December 30, 2021

AP

The GNDP Unit 1 coal-fired power plant which was supposed to be operational in November has finally received the certificate of compliance from the ERC (Energy Regulatory Commission) a few days ago. This is a supercritical power plant since it will inject a significant amount of power into the grid to meet the increasing power demand. Despite the hype of renewable energy, it seems like the government cannot still let go of traditional power plants. AP's GNDP Unit 2 on the other hand is undergoing construction and has completed test and commissioning.

SGP, SPC, AP

A few days ago NGCP (National Grid Corporation of the Philippines) has restored 85% of transmission lines that cover Visayas and Mindanao after the typhoon. Meanwhile, power in some areas will not be restored until the new year. NGCP reported that at22 of the 95 transmission lines have yet to be repaired. Other news reported that NGCP recorded at least 95 power lines that fell, including 12 towers and 820 transmission poles. In effect, energy sales from power-producing companies will be affected such that demand decreases, the supply increases, and prices will go down. Consumers of course will benefit but not for those places affected by a power cut.

The power cut had a domino effect on other businesses as well. It was reported that 80% of the IT-BPM companies were down so there is a possibility that office REITs within the Visayas area are affected by this issue in one way or another. Many have generators installed to supply them power but it was not enough since people are panic-buying and hoarding fuel. There was an artificial shortage of fuel. Meanwhile, telco sectors such as GLO and TEL were not spared in which they are not able to provide connectivity from their cell sites due to inadequate power supply. All these affect their sales.

Meanwhile, while repairs are going on, SPC's power barge (floating power plant) were sent to Bohol to provide power temporarily. On the other hand, AP's oil-fired plant VECO (Visayas Electric Company) made efforts to energize in Cebu.

MREIT

MREIT disclosed its 3-year investment strategy and are the following: 

(1) To attain a 500,000 sq.m. of gross leasable space by the end of 2024. MREIT will infuse at least 100,000 sq.m. by the end of 2022. A few weeks ago, they disclosed infusing assets worth 55,744 sq.m. of leasable space.

(2) To diversify the portfolio by investing in other townships and other real estate properties. 

(3) Achieve an annual total shareholder return of at least 10% through organic growth and acquisition.

MREIT claimed to be a pure office play REIT but then the investment strategy has plans to include other real estate property sectors under industrial, logistics, warehouse, hospitality, residential, and so on as long it is profitable. 

DMC, SCC, NIKL

The President has lifted the moratorium on open-pit mining to help the economy. There were approximately 26 companies that were suspended since 2017 when the ban took effect. DMC, SCC, and NIKL would not have much impact on this because they were allowed to operate even when the moratorium took place. I guess the advantage they have on this is lessened regulations to proceed with any future mining endeavors. For instance, DMC's Berong mine has been decommissioned this year and is looking to acquire a new site for mining nickel. Meanwhile, even if the government boosted the positive sentiment on mining, there are still risks involved because a project cannot pursue without the approval of the community. A week ago, NIKL's mining exploration project proposal in the Cordilleras has been rejected by the locals.

December 20, 2021

SPC, SCC, DMC, AP, MER, SGP

The sale of power has been suspended a week ago because of super typhoon Odette. Many of the places that got hit by the typhoon had to cut power, in effect, there was an oversupply of power and ERC (Energy Regulatory Commission) had to suspend WESM (Whole Sale Electricity Spot Market). We can learn from here is that typhoon is one of the risks of power generating companies such as SPC, SCC, DMC, and AP. Other energy sectors like SGP and MER are affected as well because there services are useless if their source is affected. Meanwhile SGP's NGCP has to fix damaged transmission lines brought by the typhoon.

MREIT

Last November, MREIT's management has released a report of acquiring 4 assets in December from their sponsor company MEG. Now that we're in the middle of December, it is finally pushing through as per last week's disclosure. Quick recap: (1) 3 assets are in Iloilo Business Park and 1 in McKinely Hill. (2) All these assets have an average occupancy rate of 99%. (3) The projected dividend is 1.00 PHP/sh after infusion of assets.

The 4 assets will have a combined GLA (gross leasable area) of 55,700 sqm. In 2022, MREIT is planning to infuse an additional 100,000 sqm of leasable office spaces. They still continue to aim to be one of the largest office REITs in Southeast Asia. Hopefully, all these assets are profitable because sometimes investors want the best performance, and size does not matter (no pun intended).

TEL

The US Trade and Development Agency is supporting TEL's 5G deployment in the Philippines by providing training assistance. This is to expand 5G service to 96% of the country's population. Meanwhile, TEL is launching products and solutions for hybrid work arrangements. They will provide 5G plans to businesses suited for work-for-home employees across the country. With no light at the end of the tunnel with regards to COVID, it seems like TEL is gearing up for the new normal of work setup.

GLO

GLO's GCash has partnered with BPI in which they added some investment products (Mutual Funds) offered by BPI. This is a continuing move for GCash to be a one-stop-shop for any finance-related needs. The more users use GCash, the better their user-based valuation in tech.

GLO, TEL

The Senate is close to approving full foreign entry in the telco sector in which foreigns can have up to 100% ownership. GLO and TEL however are neutral to this issue as they have no desire of increasing foreign ownership. The bill is more beneficial for future telcos that need extensive funding. TEL currently has foreign ownership of 22.19% while GLO is at 26.62%. Both telcos are not even maximizing the 40% foreign ownership limit. What GLO and TEL want from the government are more laws for fewer taxes and permit fees so that they can offer cheaper telecom and broadband services.

Another bill that the telcos are watching is the Senate's approval of the SIM card registration. Once passed into law, mobile numbers are now associated with a subscriber. We cannot do the same old throw-away number anymore in which many scams and spams proliferate. Security is bolstered and it expects to boost the confidence of users to adopt e-commerce and fintech. There are no details yet on the implementation but it's probably similar to other countries in which purchasing/selling a SIM is not simple. In Thailand for instance, every time you buy a SIM, you are required to fill a form, submit your IDs for validation, and then they get entered into the database. Meanwhile in South Korea, one cannot simply buy a SIM, you have to rent the SIM/phone if you're a foreigner, or you have to visit a government office to register for a phone number in which in any case you have to submit your IDs for validation and they all get entered into a database. 

December 14, 2021

SPC

The unexpected has happened, SPC declared the 3rd tranche of regular dividends for this year at 0.55 PHP/sh. They usually release 2 regular dividends a year but if ever they will release the 3rd tranche of dividends then it would have been a special dividend. SPC claimed that the dividends are attributed to higher revenues from the sale of electricity, higher availability and utilization of power generation capacities, and lower maintenance cost.

SPC remains a resilient business this pandemic and our supply of energy in the Philippines is not getting any better. The gap between power demand and supply remains thin thus energy sectors like SPC can sell most or all of their produce. We are not sure however if they will give 3 tranches or more dividends next year but for sure at least 2 tranches of dividends a year has always been consistent.

EEI

Preferred shares series EEIPA and EEIPB have been offered to the public at 100 PHP/sh. The settled dividend yield is 5.76% and 6.94% respectively. Quick recap from the last writeup: (1) Series A is redeemable after 3.5 years and Series B after 5.5 years. (2) The IPO proceeds are used to refinance debt and for their projects and equipment. (3) The listing date in the stock market has been moved to December 23.

GMA7

The stockholder meeting a week ago revealed that GMA7 is investing in one or two start-up companies and that other offers were being evaluated. Unfortunately they haven't dropped any name yet on these start-ups This move is rare to see from GMA7 since they are known to be conservative when it comes to investing. They claimed that if an opportunity arises and there is not much risk involved then they will invest in it even if it requires a substantial amount. Felipe Gozon, CEO of GMA, clarified that future dividend payouts to shareholders are not going to be affected given that GMA7 has no long-term debts and cash flow remains very healthy.

December 6, 2021

CREIT

The IPO is moved to the first quarter of next year. The listing will most likely happen by the end of January to early February as claimed in an interview a week ago.

AREIT

Around 16.1% of tenant lease is going to expire in the year 2023. AREIT plans to grow its portfolio of assets at an average of 100,000 sq.m. of the gross leasable area from 2023 to 2024. A thing that caught my attention with AREIT is that it is not a pure office rental REIT. Their three-year investment strategy includes other asset classes such as logistics and industrial properties to diversify investor risk. The criteria of assets to be included should be Grade A properties, strategically located in central business districts, and with convenient access to public transportation. On the other hand, Ayala's real estate logistics arm (ALLHC) aims for dominance noting that the sector is a favorite among institutional investors globally thus expecting strong growth opportunities. The company aims to expand its presence to key areas across the country and grow its warehouse gross leasable area. The core business segments include industrial and logistics hubs, warehousing, cold storage, and data centers.

What that said, there is a high probability and speculation that AREIT and ALLHC will somehow intertwine in the future. This would have similarities to the CentralHub REIT of DD and JFC that is expected to be issued next year. The thing that makes  AREIT stand out in this situation is that no separate IPO for another asset class. DDMPR on the other hand had its IPO proceeds to be used for a separate REIT (CentralHub REIT) instead of being re-invested to itself.

SGP

A transmission tower of NGCP in Lanao Del Sur has been bombed by unknown individuals. Although the transmission line segment has been unenergized since September of this year due to sabotaging. This is probably one of the risks that we investors have to consider because earnings that are supposed to be given as dividends to shareholders or at least increase the share value of the stock price, will instead be used for unwanted expenses.

TEL, GLO

The bill to allow telcos to purchase or lease land in private residential villages for them to build cell sites has been approved. The bill mandates existing and future housing projects to set aside part of their land for Information, Communications, and Technology (ICT) facilities. One of the reasons why telcos are having difficulty building more towers is because many homeowners' associations and communities prohibit the construction of cell sites due to their belief that the radiation emitted causes health problems.

With that said, we get to wonder why not build cell sites outside villages? I guess one of the reasons why many telcos do wants their sites in urbanized areas is because of security and protection of assets. Building and maintaining towers in far-flung areas is difficult and expensive. Similar to what happened to NGCP's tower, any individual can bomb it making it difficult to find who is accountable. It would probably be more expensive to maintain those towers than the profit they get from a small community that uses them.

Moody maintains a positive forecast for telcos in the Philippines. Revenue growth will remain stable for the year 2022 and is expected to grow by 5% next year. This is due to the rising of data consumption and broadband usage during this pandemic which proved to be essential in our day-to-day lives. 

Outside the broadband and data business, GLO claims that 7 out of 10 Filipinos have GCash which equates to 51 million GCash users in the adult population.  2.5 times a day average active users and daily logins peaking up to 23 million this year alone. Meanwhile, 2022 is nearing and many are expecting whether TEL's move on Maya digital bank will disrupt something in the market since Paymaya for now is unable to beat GCash.