October 19, 2022 | 09:00
Citigroup Energy REIT [CREIT 2.23 1.36%] [link] will sell its first debt in the fourth quarter of this year, when it comes to market with 3 billion pesos in ASEAN “green bonds”. The offering will come with an oversubscription allowance of 1.5 billion pesos. CREIT said they were trying to “support [CREIT’s] growth momentum,” and that this transaction is part of CREIT’s “leverage program” to use debt to fuel growth. CREIT plans to use the proceeds to purchase rooftop solar equipment and 500 hectares of land to lease to affiliates.
MB Quick Take: Out of the box, REITs can borrow up to 35% of their invested capital (the value of their deposited properties) to finance growth and acquisitions, but this cap is doubled to 70% if the REIT earns a “PRS Aaa” best rating from PhilRatings. Only two REITs have this rating (AREIT [AREIT 31.00] and RL Commercial REIT [RCR 5.00 0.40%]). This transaction, by my calculations, and assuming the full exercise of the oversubscription allocation, would bring CREIT directly to that 35% leverage limit. Either way, increasing its credit rating would unlock a whole new world of debt, but so would adding new projects and assets to the REIT. For REIT shareholders, well-deployed debt can fuel a virtuous circle.
Atlas Consolidated Mining [AT 3.50 4.48%] [link] Third-quarter earnings down 11% due to lower production caused by “bad weather”. Copper production fell by 11% and gold production by 13%. The quality of mined metal was also lower, as were market prices for metals throughout the period.
MB Quick Take: This was just a third quarter teaser, but it was packed with a lot of information and gave a pretty good look at tailwinds (long-term increases in metal prices) and headwinds (bad weather, lower quality production, increased fuel costs) . What worries me the most here is the weather component. AT said bad weather had impacted “the first four months of this year and this quarter”, which, if we take it at face value, is 7 of the 9 months of the year so far. here. If bad weather is hampering production, how will AT fare if climate change causes less favorable weather conditions in less predictable patterns?
DMCI [DMC 10.16 4.15%] [link] declared a special cash dividend of P0.72/share, payable on November 16. Combined with the regular and special cash dividends declared in April, DMC will have paid a combined dividend of P1.20/share this year, which is up 25% from 2021. The total dividends for FY22 represents a cash yield of 11.3% based on its current price.
MB Quick Take: this dividend will be paid the next day Semirara Mining and Electricity [SCC 41.55 0.12%] pays out its massive dividend, of which DMC is a major beneficiary. It’s basically the Consunji family riding the coal demon that was created by all the unusual macro pressures. Minority and retail shareholders can participate, as the family tries to distribute these funds through dividends.
Correction: Yesterday I said that the “Gotainun family” was the one who treated SCC with all those chonky dividends, but that was a mistake, and I meant the “Consunji family”. It’s even a double mistake considering the misspelling of the Gotianun family name.