May 30, 2022

NIKL

NIKL aims to increase its sales volume by 10% by the year 2025. For context, they were able to sell 17.9 million WMT (wet metric tons) last 2021. Their new nickel mines in Isabela and Eastern Samar are going to be deployed in 2024 in which they expect to export at least 19.8 million WMT of nickel ore to China and Japan. If this forward-looking prospect materializes, the probability of NIKL's share price appreciating in 2025 is likely going to happen.

That being said, speculative investors will have to put a price on whether NIKL is worth buying now or not. For now, there is continued strong demand for stainless steel and electric vehicles in which nickel is largely used. The price of nickel is still high and remains to be high until 2023 as per analysts' forecast. The peso is weak against the dollar and is forecasted to reach 53 PHP/USD. Why does this matter? For context, NIKL was able to sell a lower volume of nickel this 1st quarter of 2022 as compared to the same quarter in 2021 and yet they were able to have a higher net income of 80%. This is due to the high global nickel price coupled with a weak peso exchange rate which is beneficial for businesses that export products like NIKL.

The future of NIKL sounds defensive giving a good upside but we should not neglect possible risks. Forecasts as we know are based on current and historical data. New variables will come into the equation that invalidates the forecast such as when the war between Ukraine and Russia stabilizes, Indonesia's nickel export ban is lifted, and the possibility that our country's economic team would reverse the weakening of the peso, and so on. As always, conservative investors always remind us to buy share prices with a margin of safety relative to the fair value and in tranches.

GLO, TEL, NIKL

TEL, GLO, and NIKL have maintained their position as part of the top 10 holding of ATRAM's PSDGF (Philippine Sustainable Development and Growth Fund). This is a mutual fund that distributes funds of investors in stocks of companies that contributes to positive environmental or social change, thereby making an impact on the sustainable development and growth of the economy. Within this basket of stocks, TEL, GLO, and NIKL receive 7.6%, 6.3%, and 6.4% of investors' funds respectively. Similar to PSEi, MSCi, FTSE, and other stock indices alike, the more that a stock is included in a variety of indices, then the better the inflow of funds to the stock. In effect, there is a strong build-up of stock price support. ATRAM's PSDGF is not as big as other indices since it only has a fund size of around 360 million PHP. If we get 6% to 7% of it then we'll have around 20 to 25 million PHP. This is a significant amount to move NIKL stock price but not much for TEL and GLO.

SGP

NGCP energized Bataan's Mariveles-Hermosa 500 kiloVolt transmission line that will allow more than 2,500 megawatts (MW) of energy to be transmitted. Transmission lines previously exist in Bataan since it is where GN Power Dinginin Coal-Fired Power plant is located and known to contribute a significant amount of power to the grid. This newly energized transmission allows more MW of power to be transmitted to the grid and what's missing now are additional energy plants that will utilize these transmission lines. This could imply that there is a low return on investment at the moment since the transmission lines are under-utilized, will depreciate in the future, and are a liability (e.g. maintenance). Even so, NGCP is mandated to continuously build and get transmission lines ready on locations whether there are energy plants around them or not. On the positive side, energy is still a much-needed commodity and Bataan would be one of those places for energy companies to do land banking and expand their power plants. 

MER

Spectrum, MER's solar power arm is continuously making partnerships with businesses for solar installation. This time around they installed a solar rooftop to a company called Alphatech Development Corporation in Bulacan. This allows Alphatech to save approximately 3 million PHP worth of energy costs annually.

I've been tracking Spectrum's partnership in the past. The following are companies for whom they installed solar: (1) Ajinamoto Philippines Corporation, (2) WLCON, and (3) Avon Philippines. All these companies have something in common and that is to lower their energy cost and reduce their carbon footprint. There is a possibility of a carbon tax to be implemented in the new administration as per the disclosed government's taxation plans. The advantage of MER's Spectrum over other competitors is that these companies going solar can take advantage of the Retail Competition and Open Access (RCOA) law. This allows companies to negotiate their electricity rates with their preferred suppliers.

VREIT

The final offer price has been set to 1.75 PHP/sh down from a high of 2.50 PHP/sh. Their prospectus disclosed a projected dividend income of 0.10 PHP/sh and 0.16 PHP/sh by the years 2022 and 2023 respectively. This implies a dividend yield of 5.7% for the year 2022 and 9.1% in the following year with the assumption of a 100% dividend payout ratio. The law, however, mandates at least a 90% dividend payout ratio so conservatively speaking the dividend is around 4.9% for the year 2022 and 8.0% in the following year. 

Historically speaking, Villar stock prices are known to depreciate by a significant amount over time due to many reasons. With the forward-looking high-yield dividend of VREIT, let's see if the price will hold. There's that possibility because yield is higher when the stock price is lower with the assumption that there is dividend stability and/or growth. Moreover, VREIT is offered at a price below the net asset value of 4.86 PHP/sh as per the prospectus. We'll have to watch this space for new development. If investing in this stock, be ready on the lookout to prepare and cut losses. We don't want another DDMPR to happen due to negative sentiment. Moreover, we shouldn't solely rely on the prospectus' NAV/sh as the fair value of the stock. For context, CREIT had a NAV of 2.51 PHP/sh during the IPO only to find out a quarter later that the audited NAV is 2.12 PHP/sh and this is probably one of those reasons why CREIT dropped in price.

May 23, 2022

GMA7

GMA7 ended up with a net income of 2.1 billion PHP for the first quarter of 2022 which is 7% higher than the same quarter a year ago. Most of the earnings came from political advertisements. Felipe Gozon, CEO of GMA7, remarked that they will try to achieve an annual net income of at least 8 billion PHP for this year and higher than the 7.5 billion PHP annual net income a year ago. We've got 3 more quarters to go and 2.1 billion PHP is still far from reaching last year's net income.

The issue is whether it is possible to surpass last year's income given the fact that the election is already finished thus many analysts are expecting that the earnings will eventually lower. Their advantage is that they continue to monopolize the broadcasting sector. Partnerships are being made with ABS CBN for batches of movies. They currently have 92 stations nationwide and continue to expand to 14 more stations.

GMA7's future is uncertain since it is possible to have new competitors under the new presidency. Moreover, GMA7 is politically at risk. Way back in 2007 just before GMA7 made an IPO debut, Imelda Marcos is claiming that they are the rightful owner of some shares of GMA7 under Gilberto Duavit's name. Duavit, one of the founders of GMA7, however, refutes the claim. Nevertheless, the case ended up in GMA7's favor. Felipe Gozon also expects no legal problems with the Marcos admin since they have been compliant with laws and regulations. That's what Felipe wants to believe but we don't know what Marcos has in mind.

Fundamental-wise, GMA7 remains a healthy business. They are strapped with cash multiple higher times than their debt and dividends payable found on the balance sheet thus there is the certainty of dividend declaration. The certainty of dividend amount whether it could sustain or not is not sure due to negative forward-looking sentiment but we'll have to keep an eye on the performance of the income statement, balance sheet, and cash flows in the next few quarters. Valuations of GMA7 are a mixed bag like COL financials gave GMA7 a buy rating. Other analysts are recommending a hold for those who have previously entered and not a recommended buy for those who are still about to enter due to the fact that GMA7's EPS growth (Earning Per Share) started to slow down but their book value has significantly decreased. For context, GMA7 ended with a book value of 1.96 PHP/sh in the first quarter of 2022 and never they had such book value lower than 2.50 PHP/sh for the last 5 years.

LTG

I usually keep track of dividend stocks that gives at least 5% yield on average for the last 5-years and LTG finally caught my attention after they have declared another 0.30 PHP/sh a week ago. That being said, at the current trading price of 8.41 PHP/sh, LTG gives a dividend yield of at least 13%. 

From a fundamental perspective, LTG is an undervalued stock. At the current trading price of 8.41 PHP/sh, LTG is trading cheaply relative to the good earnings and book value of the company. LTG is strapped with cash multiple times higher than their debt. The income statement maintains good and consistent profit margins despite the pandemic. LTG is probably the highest dividend-yielding stock at the moment due to the special dividends coupled with the low stock price. LTG is also one of PSE's picks for the dividend-yield index (DivY) and the PSE index.

With good fundamentals, one would wonder why LTG's stock price continues to depreciate. The following are a few of the sentiments I have observed as I followed this stock in the past:

(1) There is an unstable family relationship that is affecting the business. Lucio Tan is still in control of his empire and appoints people to his businesses. The issue is that Lucio Tan appoints a family member at one point and then suddenly changes it to another for some undisclosed reason. The people in the management are important to investors because it gives confidence and some sort of predictability most especially on forward-looking prospects. The Ayalas a month ago agreed with a joint venture project with Eton, LTG's real estate development arm. The Ayalas were confident since they already knew the capability of the management in Eton. Just a week ago there was a sudden change in management which left Ayala confused and their joint venture questionable.

(2) For some investors, LTG's fundamentals are not what it seems. Even though PAL is not directly under LTG, the issue is that PAL is under the empire of Lucio Tan who we already know by now has the supreme control of appointing people. This implies that if we want to see a more sensible valuation of LTG, we should then include PAL as part of the valuation. We know very well that PAL right now is on the brink of bankruptcy and is the biggest creditor of PNB. Once PAL default on its loans, PNB losses money which is, later on, reflects on LTG's balance sheet since PNB is under LTG's holding.

(3) Similar to GMA7, LTG is politically at risk but at a different level. Lucio Tan is a crony of Ferdinand Marcos in the past. Lucio Tan received tax breaks giving his businesses an edge against rivals. Back in 2007, Bong Bong Marcos testified that his father Ferdinand Marcos and Lucio Tan were business associates and that a significant part of Lucio's Wealth is owned by Marcos. Corazon Aquino and Fidel Ramos made attempts before to prove that Lucio Tan's businesses had been secretly owned by Marcos and therefore should be confiscated. Now that Bong Bong Marcos is the next president, nobody knows what's going to happen next. One thing for sure is that some investors don't like stocks that are politically tied.

(4) With rising prices of commodities, most of LTG's holdings are affected except PNB. Their expenses in tobacco production, distillery, brewery, cost of construction materials, and the like are all going to increase. This implies that they will pass these costs to their consumers by increasing the prices of their products and services. The issue is that the inflation rate is high so consumers are going to be wary of how they will spend their money especially since wages have not increased. Basic necessities in life such as food, housing, and the like are all expected to increase in a high inflation rate environment. LTG's products and services however are not basic necessities thus analysts expect a lower revenue. 

With those being said, anything that would reverse the above-mentioned negative sentiments would probably be the catalyst to stop LTG's price from depreciating.

DMC, SCC

DMC is considering consolidating its mining business by moving its nickel mining to SCC. The management is studying whether this will create value for DMC and SCC shareholders.

A year ago, DMC's nickel mining prospered due to the high demand for nickel coupled with tight global supply. Moving DMC's mining subsidiary to DMC will seem to benefit SCC more than DMC if nickel becomes in demand. DMC currently owns 100% of its mining corporation. After consolidation, DMC will only have a share of approximately 60% of it as per the holding's group structure. On the hand, if the nickel business will not prosper, well at least its effect on DMC's income statement would also be lowered.

The exact reasons for consolidating the mining businesses are undisclosed. Although it makes sense to leave the nickel business to SCC since it specializes in mining. Nevertheless, nothing is final anyway. Isidro Consunji, the president of DMC and CEO of both DMC and SCC, bought 165 million PHP worth of DMC shares and 138 million PHP worth of SCC shares a week ago. This boosts investor confidence for both DMC and SCC. I've been tracking Isidro's DMC and SCC shares since 2021 and he has an average cost of 7.58 PHP/sh and 28.78 PHP/sh respectively.

May 16, 2022

TEL, MREIT, RCR, SGP

The result of MSCI rebalancing a  week ago has already been published but effective on the 31st of May. MREIT, RCR, and SGP have been added to the MSCI small-cap index. Meanwhile, TEL has been added to the large-cap index. Although the effectivity date is at the end of this month, institutional investors have already started adjusting their portfolios. We should expect an inflow of funds to the said stocks.

SGP

A subsea transmission cable to connect Negros and Panay is seen to be completed this June. This is a three-stage project and is finally in its last stage. Once completed, power from Panay and Negros can be transmitted to the rest of the Visayas. This is in line with the "One Grid Philippines" objective of NGCP which is to unify the Philippine grid. The "One Grid Philippines" has been a vision of the government way back in 2020. More similar projects are to be done in the future such as interconnections for Batangas-Mindoro, Bataan-Cavite, Bataan-Pasay, and Palawan-Mindoro. A Laray-Cordova transmission line project is also in the pipeline.

That said, SGP has more room for growth even if it has monopolized the transmission service. NGCP's revenue is somewhat directly relative to its expansion. Electricity is a much-needed commodity and the more they connect places, the better the revenue.

MWC

MWC has not been doing well lately. They ended up with an annual net income of 3.8 billion PHP from a high of 4.5 billion PHP a year ago. The 17% decrease is mostly attributed to the cost of services coupled with weaker revenue on water services. The top contributor to their cost of services is depreciation of assets, repairs/maintenances, contractual services, and a 151% increase in management, technical, and professional fees. They also had other expenses like 2.4 billion PHP for interest payments due to their debt, and a 426% foreign exchange loss of almost 1 billion PHP. The foreign exchange loss is due to debt as well. Those are just to name a few but they took out most of the share in the gross profit.

Their 2022 first-quarter report has been disclosed as well and the bleeding continues. They earned a net income of 1.1 billion PHP which is 15% lower than the 1.3 billion PHP of the same quarter a year ago. Still, they are losing on foreign exchange rates, high operating expenses, and weaker revenue on water services.

MWC will be on business as usual. Debts are manageable, water is still a much needed commodity, they have a long franchise ahead, and thus they continue to earn. The dividend income however is the issue.

MWC has a dividend payout policy of paying out 35% of the net income. That said, we're speculating a dividend income of 0.42 PHP/sh payable semi-annually. Historically however MWC used to give out the same amount during the pre-pandemic level and the good thing is that it has been increasing but might cease to increase with the current state of financial health. Moreover, the downside is that the dividend yield at the current price of 17 PHP/sh is around 2.5% which is not attractive to hedging an inflation rate of 4.9%. Speaking of the high inflation rate, BSP is planning to hike the interest rate. MWC is leveraging on debt. It doesn't matter if MWC is leveraging on local or foreign debt because even foreign sources have already hiked their interest rate as well. This could probably continue to impact MWC's financial stability.

SPC

This is another utility stock that has continued to bleed. Their first-quarter report has been disclosed with earnings of 0.08 PHP/sh which is 72% lower than the earnings of 0.31 PHP/sh of the same quarter a year ago. 

One of its investee companies KEPCO SPC had a 91.5% decline in income. They attributed the loss due to the cost of maintenance on power generating units and the challenge of renewing power supply contracts. Even if the power rates have increased in the market, their sales were not able to offset the losses. 

I've been going through the financial statement of SPC that ended on March 31, 2022. They have dividends payable of 4.3 million PHP. This is equivalent to a dividend of 0.0029 PHP/sh if we divide it by SPC's total outstanding shares. In accounting, dividends payable are dividends approved by the board of directors to be paid to shareholders until it is declared. What's odd here is that this is the first time I have seen the "dividends payable" in the financial statement of SPC. I have never seen "dividends payable" in past financial statements of SPC that I'm aware of. Nevertheless, I am not giving a heads up on the actual dividend income to be declared because I am not certain of any dividend policy of SPC. I might be wrong because there are no "dividends payable"  in their previous financial statements and yet they released dividends. Moreover, they ended up with a 6 billion PHP unappropriated retained earnings which dividends normally are taken from. For context, they had the same more or less unappropriated retained earnings in the last couple of quarters and yet they declared at least 1 PHP/sh as annual dividends. The only difference back then was that they weren't earning at a loss.

DMC

2 weeks ago SCC reported a surge in profit for the first quarter. SCC attained quarterly profit which is roughly 93% of the 2021 annual income. Since DMC owns 60% of SCC, they posted the first-quarter earnings up by 165%. DMC's first-quarter earnings are approximately 50% of the 2021  annual income. The probability for DMC to give out special dividends is also possible since there are 3 more quarters to go to possibly reach or exceed last year's annual income.

DMC's dividends are usually lower than SCC. Last year's coal business was good and DMC gave an annual dividend of 0.96 PHP/sh a year ago while SCC gave out 3 PHP/sh. We're expecting the same level of dividends this year due to high earnings. In normal circumstances, DMC usually gives a dividend of 0.48 PHP/sh and SCC gives 1.25 PHP/sh. SCC made it clear that it was just a lucky year and the trend might not continue in the short to long-term since the overall future sentiment towards coal is still negative. 

That being said, if we're planning to choose between DMC and SCC for a safe and long-term dividend portfolio, then it will be awarded to DMC. Both give a  high dividend payout of at least 10% if we assume they give out special dividends this year. Since we're not expecting the coal business to be up all the time, DMC will give us a better valuation. Assuming the coal business goes back to normal earnings, SCC's current stock price is expensive and gives a low dividend yield. On the other hand, DMC will remain undervalued and would still give a dividend yield of at least 5%.

CREIT

CREIT has declared its first tranche of dividends for this year at 0.044 PHP/sh. This gives a dividend yield of approximately 7% at the price of 2.49 PHP/sh. What makes it even better is that the yield does not include the special dividends from energy sales which will be released annually. Oliver Tan, CREIT's director, bought 4 million shares a few days before the dividend declaration. He currently has an average cost of 2.48 PHP/sh.

CREIT remains attractive at the moment. The growth prospects of CREIT do not much have to say as compared to office REITS but it is defensive from volatile occupancy rates. Cushman & Wakefield reported earlier that 182,000 square meters of new offices are being injected into the metro increasing the overall vacancy rate of offices to 16%. There are 600,000 square meters of supply in the pipeline. There are no new major transactions and tenants continue to exit most notably from offshore gaming sectors. Meanwhile, IT-BPM which remains the biggest source of office space is demanding a permanent work-from-home setup. The mandate for 100% on-site reporting might trigger for foreign entities to go to other countries. PEZA has started to reduce the mandate to 70%.

May 9, 2021

NIKL

First-quarter income report is 80% higher than the first quarter a year ago. The income is not because they sold a higher volume of nickel but rather due to the sharp increase in nickel prices. There is a global shortage of nickel and seen to continue for the rest of the year. The demand however for nickel remains to be high which is mostly used in the production of stainless steel and electric vehicles. Another contributing factor is the weakening of the peso against foreign currency. NIKL exports a significant amount of nickel outside the Philippines thus they benefit from the exchange rate.

The board of directors plans to review the dividend payout policy and increase the dividend payout ratio to 30%. All along, many investors thought that 30% was the dividend policy as it was written on their website. Nonetheless, it doesn't matter that much because, on a 5-year historical basis, NIKL has an average dividend payout ratio of 75%. With the positive sentiment towards the earnings of NIKL, hopefully, they give out special dividends in the next incoming months.

For context, NIKL's first-quarter reported a 17.8 billion PHP worth of unrestricted retained earnings where dividends usually come from. Using a conservative approach, we get a 5.3 billion PHP as dividends if we use the 30% dividend payout ratio policy. If we divide that by 13.6 million outstanding shares, then we should get an estimated 0.39 PHP/sh as dividends. The dividend could be better if we use a higher dividend payout ratio of let's say 75%. 

Meanwhile, their renewable energy business is on track and is projected to produce 100 MW of power this year and 200 MW by 2024. NIKL has a target of 1,000 MW of renewable energy in the pipeline.

SCC

SCC made a press release that their first-quarter income is 557% up from a quarter ago. The 15 billion PHP income they attained this quarter is roughly 93% of their 2021 full-year annual income. A year ago, SCC gave out special dividends because of high earnings. This implies that a high probability of dividends will push through this year.

The high earnings are due to the strong performance of their coal business. Similar to nickel, global coal prices are soaring. Moreover, they are benefitting from the weak peso exchange rates since the bulk of their coal is being exported and sold outside the Philippines. 

In addition to coal, their energy business is doing well and they were able to sell electrical power at elevated prices. It has always been a trend that energy sales are at their peak during the first quarter of the year since it's the peak of the hot season as well. For context, the Philippines has reached its highest heat index this year at 53 degrees Celsius. The population does not much have a choice but to use as much power as they need to run their air conditioning systems.

SCC made a clear remark however that this kind of earnings is unusual. It was just a lucky year and the trend might not continue in the short to long-term. The overall future sentiment towards coal is still negative. If only renewable energy is as cheap and as sustainable as coal, then coal would have probably been a dead business. Renewable energy is indeed getting better and cheaper through the years but is still not as practical as coal.

DDMPR

DDMPR finally declared its last tranche of dividends for 2021. The dividends remained flat but what made it attractive was that the dividend yield is high due to the steep drop in stock price. Those who bought at an IPO price of 2.25 PHP/sh are still at a loss. However, those who are going to enter at the lower levels are benefitting from the high dividend yield and short-term capital appreciation.

DDMPR's fundamentals remain the same in the sense that it is still a high-risk REIT and does not give much value to dividend-seeking shareholders. DDMPR released statements that they made a 41% net income for 2021. Then why aren't the dividends growing? That's because the net income is not attributed to the rental income but rather due to the revaluation of property. DDMPR annually re-evaluates its property to raise its value, a technique that Injap does to its properties to make the balance sheet look good. That said, DDMPR has now an increased 2.3 PHP/sh net asset value (NAV) from a low of 2 PHP/sh. This is something we should expect for DDMPR in the future, that its NAV will keep on increasing year-on-year. NAV is usually used as a fair market value for a REIT however it is the market that eventually decides. For now, the market price is not moving towards the NAV for so many reasons.

DDMPR is still the cheapest REIT in the market but it is cheap for a reason. The high dividend yield might not sustain since at least 40% of the tenant's lease contract will expire in 2023. No forward-looking statements are being released such as whether new tenants are already ready to take over, whether rental rate escalation happened and if their submitted PEZA application is close to being approved,  and so much more. Investors are cautious because the more speculative a stock becomes, the more it becomes risky. The more it becomes risky, the lesser the investors allocate funds to it or just ignore the stock and move to another asset.

SPC

Last February of this year, SPC disclosed that they will be purchasing 51% of STEAG State Power Inc., a coal-fired power plant in Misamis Oriental. A few days ago, however, they disclosed that it has been dropped. SPC and STEAG mutually agreed to terminate the transaction due to a failure to satisfy the conditions of the sale. The reason has not been disclosed but for sure the supposed 52 million USD budget to purchase STEAG shares will be ceased. SPC's annual report states that they have around 3 billion PHP in cash and 52 million USD is approximately 2.7 billion PHP. That said, we can imagine how big SPC's cash will be greatly reduced if the purchase pushes through. They could probably purchase STEAG in straight cash but I'm pretty sure that's not a wise move. Anyhow, paying it in straight cash, debt, and/or future earnings will lower the overall financial standing of SPC. The return on investment of STEAG however is speculative and whether it will add value to SPC as a whole or not. Nevertheless, adding more coal-fired power to their portfolio might not be a wise move anyway since the world is pushing for renewable energy no matter how difficult it is.

PSB

MBT's thrift bank PSB continues to thrive. The last time I wrote about PSB was last November when it managed to stay resilient during the pandemic despite the fact that many loans are reported to turn sour on other banks. For the first quarter of 2022, they had made a net income of 888 million PHP which is a 102% increase year-on-year. The increase in income is due to increased earnings from service fees, and increased loan demand coupled with lowered non-performing loans (e.g., lowered loan default).

PSB remains the 2nd largest savings bank in terms of assets and has maintained a PRS Aaa credit rating. This implies a stable business outlook and is seen to be unchanged in the next 12 months. The Bangko Sentral ng Pilipinas (BSP) reported that the thrift banking industry in the Philippines remains stable. Loan quality of thrift banks have improved since September 2021 and loans are being settled.

Dividend-wise, there's not much to say about this stock. Even though they've been improving earnings, dividend income hasn't grown. For the last 5 or more years, they've been paying 0.75 PHP/sh as dividends quarter-on-quarter or a total of 3 PHP/sh annually. The good thing is that it remained consistent even during the pandemic. The bad thing is that inflation is now at 4.9% and PSB's typical 5% gross dividend yield is not a good hedge. It's also a bad idea to root for capital appreciation since PSB has a low free float level. Only 10.57% of its outstanding shares are being traded in the public making it not volatile for a possible chance to earn through capital appreciation. The low free float level makes it difficult to dispose of PSB shares when the time comes since it is not widely traded in the market.

May 3, 2022

TEL

A week ago TEL finally signed the sale of 5,907 of its tower for 77 billion PHP. They are also going to lease those towers back and those towers will be shared by other telcos as well. The plan of selling their tower is not new. They've been thinking about it ever since the government pushed the "common tower policy" a year ago. They cannot monopolize their tower so it makes sense to sell and lease it back because it is more economical. They're at a disadvantage if they will be doing the maintenance and yet the tower is being shared by their competitors. A year ago they however planned to sell 11,000 or 50% of their towers. Only 25% has been sold so far so this means that they have more towers to dispose of in the future. They plan to use the proceeds to strengthen their balance sheet by repaying debts. With the recent sale, they disclosed that 9 billion PHP of the proceeds will be used as special dividends.

Meanwhile, TEL's e-wallet and digital bank Maya (formerly Paymaya) is now being rolled out. The digital bank offers high yield savings account regulated by BSP. Fintech Voyager, the subsidiary and developer of Maya was able to raise 210 million USD to become the 2nd Philippine 'Unicorn'. This is something to keep an eye on and we'll soon see how much revenue it will add up to TEL. GCash, the 1st Philippine 'Unicorn' had its hyped-up valuation days too but sadly it's not a significant contributing factor to GLO's overall net income.

PLC

The much-awaited dividend has been finally declared. PLC declared a 0.05 PHP/sh which is higher than the 0.04 PHP/sh a year ago. Those who have bought PLC shares at the 0.4 PHP/sh or below will benefit with a dividend yield of at least 10%. 

The future prospects of casinos however are still uncertain. The Philippine casino gaming revenue has increased to 97 billion PHP in the year 2021 from the low of 81 billion PHP in the year 2020. Revenues are still far away from the pre-pandemic level of at least 150 billion PHP. 82% of this revenue are casinos that are located in Entertainment City in which PLC's City of Dreams Manila is located. 

PLC did well this 2021 in which they ended with a net income of 1.1 billion PHP from a low of 324 million PHP in the year 2020. However, the net income is still far away from the usual pre-pandemic level of at least 2 billion PHP. The reason why PLC did well is due to lower quarantine alert levels which allowed the casinos to operate. Moreover, they bagged a 5-year contract from PCSO to operate the lotto business which improved their sales.

PLC still remains an attractive stock for dividend play since they give out at least 80% of the unrestricted retained earnings as dividends. The high dividend payout is backed by healthy finances and strong cash flow. They have no debt, no capital expenditure requirements, and no significant lease or interest payments. They do not share operating losses in City of Dreams Manila and they earn only through gaming revenues.

The sustainability of the dividend income however is uncertain since earnings have not reached the pre-pandemic levels. COVID is still here and new variants were detected. There is uncertainty if quarantine alert level 1 is going to be common which allows casinos to operate. COVID news is being overshadowed by the election at the moment and we don't know what's going to happen after. PLC released its first-quarter report and they have already made a net income of 298 million PHP.  Note however that their annual net income in the year 2020 was only 324 million PHP and yet they were able to pay out dividends. We have 3 more quarters to go for 2022 and PLC is close to going beyond the 324 million PHP net income. We have to keep an eye on the earnings for the next few quarters. The closer the annual income reaches 1.1 billion PHP then the higher the probability of sustained dividends.

PLC's management made it clear in their annual stockholder meeting a week ago that they will continue to payout dividends and enhance shareholder value. Such statement brings the hype but it's not a good idea to buy now and chase the high dividend yield because it is being played by traders. PLC pays annual dividends anyway so there's no rush to buy. It's best to wait for ex-date for share price to drop and consolidate. Until then we need to track the earnings on a quarterly basis before entering.

MREIT

MREIT declared its first quarterly dividends 2 weeks ago. It amounted to 0.2430 PHP/sh, up from a low of 0.2399 PHP/sh a quarter ago. It hasn't reached yet the projected dividend of 1 PHP/sh for the year 2022. The management however emphasized that the dividend income does not reflect yet the assets that were infused and are to be infused for the remaining of this year. The management so far is consistent and is able to deliver its forward-looking statements. 

RCR

RCR on the other hand has finally closed the deal on acquiring 2 assets which they reported last March. These 2 assets have a combined gross leasable space of 44,000 square meters. They projected a dividend yield of 6.06% for the year 2022 which is higher than the 5.96% they reported nearly a month ago. These projections are based on the IPO price of 6.45 PHP/sh.

RCR made a forward-looking statement before that they will be infusing 442,000 square meters worth of assets. After acquiring the said 2 assets earlier, RCR now has approximately around 398,000 square meters left to infuse. However, there are no new disclosures on when the next infusion is going to take place. COL analysts made a projection that RCR will be paying as much as 0.42 PHP/sh as annual dividends by 2023.

AREIT

AREIT's share price has been dropping lately reaching 39 PHP/sh. We do know that ALI made a property-for-share swap with AREIT at 44.65 PHP/sh. ALI however sold these shares at 39.70 PHP/sh to some institutional investor. ALI will be using the proceeds for some joint venture project with LTG's real estate arm. ALI traded its properties to AREIT to raise cash. Nobody knows the reason why ALI sold the shares at a discount to institutional investors but such actions might affected market sentiment which is why AREIT is now trading at 39 PHP/sh. Retail investors probably thought that 39 PHP is the fair market value.

Is this something to be worried about? For a long-term dividend investor, probably not. The fundamentals of AREIT is still intact. AREIT at 39 PHP/sh is in fact still expensive for some investors because it is still trading above the net asset value of 32 PHP/sh. It is however rare for AREIT to trade below the net asset value so some already see any price below 39 PHP/sh a bargain. The dividend yield of AREIT at 39 PHP/sh is still not as high as other REITs however COL analysts made a projection that AREIT will be paying as much as 2.21 PHP/sh by 2023. That rate equates to an annual dividend yield of 5.67%. With fundamentals intact, resiliency of business in the COVID era, and an attractive forward-looking dividend are good cushions to buy AREIT speculatively if rooting for short to medium-term capital appreciation. 

Omar Cruz, AREIT's lead independent director, bought additional AREIT shares at 41 PHP/sh. An insider buying shares from the company it is working for boosts investor confidence. I've been tracking all of Omar's trading activities on AREIT and so far he hasn't sold any shares and has accumulated at least 410,000 AREIT shares at an average cost of 32 PHP/sh.

DDMPR

DDMPR is the only REIT that has not declared its last tranche of dividends for the year 2021. Is this something to be worried about? Well, probably not if we are still in it for the dividends. The REIT law requires them to pay out dividends anyway. Some investors have already unloaded their shares for the following reasons:

(1) The management is not transparent to their investors. Many investors held to Injap's statement in the IPO that they intended to pay out dividends quarterly. Some investors attempted to call the investor relations of DDMPR with regards to the dividend and unfortunately they do not know as well. Nobody knows what's going on but for sure it is increasing fear, doubt, and uncertainty among investors. DDMPR remains silent and the negative speculations are growing. With doubt and uncertainty going on, investors are selling at a loss to protect their capital. Some investors are not planning to buy back DDMPR shares even if it goes to an attractive level and that is because of inferior investor relation management. 

(2) Still no infusion insight. Ascott DD Meridian Park and Double Dragon tower were projected to be completed this year. Double Dragon tower has been completed but no disclosures about it yet. Ascott DD Meridian Park is now projected to be completed in 2023. The REIT law however mentioned that an asset has to be operating for at least 3 years before being infused into a REIT. If true, then we'll have to wait until 2025.

(3) Their buildings are still not PEZA accredited. Their tenants are high risk because the majority of them are gaming-related BPOs and POGOs. They do not seem not to last long as long-term tenants which eventually affect DDMPR's occupancy rate and dividend yield.

On the other hand, here are a few positive notes on why some investors are holding and continue to buy DDMPR shares:

(1) DDMPR is located in a premium location. There will always be a business in the bay area. DDMPR might look bad now but business is a cycle. Real estate is a somewhat resilient asset anyway. They probably will have PEZA accreditation in the future with better tenants. Investors are fine leaving cash they do not need and be fine with the dividends. 

(2) It's still the only REIT where the land is included. This entitles investors to benefit from the increase of the land property value.

(3)  DDMPR has no debt. DDMPR is trading below the NAV (net asset value) of 2 PHP/sh.

SPC, AP

For the first time in 5 years, SPC had an annual EPS (earnings per share) of below 1 PHP. They ended up with an EPS of 0.80 PHP for the year 2021 down by 11% from a year ago. The drop in earnings is due to the suspension of WESM (Wholesale Electricity Spot Market) in the Visayas region. WESM was suspended last December 2021 because of Typhoon Odette thus SPC was not able to sell its output. WESM partially resumed on January 17 but the rest on February 10 of 2022. SPC shares the same sentiment as to why AP was down as well since both of these energy companies have significant operations in the Visayas region.

With that said, there is this uncertainty of dividend payout. AP for sure will most probably continue paying out dividends since they are committed to a dividend policy of paying at most 50% of their earnings to shareholders. SPC on the other hand has no such dividend policy and investors rely only on past dividend payouts. 

I can only think of 2 cases by how much SPC will give out as dividends:

(1) SPC has a 5-year average dividend payout ratio of 70%. This implies that we should expect SPC to pay out 0.56 PHP/sh as dividends if we are to get 70% of the EPS. SPC is known to pay out dividends twice a year so we can conservatively say the first tranche of at least 0.28 PHP/sh dividend payout which is lower than the usual 0.40 PHP/sh SPC regularly gives. We can also estimate dividends by adjusting the 70% payout ratio. Based a 5-year historical data, SPC can have a dividend payout ratio of as high as 95% and as low as 50%. 

(2) Dividends are taken from unrestricted retained earnings. For the year 2021, they had an unrestricted retained earning of 5.6 billion PHP which is lower than the 7.1 billion PHP in 2020. Last 2019 SPC had an unrestricted retained earning of 5.9 billion PHP and they were able to give the first tranche of 0.40 PHP/sh as dividends. 

The issue however is that SPC had released 3 tranches of dividends in 2021 and they have spent a significant amount to acquire assets from STEAG (a coal company in Mindanao) and power barges from ACEN. That said, we do not exactly know how much SPC will pay as dividends or if they will give out dividends. Anyhow, there will be an annual stockholder meeting on the 31st of May and we'll have to keep an eye on the results and if dividends will be discussed.

Even though SPC made lower earnings, this does not imply that they are in trouble. They are still strapped with cash, with minimal to no debt, and the business fundamentals are still intact. Typhoons have always been a significant risk in the energy sector. Nevertheless, energy is still a much-needed commodity. They have admitted that there is no assurance yet of substantial additional source of income and they are looking for opportunities in the power and energy sector. Their planned exploration to renewable energy sector is still waiting for SEC approval. 

NIKL

The PH is asking the US to consider our country as a partner in supplying nickel and cobalt resources. The PH is abundant in the said minerals that are often used in the production of tech products. In response, 2 US firms are looking to tap local nickel companies for supply. These 2 US firms are into energy and battery systems. 

There is no further information yet with regards yet who those local nickel companies are but tagging NIKL to this discussion because it is the top nickel producer in the country and number 2 globally.

DMC

DMC's construction arm partnered with Northern Star Energy Corporation to build the 3rd largest import facility which when completed will be leased to Shell Petroleum. The expected completion date will be in 2024. 

On the other hand, DMC's construction arm partnered also with RLC for the construction of Sonora Garden Residences, a condo in Las Pinas. This is expected to be completed by 2024 as well.

With those said, DMC bagged a contract that would give them additional income to the holding company until 2024. Hopefully, when completed, they will bag more contracts to do the maintenance as well.

MER

Meralco's solar power arm seems to gain traction. Last February, MER closed a deal with Ajinomoto Philippines Corp (APC) for the installation of solar power. Then in March, they closed a deal with WLCON for solar rooftop installation. A month ago they again closed another deal with Avon Philippines for another solar power installation. 

The trend of companies adding solar to their buildings is becoming more common and MER is there to grab the opportunity. The advantage of MER over other competitors is that these companies going solar can take advantage of the Retail Competition and Open Access (RCOA) law. This allows companies to negotiate their electricity rates with their preferred suppliers. Solar as we know had been around for a long time and the reason why companies are choosing MER is probably that they are being offered a good deal on electricity rates.