July 17, 2023

FILRT

FILRT share prices have been dropping continuously in the past few weeks. It started when their recent dividend payout has been declared out of the usual schedule. A year ago, the first quarter dividend was declared in April. For this year, the first quarter dividend was declared in June which made it unusual since it was a 2-month difference from a year ago and it was already the first half of the year. This situation has happened before in DDMPR where they missed to declare a quarter of dividends hence causing its share prices to drop. FILRT has not disclosed any information that is surrounding the negative sentiment towards the share price so investors are left to speculate that the delay in the dividend declaration is due to financial issues. It is a safe assumption that investors had to make because FILRT’s occupancy and lease renewal rate is not looking good to start with. To make matters worse, when there is an unusually large selling volume of shares happening in stock, many traders and investors are poised to sell as well. This is because insider trading is rampant in the PSE market where institutions who have insider knowledge with regards to a company have the advantage to dump or pump the shares before information is officially disclosed to the public. Nevertheless, nobody knows if FILRT has insiders, but some shareholders who have no insider information, they’d rather follow and sell instead of incurring more losses. What’s holding FILRT's share price not to drop further is that the annualized dividend yield is reaching at least 8%. The share prices however could still go lower if the dividend income is not sustainable since FILRT’s occupancy rate remains volatile.

In a move to calm investors, FILRT disclosed a week ago that they are in talks with major BPO firms looking to expand their current leases. Moreover, FILRT is going to introduce co-working spaces to meet tenant needs to at least improve their occupancy rate. Having said that, FILRT expects to add 12,400 square meters of new leases if everything goes as planned. The said 12,400 additional square meters of new leases is a significant number but still below the average gross leasable area for all of FILRT’s assets which is at 17,000 square meters.

The addition of the new leases might not offset the expiring leases this year. Looking back in 2021, FILRT disclosed that 18% of leases will expire this 2023. A quarter ago FILRT disclosed that they were able to renew 32% of the 18% expiring leases without mentioning figures in terms of square meters. The recent disclosure however said that around 10,300 square meters were renewed earlier this year. Having those as given, we can calculate from here that a total of 32,000 square meters of leases are going to expire this year. If we sum up the renewed 10,400 square meters of lease and the expected 12,400 additional square meters of new leases, then we get a total of 22,700 square meters of lease which is still not enough to break even with the 32,000 square meters of expiring leases. This gives a low probability that the dividend income will increase. The best situation that investors could hope for is at least for the dividends to sustain.

FILRT investors will have to take a deep breath because next year is going to be a more challenging year where 21% of the leases will expire.