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Stock Commentary

SEC approves IPOs of MREIT, RL Commercial

Merkado Barkada
SEC approves IPOs of MREIT, RL Commercial

Both MREIT Inc [MREIT] and RL Commercial REIT Inc. [RCR]  have been approved by the SEC, albeit with slightly different timelines than originally provided by their respective sponsors.

For MREIT, it will conduct its offer period from August 23 to August 27, and IPO on September 6th. Megaworld [MEG 2.71 3.21%], MREIT’s sponsor, will sell just over 1.2 billion common shares (49% public float) of MREIT (assuming full exercise of the over-allotment option), at a maximum price of P22/share. Since the deal is 100% secondary, all of the money raised will go to MEG, not to MREIT. For RCR, it will conduct its offer period from August 31 to September 8, and IPO on September 20th. 

Robinsons Land [RLC 16.30 0.73%], RCR’s sponsor, will sell just over 3.6 billion common shares (33.7% public float) of RCR (assuming full exercise of the over-allotment option), at a maximum price of P7.31/share. This deal is also 100% secondary, so all money raised will go to RLC, not to RCR. Both sponsors will set the final price for their respective REIT a day or two before the start of the offer period.

MB BOTTOM-LINE

My bet is that MEG and RCR are hungry for the fresh truckloads of cash that will be unlocked by these IPOs, so they’re unlikely to “pull a Del Monte” and defer their IPOs post-SEC approval for something as transitory as “market conditions”. Unless the pre-selling has identified a major lack of buyers anywhere near the maximum offer price, these two IPOs are good to go.

Now, whether or not the sponsors will appropriately price their IPOs, and then, whether or not the price and yield profile of the IPOs meets your investment criteria and fits your personal situation... well, those are other matters entirely. REITs are a stable investment; they offer reliable dividend-based income, with potential stock price upside, depending on the market’s demand for low-risk returns and the REIT’s ability to grow its leasing income base. That said, REITs are not a guarantee of anything. Just look at AREIT [AREIT 36.00 1.10%], which sank well below its offer price in the first weeks of trading before its eventual recovery and strong performance, and DDMP [DDMPR 1.81 0.55%], which copied the poor stock price performance part without also copying the eventual recovery bit.

Nobody should be pushing money into PSE EASy or to their broker for REIT IPOs expecting to make massive returns in a short period of time. That’s “basura season” thinking, not “REIT buying during ECQ season” thinking. Just because REITs are relatively stable doesn’t mean that at 10% drop in the first week won’t sting! All I’m saying here is “be careful”. I said the same for AREIT and DDMPR.  At least now with AREIT and DDMPR on the open market we have a better idea of how investors might price MREIT and RCR, but with REITs (and any long-term investment) the devil is always in the details. Always do your research!

 

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MEGAWORLD CORP. PHILIPPINE STOCK EXCHANGE REAL ESTATE INVESTMENT TRUST REIT ROBINSONS LAND INC
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