the same before the pandemic, during the pandemic, and even when new variants of COVID came.

(9) GMA7 currently monopolizes the broadcasting sector. The election is nearing and they have been making good earnings from the advertising business.

GLO, TEL, and AREIT have remained resilient as well however their stock price has appreciated such that buying them right now will not likely give a 5% dividend yield. However, they are something to keep an eye on when their price dips.

Note: These are not stock picks nor recommendations but of my own opinion and due diligence. 

November 22, 2021

GLO, TEL

GLO has plans to take its data center business seriously. GLO for the past few years focused on business-to-consumer products and solutions such as GCash. Now, they are in talks with ST Telemedia Global Data Centres (STT GDC) to improve their data center and grab a share of the business-to-business space.  STT GDC is a respected Singapore-based company that specializes in data centers. GLO has been operating data centers since 2001 but it was never a major source of income.

Currently, TEL leads the data center business in the country in which they have already started the development of hyper-scale business a few months ago. While GLO has been busy with GCash, TEL has been busy with the business-to-business space by improving its data centers and network infrastructure. Most of their data centers are certified and have been laying out additional underground sea cables. With their current infrastructure, they still lead the broadband segment and they are ready to offer the first 10,000 Mbps service in Manila this December. GLO has a lot of catching up to do on the broadband segment but TEL on the other hand needs to catch up with GCash and the mobile segment.

DITO on the other hand is still penetrating the mobile segment, had plans to start to enter the broadband segment, and they even claimed to enter the hyper-scale business. DITO however is never seen a threat most especially since they have negative losses reported just this quarter.

CREIT

SEC has finally cleared the IPO of Citicore Energy REIT (CREIT), it will be the first energy REIT. It is expected to be offered this 26th of November until the 3rd of December. The REIT will be listed in the market on December 13.

A quick recap from the last writeup: (1) the portfolio and income consists of solar power generation, freehold land, and leasehold land. (2) The IPO proceeds will be used to acquire 2 solar assets from the sponsor Citicore. (3) The maximum offer price is 3.15 PHP/sh in which we'll have to wait for further announcement of discount. (4) The projected dividend yield at the maximum offer price is 5.7% for the year 2022 and 6.0% for the year 2023.

MWC

MWC is back on track on giving out dividends. A week ago they declared a 0.531 PHP/sh. With franchise approved for the next 25 years, this ensures stability in business and at the same time dividend payouts. MWC dividend payout policy remains unchanged in which they give out up to 30% of earnings as dividends. As per historical data, MWC regularly gives dividends twice a year.

EEI

Update on the preferred shares offering: It will be from December 9 to December 15. The listing date will be on December 24.

A quick recap from the last writeup: (1) Offer price is 100 PHP/sh. (2) The dividend yield is not yet disclosed but it is expected to range between 5.14% and 5.79% for Series A and 6.47% to 7.12% for Series B. (3) Series A is redeemable after 3.5 years and Series B after 5.5 years. (4) The IPO proceeds are going to be used to refinance debt and at the same time for their projects and equipment. 

SGP

There was a lot of speculation on this stock for how much dividend it will give. SGP is a nobody stock until it was the only stock available to dividend investors who wants to own a piece of NGCP. Dividend investors know for sure that there will be dividends coming from NGCP but it will have to go through 2 layers of companies before it reaches SGP shareholders. NGCP dividends will have to go first through One Taipan Holdings Incorporated and Pacifica21 Holdings Incorporated before SGP. With that said, dividend investors are not sure whether the full dividend amount released by NGCP will be funneled to SGP through its subsidiaries or if these subsidiaries will get a cut of dividends and give the rest to SGP.

SGP said that NGCP will give dividends quarterly in which they also decided to release quarterly dividends for SGP shareholders. There is no minimum dividend payout ratio but it can be up to a maximum of 100%. Just today, they declared a 3rd quarter dividend of 0.20 PHP/sh which gives a dividend yield of approximately 6.7% per annum at the FOO price of 12 PHP/sh.

Many dividend investors added SGP to their portfolio because it is a defensive stock that gives predictable dividends. Its only asset is NGCP which monopolize power transmission service. Similar to MER and MWC, they have long years of contract agreement to operate making the business stable. At the same time, they all share the same risk in which the government has the power to revoke their franchise like what happened to MWC two years ago.

DMC

DMC recently reported having bagged new contracts worth 4.5 billion PHP and an additional 2.6 billion PHP from their ongoing projects from January to September. These contracts include a mall, medical building, power plants, and train depot. They claimed that bidding for big-ticket infra projects is starting to pick up and was able to accomplish major construction project due to the easing of quarantine restrictions.

November 16, 2021

MREIT

The management released a report claiming to acquire 4 assets by December this year. It is still subject to approval but 3 of the assets are in Iloilo Business Park while the other is in McKinely Hill. All these assets have an average occupancy rate of 99%.

MREIT currently has no debt and has a stable occupancy rate in its portfolio led primarily by BPOs. The company projects a total of 1.00 PHP/sh as dividends.

AREIT, FILRT

Both AREIT and FILRT has been added to the MSCI index. This is probably the reason why FILRT stock's price went up significantly. Many institutional investors who tracks the MSCI will have some of their funds invested on both AREIT and FILRT. We should be expecting a strong price support at current levels. AREIT is now supported by 2 popular indices, FTSE and MSCI.

DDMPR

DDMPR remains resilient after they have released their 3rd quarter report. They have declared a dividend of 0.028 PHP/sh from a previous of 0.027 PHP/sh. They maintained a 97% occupancy rate despite the pandemic and they are right on time with the declaration of alert level 2 in which quarantine restrictions are loosened. Although majority of their tenants are gaming-related BPOs, they are positive that other tenants will bounce up from the loosened restrictions.

DMC, SCC, NIKL

The stock price has been dropping the past few days and most probably because of coal prices going down. Even if coal prices have gone down, coal prices are still expensive and profitable but not as profitable a quarter ago. Meanwhile DMC's construction business remains sluggish.

During the DMCI investor's meeting, the outlook of management towards coal and nickel prices remain elevated and the reopening of the economy should drive sales. High coal prices will hold until the first quarter of 2022 and electricity demand will increase since NCR is now in alert level 2. It is expected that there will be higher overall energy sales in the 4th quarter of this year. Meanwhile, they are currently testing their diesel-solar plant in Masbate which they have ventured a few quarters ago, and their initial move to renewable energy

DMC's nickel mine is about to end in the 1st quarter of 2022. It should've been retired a few quarters ago but they just extended it because of the demand of nickel. Right now they're eyeing for new mine in 4th quarter of 2024. Since DMC will be out in the nickel play for a few years, dividend investors looking to invest on nickel can alternatively invest in NIKL. 

BRN

BRN's preferred share is now open for subscription. The declared final dividend yield is 7.00%. The shares will be tentatively listed in the market this November 29. 

A quick recap that boosts dividend investor's confidence: (1) proceeds is for their real estate projects, land banking, funding projects from a subsidiary, and other general corporate purposes, (2) good financial standing, the assets are multiple times higher than their current liabilities, and (3) an earning company.

PSE

An interview between COL's April Tan and PSE's Ramon Monzon happened a few days ago and one of the interesting discussion was the addition of High Dividend Yield index in which is a category of stocks that probably gives good dividend yield. It is still under approval and they hope for it to be out in January 2022. 

"High Dividend Yield" gives both a positive and negative connotation. Many investors gets attracted with high dividend yield stocks but it is not worth it if the value of the company is not good. Many dividend investors are looking for "healthy" dividends in which dividends should not be from debt,  should be given consistently, must be an excess earning of the company after taxes/expenses, and if possible it should be increasing. The "High Dividend Yield" index mentioned by PSE has no formal definition yet but it is something to keep an eye on.

November 7, 2021

MER

Meralco reported that electricity rates will likely go up this November due to the Malampaya shutdown that happened a month ago. Powerplants that use natural gas were forced to use expensive liquid fuel. In our power generation mix, 17% of which comes from the use of natural gas second to coal at 61%. 

On the other side of Meralco's business, their subsidiary eSakay partnered with tech-logistics firm Mober to offer on-demand delivery services. Their partnership revolves around the utilization of electric vehicles and charging infrastructure. It's something to keep an eye on whether the use of electric vehicles is sustainable despite that power is expensive in our country. At some point, it'll be the consumers who will carry these costs in the long run. For how much eSakay would profit from this partnership will remain speculative to investors. In addition to eSakay, Meralco's power generation arm MGen is working on building 4 solar farms distributed in Rizal, Isabela, Nueva Ecija, and Ilocos Norte.

Meralco's board meeting showed that they've been doing good this 3rd quarter. Energy sales from Clark are up, Bayad center revenue is up, Radius (MER's broadband services unit) is profiting, Power sales from MGen is up, and MIESCOR (engineering and construction services unit of Meralco) revenue is up. Insiders like Ray Espinosa (MER Director, President, and CEO) and Lance Gokongwei (MER Director) bought more MER shares just a week ago. 

MER business remains sustainable and the sustainability of dividends is something dividend investors will not have to worry about.

TEL

For this 3rd quarter, TEL's core net income is up by 11% year-on-year. Most of the earnings came from the home broadband segment. TEL's broadband subscribers reached 3.7 million which is a 33% increase year-on-year. This is due to TEL's aggressive fiber expansion and many copper-based subscribers are shifting to a fiber network. Their year-on-year net income was not that much because TEL has been in a tight competition against GLO and DITO. Their debt, operating expenses, and depreciation are all up due to network expansion. Revenue from the mobile segment remains profitable but not that much. On the other hand, their digital wallet PayMaya is not as profitable as GCash. 

TEL has been spending a lot lately on their growth and it will take time before it will be realized. Manuel Pangilinan (MVP) sees TEL undervalued despite all the seeds they are planting today such as their hyperscalers, digital improvements on PayMaya, and the Maya Digital Bank which will be released next year.  MVP sees these as the next major revenue growth drivers in the next 3 years. MVP thinks that PayMaya may have also achieved a 1 billion USD valuation (unicorn) although this is still subject to market testing.

With all these things TEL is going through, dividend investors are thinking about whether it's time to divest or remain invested. TEL has a dividend policy of giving 60% of its earnings but this is subject to market conditions most especially if TEL needs cash for expansion. Dividends might become unstable or reduced in exchange for speculative growth. Risks are higher but rewarding if growth materializes. What are the chances of their plans going to be successful? I can't say anything for sure but sometimes it does not matter because in the telco sector, GLO and TEL are the only significant players fighting for market share.

NIKL

DMC made lots of money previously because of high demand in nickel. This time it is NIKL's turn in which their income increased by 168% year-on-year. Nickel remains in demand most especially that electric vehicles (EV) are rising in which it is used to produce EV batteries. NIKL exports majority of their produce to Japan and China.  Moreover, Indonesian nickel ore export ban has not yet been lifted giving more opportunities for NIKL to grab larger nickel market share.

NIKL has a dividend policy of giving at least 20% of income. NIKL however has a reputation of giving generous dividends during profitable times. With that said, NIKL declared a special cash dividend of 0.22 PHP/sh, the highest this year. In total they have declared 0.45 PHP/sh for this year in which the dividend yield is around 8% at current trading price. Nickel however is not always in demand, it usually is at its high every 2 to 3 years as per observation. Thus, NIKL's trailing 5-year average dividend yield is at least 5% making it attractive to dividend investors.

AP

3rd quarter report shows an 89% increased earnings from power generation despite they're heavily spending for their renewable energy portfolio. This is expected most especially that power demand is high and the supply is low. Their GNDP Unit 1 is expected to become operational by the end of this November in which it will deliver more needed energy into the grid. Meanwhile their GNDP Unit 2 is planned to be operational on the 1st quarter of 2022.

RCR

The awaited first declaration of dividend has been declared at 0.062 PHP/sh. The dividend income is from 2 months of operation in the 3rd quarter. The annualized dividend yield of 5.77% is on track as they have promised. Sadly, they excluded 1 month for the 3rd quarter dividends as they were too strict on giving dividends based on IPO date. AREIT IPO was in the middle of the year and yet they gave the full dividends for the full year. Meanwhile, DDMPR gave the dividends from a quarter before their IPO. Anyhow, 2022 is nearing and RCR is committed to inject around 40,000 to 100,000 square meters worth of assets within the next 18 months. The projected dividend yield by 2022 is around 5.96%.

PSB

PSB managed to post a positive income this 3rd quarter despite that most bank's source of income is from loans that turned sour ever since the pandemic. The loan interest rates are low and demand is slow. PSB managed to offset those loses through their non-interest income from trading gains, reduction of operating expenses, and lowered loan loss provisions. On the other hand, their assets expanded by 21% in which they still hold the title as the 2nd largest savings bank in terms of asset.

PSB's quarterly dividends remains stable even just before the pandemic. They've been averaging at least a 5% dividend yield for the past 5 years. PSB stock price has been moving like a preferred share in which stock price remains flat and the low volume of trades. Some dividend investors are not worried buying PSB shares because of their healthy financial state. The only thing missing with PSB is their growth but dividend investors does not care that much as long as dividends are coming in. PSB right now is like GMA7 10 years ago in which it is ignored by many. GMA7 holders are mostly dividend investors from the past that never expected the stock price to go all time high after 10 years. They were just happy with consistent dividend payouts. Who knows where PSB will be in the next few years, right now they only have assets but doesn't have an edge against other familiar banks. The significant move they did recently was to publish their mobile banking app and adapt to the digital transformation.

November 2, 2021

PLC

PLC, the casino arm of BEL is continuously making money as shown in their 3rd quarter report. BEL's earning is in a downtrend but the operating losses of BEL do not affect PLC. During the 2nd quarter report, their net earnings of 570 million PHP has already surpassed last year's annual income, and yet they were still able to generously pay out dividends. For this 3rd quarter report, they have now around 900 million PHP net earnings year to date and this gives dividend investors confidence that dividends will remain stable considering that it is PLC's dividend payout policy to pay at least 80% of the earnings to shareholders. Many speculated that earnings won't be that much this 3rd quarter because of the aggressive lockdown imposed by the government. The sentiment now improved because of the declaration of Alert Level 3 in which casinos are allowed to operate. City of Dreams Manila released an official advisory that 75% of their casino is open to everyone regardless of the patrons' vaccination status.  On the other side of PLC's business, their rental income and commission and distribution of lotto operations have increased as well which is expected to happen since they bagged the 5-year service contract from the Philippine Charity Sweepstakes Office.

GLO, TEL

Despite GLO and TEL aggressively pushing their fixed broadband product, CNVRG is proving to be a respected player in the field. In the first half of 2020, TEL holds the largest market share in fixed broadband, followed by GLO, then CNVRG. For the first half of 2021, CNVRG's aggressive expansion is paying off and in effect making them better than GLO in the fixed broadband segment. TEL's market share has been reduced as well but they still hold the majority of it. CNVRG now has plans to expand its services to enterprises similar to TEL. Once CNVRG proves itself better in this field, this will affect TEL's market share.

Outside the fixed broadband segment, GLO and TEL are still aggressive in expanding their mobile service. GLO has built an additional 1,080 towers this year and have finally upgraded all of their towers to use the 4G LTE. GLO still leads the mobile segment and maintains mobile consistency score in NCR at part with global benchmarks. Meanwhile, both GLO and TEL are starting to expand their 5G service. GLO recently reported they are now expanding their 5G service in some places in Visayas and Mindanao.

GLO is now defining itself as a digital solutions platform in which its focus is not totally in telco. They are following Google as their model in which it started as a search engine that allowed Google to create new businesses out of it. GLO's telco gave them new business opportunities like GCash, health tech, fintech, adtech, e-commerce, online shopping, and the like.

TECH

SEC just approved TECH's issuance of preferred shares to be offered this November 25 to December 3 and at the cost of 50 PHP/sh. The proceeds are going to be used for their expansion, partially paying old debt (a previously maturing preferred share offering), and working capital. No dividend yield released as of the moment but it is something to keep an eye on for interested dividend investors. TECH is a known company that had issued multiple preferred shares previously and so far they've been a good payor.

AREIT, FILRT, MREIT, RCR

A few weeks ago the BPO industry was asking the Fiscal Incentives Review Board (FIRB) to allow work-from-home setup and at the same time avail of the tax incentive. The BPO suggested that the basis of tax incentives should be based on the gross revenue rather than the workplace. This proposal is a threat to REITs whose majority of their tenants are BPOs. Upon approval, many of the BPO tenants will downsize and vacate office spaces. A week ago, FIRB rejected the proposal to grant tax incentives to sectors implementing work-from-home arrangements. It's not that FIRB is not allowing people to work from home but there 10% of the manpower should be on site. BPOs were instead advised to apply for Safety Seal Certification (SSC) to assure their employees are working in a safe environment. As far as I remember, AREIT and FILRT have already obtained their SSC. Just awhile ago however, news came out that Philippine Economic Zone Authority (PEZA) will renew its appeal to FIRB with regards to make the basis of tax incentives on gross revenue rather than the work place. For REITs investors, this is something we need to keep an eye on.

JLL, a global real estate service firm, has reported that office leasing is down by this 3rd quarter. Many tenants are not certain of using an office for the next few years because of the pandemic. Many are still in a work-from-home setup and are observing our economic recovery from the pandemic. On the other hand, Cushman & Wakefield, a global commercial real estate service firm, said that vacancy rates are expected to get worse and the exit of offshore gaming operators is significantly contributing to the increase of vacant spaces. The average prime Grade 'A' monthly rental rate in Metro Manila closed at 1,047 PHP/sqm which is a 3.3% decline on a year-on-year basis. 

If the above research is true, it would seem like the annual rental escalation rate of REITs might get affected. Office leasing is down but probably not for the BPO sector in which they need those PEZA accredited office spaces to avail of tax incentives.

SCC

The 3rd quarter report showed that SCC have achieved earnings beyond the pre-pandemic levels. This was expected and most especially because they gave out special dividends. The insiders continued buying shares even a day before the dividend ex-date in which the stock price is usually high. This is an unusual move but justifiable because even buying at those prices still gives a dividend yield of 10% and even if they buy at premium prices their overall average cost is significantly low. The Consunjis forecasts that coal sales remain elevated until the first half of the year 2022. The expected next dividend payout will be in March and many dividend investors expect a stable dividend payout. 

Coal is still in demand both locally and globally. We still lack enough supply of power in the Philippines and most especially when the dry season comes. The government cannot phase out coal plants, in fact they need 330 billion PHP to buy out the coal plants in Mindanao. I am not sure where the government will be getting that amount of money considering that we have around 11.92 trillion PHP debt in the World Bank. Moreover, the Department of Energy (DOE) does not want to phase out the plants in Mindanao because it has the highest growth in electricity demand compared to Luzon and Visayas. Though none of SCC's plants are being bought by the government but the fact that 90% of the coal  market share is controlled by SCC in the Philippines, I cannot imagine the amount of money the government would need to buy all of SCC's coal plants.