DITO CME planning P8 billion stock-rights offering to fund Dito Tel capex
DITO CME's [DITO 6.81 3.27%] President, Ernesto Alberto, revealed DITO’s plans to conduct an P8 billion SRO during a recent interview. Mr. Alberto said that the SRO would have a price range of P6.11 to P7.00 per share, that DITO would sell just over a billion shares to the market, and that the company would look to list the shares sometime this December.
According to the Inquirer, Mr. Alberto said that “80 to 85 percent of the proceeds would fund capital expenditures for the telco business under Dito Telecommunity while the remainder would be for other digital businesses”, and that the SRO price is “at a discount to [how much it is] today, albeit price has been depressed not only for Dito shares but the entire market”.
The article also provided some updated metrics on DITO’s performance and growth, most notably that DITO had approximately 3.5 million subscribers “as of last week”, and quoted Joseph Ong, DITO’s CFO, as saying that DITO “should be within the striking distance” of breaking even “in about three to five years”.
MB BOTTOM-LINE
As with any DITO interview, there’s a lot to unpack here. First, the proposed low-end of the SRO price range is at a 10% discount from yesterday’s close, which was itself about 10% lower than the volume-weighted average of DITO’s last 30 trading days. But SROs are often provided at a discount as a “give-back” to existing shareholders, so that might not be so weird.
Second, as we’ve seen with a few of the other offerings this quarter like The Keepers [KEEPR susp], the actual price of the offering might be even lower than the pricing range initially provided by the company.
Third, the P8 billion SRO would represent about 7% of post-SRO outstanding shares, and about 30% of post-SRO listed shares.
Fourth, while Mr. Alberto is correct that DITO’s price has been “depressed”, considering that it has lost over 62% of its value since its February 22 close of P18.12/share, Mr. Alberto’s attempt to justify this absolute stock price face-plant by claiming that this price depression is a problem affecting the broader market is simply misleading and untrue on its face.
The PSE Index closed at 6,810 on February 22, and finished the day yesterday at 7,106. That’s a modest 4% increase, not a face-melting 62% loss, as shareholders of DITO have suffered over the exact same time period. Even within its own sector, telecom, DITO’s competitors have actually significantly outperformed the market, with Globe [GLO 3134.00 4.61%] gaining 54% since February 22 and PLDT [TEL 1642.00] gaining 26%.
A reasonable counterpoint might be that both GLO and TEL have benefited generously from valuations applied to their fintech investments in GCash and PayMaya, respectively, and that would be accurate; however, is this integration with digital payment systems not the future of telecommunications?
Fifth, We can probably let DITO off the hook for not having a strong fintech arm at the moment as it tries to simply do the bare minimum as a straight telecom to justify its congressional concession agreement, but even then, how well are they really doing?
Back on August 5th, we extrapolated DITO’s subscriber uptake rate at the time and concluded that if they were to maintain their current pace, that they would “3 million milestone by mid-September, the 4 million milestone by mid-October, and to have around 7 million subscribers by the end of 2021”. Well, if they only hit 3.5 million “last week” (end of October), that tells me that they’ve fallen behind their own pace, since we’d have expected DITO to hit 4 million subscribers by October 15 instead of hitting 3.5 million in the last week of the month. The velocity of their new subscriber onboarding is slowing down.
Last, it sure seems like DITO is busy moving all the goalposts that it can on profitability. Back in March, DITO said that it would “not turn a profit for two years”, and now, 8 months later, it’s saying that it will still be another “three to five years” until it’s “within the striking distance” of profitability.
Did something change with DITO’s internal projections over the past 8 months, or was Mr. Santiago just being too cute with his words or was he not telling the truth back in March?
If, come November 2026, when DITO still has not yet quite managed to break even, will shareholders be relieved to know that this outcome was within the parameters outlined by Mr. Ong’s “three to five years” to “striking distance” of profitability prediction?
DITO shareholders might not be holding on to such massive losses if DITO’s management put up cell towers and signed up subscribers as well as they move the goalposts for their own performance.
--
Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
- Latest
