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Stock Commentary

Why doesn’t the market share your doomsday view of DDMPR?

Merkado Barkada
Why doesn’t the market share your doomsday view of DDMPR?

I got this question after my Monday write-up on DDMP [DDMPR 1.06] [link] and its fading metrics and terrible accounts receivable situation. To give the unabridged version of the question:

“Why does the market not share your doomsday view? What do they think they know that alleviates this hot mess?  After my morning read I had expected 0.80.”

The answer is a combination of two unsatisfying concepts. First is the idea that whatever bad news we read about is already “priced in” to the stock, such that the revelation that DDMPR’s occupancy sucks or that its WALE is still degrading is something that has--in some way--been “baked in” to the stock’s price for a long time. The market is a forward-looking prediction machine. This is why sometimes press releases that sound really bad result in a weird uptick in the stock’s price. Perhaps “the market” expected the news to be even worse, so despite how bad it sounds, it’s actually good news relative to the market’s going assumptions. The second is the reality that our market is actually rather small and its insider information rather “leaky”, so it’s sometimes possible for stock transactions to be skewed by insider movements or random transactions more than in other markets where larger volumes smooth out these bumps and make stocks appear to act more “rational”. All things considered, DDMPR trades with a yield that is closing in on Villar territory, so I think it’s clear that the market already considers DDMPR to be a riskier bet than most of its peers.

 

MB bottom-line: If the market priced DDMPR’s risk the same as it did Filinvest REIT [FILRT], DDMPR’s stock would need to move up 14% to around P1.20 to match FILRT’s 7.7% annualized yield. To get to the RL Commercial REIT [RCR] level, DDMPR’s stock would need to rise around 38% to around P1.45 to match RCR’s 6.4% annualized yield. To match AREIT [AREIT] and its REIT-leading 5.8% yield, DDMPR’s stock would need to rise more than 50% to around the P1.58/share level. I know how disorienting and disappointing it can be to see a disconnect between the news and how a stock’s price acts, but in the case of DDMPR, I think the market kind of already does share my doomsday view, it’s just that we’re so used to seeing it languishing near the bottom of the REIT table that we forget what it once was, how it once ran alongside the giants. You wouldn’t know it by looking at it today, but DDMPR was (at one time) an innovative concept that stoked optimism in the hearts of many investors.

Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.

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