Vistamalls suspension lifted after reporting failures cured

Vistamalls [STR 1.99 ?32.7%; 0% avgVol] [link] was allowed to return to open trading on Tuesday after an 18-day suspension for its failure to submit an Annual Report for FY24 and a Quarterly Report for Q1/25. After STR submitted both in the pre-market hours of June 3, the PSE allowed the suspension to be lifted. Once lifted, exactly 1,000 shares were traded and that single trade caused the stock to gain more than 32%. No shares were traded yesterday. The late reports showed that STR’s FY24 net income dropped 19% to P6.9 billion, and its Q1/25 net income dropped 15% y/y to P1.9 billion.

  MB BOTTOM-LINE:  Just another heavy Villar stock doing heavy Villar stock things. STR’s massive drop in profitability was not directly addressed by the Villar Family in the company’s Management Discussion and Analysis section. The only line in the entire write-up that gave a clue as to what was happening was the one that noted STR’s interest expense increased 445% from P0.7 billion to P3.6 billion, “due primarily to lower capitalization rate.” For anyone familiar with real estate capitalization rates (net operating income / market value), that’s actually not what they’re talking about here. When STR borrows money to build a new mall, they get a grace period while the new mall is under construction, where they can capitalize a certain percentage of the borrowing costs. STR is paying interest on the money, but that interest isn’t hitting its income statement under the “Interest Expense” account... until the mall starts commercial operations. That’s when the grace period ends, and the capitalization rate dramatically lowers. I’m not an accountant. There is a lifetime (and a thriving career) worth of nuance in the accounting rules that apply here, and anyone interested in investing in STR over the long-term should take a closer look at these rules to see how they’ve been applied and how they’ll impact STR’s earnings going forward. The point of this little bit is just to provide a little context for why STR’s profitability is down, and remove a little bit of the confusion that may have been caused by the brief flash of attention STR paid to this massive change in its communications with investors. Hopefully my attempt didn’t heighten the confusion!

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