Filinvest REIT debuts with an uneventful and very REITy IPO

The third member of the PSE’s REIT group joined the exchange in an IPO that was successfully underwhelming. Filinvest REIT [FILRT 7.02 0.3%] started trading in positive territory right from the start and had managed to climb up about 2% in the first hour before settling back into the 0.5% gain range for the rest of the day. The stability fund, run by BPI Cap, never even had to press start to join the fight. FILRT started the day at the very top of the chart in traded volume for the entire exchange, but after that little peak at around 10:30, the volume trailed off as well. Still, it was the 5th most active stock for the day by value traded.

The slight increase in price marginally reduced FILRT’s yield. Assuming flat funds from operations, a higher stock price will reduce the yield (return) of the projected dividends.

MB BOTTOM-LINE

The day was already a success for Filinvest Land [FLI 1.12 0.88%] and the Gotianun Family since the IPO shares were already fully sold during the offer period. Whatever was traded yesterday had nothing to do with FLI’s holdings, as all of its FILRT shares are being held off the table by various PSE-mandated lockups. Did some of the IPO buyers quickly sell after a quick stock price pop became less and less likely as the day wore on? It’s difficult to jump into the heads of the thousands of shareholders that were active on the stock yesterday, so we will have to wait to see how the stock performs going forward.

As discussed yesterday, when we compare FILRT to its REIT contemporaries, AREIT [AREIT 36.40 unch] and DDMP [DDMPR 1.78 unch], FILRT’s relatively high yield (~6.3% compared to ~4.6%) and low “Price to AFFO multiple” (16x compared to 20x) are standouts differences that, to me, seem to imply that FILRT’s stock price would need to rise to achieve parity with its peers. To get FILRT loosely in-line with the estimated yields of AREIT and DDMPR, the stock price would need to rise to be about [9.50/share. Similarly, to get FILRT into the same general area in terms of its price-to-AFFO multiple, the stock price would need to rise to be about P8.75/share. Either way, the metrics that I’m tracking suggest that FILRT is due for a price increase, but I could be wrong.

My calculations could be off, and I could be missing some important pieces of the puzzle. REITs are a fascinating new investment instrument, and my past experience with investing in them is limited. I’m learning as I go, it’s just that my learning is out in the open for all to see. As relatively simple as REITs are, it’s possible to quickly get lost in the onion layers of the valuation puzzle. Anyone with REIT analysis experience is welcome to reach out and help me learn what I need to learn about this new area of market interest!

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