The renewable energy REIT started the day in positive territory and never looked back. There’s a lot to get to, so let’s hit it point by point.
Dominguez downer: We had the usual speeches from dignitaries before Citicore Energy REIT [CREIT 2.84 11.37%] rang the bell at 9:30am; PSE President Ramon Monzon pumping the strength of the renewable energy and REIT sectors, but Department of Finance Secretary Dominguez kind of ended the pre-open on a downer note when he launched into a tirade against the “Western countries” that, from a tone perspective, really didn’t fit the moment. Secretary Dominguez didn’t pass the vibe check. That said, CREIT rang the bell and got the party started.
Performance: CREIT started trading at around P2.71/share, which was already up 6% from its IPO price of P2.55/share, but quickly shot up to as high as P2.94/share (it’s intra-day high) over the course of the first 10-15 minutes. That’s a 15% gain, but it wouldn’t last. The price retreated back to around P2.80/share, back up to P2.88/share, then back down to P2.78/share before rallying at the end of the day to close at P2.84/share, an 11% gain. Not bad.
Huge value/volume traded: CREIT had nearly done P1 billion in traded value in the first 30 minutes of trading, which was more than 4x its nearest challenger, and finished the day with nearly P1.5 billion in traded value, with over 520 million shares changing hands. While significant in size relative to the other traded shares, it’s only about 21% of CREIT’s public float. That’s on the high side of recent REIT first-day volumes; Megaworld REIT [MREIT 20.05 1.96%] did about 4% of its public float, RL Commercial REIT [RCR 8.16 2.77%] did about 2%, and Filinvest REIT [FILRT 7.55] doing around 2% as well. The first REIT, AREIT [AREIT 52.00 0.97%] traded less than 1% of its float on its first day, and DDMP [DDMPR 1.79] did about 11% of its public float. So, while some have found that higher levels of first-day turnover can have a negative correlation with future performance, the CREIT situation is a little different because it did most of this volume during a super-strong intra-day bullrush on the stock. None of the other REITs climbed over 7% on the first day of trading. Heck, AREIT plummeted. When CREIT started to do real business past +10%, that’s when the volume was off the charts.
New yield: As MB readers will know, the CREIT prospectus yield of 7% only applies to the IPO price of P2.55/share; shares purchased at any other price will automatically come with a different yield, since the amount of the projected dividend doesn’t change. At CREIT’s closing price of P2.84/share, the yield is now 6.34%, which is comparable to DDMPR’s 6.24% yield, but still ridiculously high compared to AREIT (3.38%), MREIT (4.79%), RCR (4.51%), or even FILRT (5.84%). The stock price must rise significantly from here to drag CREIT’s yield down into the range between MREIT/RCR and FILRT.
Media press conference: I got the chance to attend my first media briefing (virtual, but still: I got a call-out just after the Manila Times!), and that’s where I learned a few interesting bits from CREIT’s answers to questions asked by other reporters:
- CREIT thinks that it might be able to complete its 5-year plan in less time, possibly in coordination with “partners” like AC Energy [ACEN 8.86 3.14%];
- CREIT is in talks with ACEN about the possibility of infusing assets that are co-owned by ACEN and CREIT’s parent company, but nothing definitive on this yet;
- CREIT said that it was open to buying operating or brownfield (under development) projects, citing the fragmentation of the solar/renewable industry and the large number of smaller projects that might be ripe for consolidation;
- CREIT’s engineering team is exploring floating solar power plants; and
- CREIT thinks that there is 15 years of opportunity in the renewables market ahead, and that’s without any growth in electricity demand baked into the assumptions.
I also learned that they prefer to pronounce their ticker symbol as “see-reet”, which is pretty different from the “kreet” that I use in my head when I read it. Now comes the hard part of trying to train my brain to read it as see-reet, considering that I still can’t avoid looking at FILRT and thinking “fuh-LERT” in my drippiest valley-girl accent. The struggle is real.
MB BOTTOM-LINE
It’s safe to say that CREIT has had the most explosive IPO of any REIT so far, both from a daily gain perspective and volume turnover perspective.
These kinds of one-day gains are actually pretty unusual in the REIT sector, where huge swings in the stock’s price are usually tempered by the stock’s yield.
Here, however, I think that the high yield was a pretty big influence on what happened with the stock’s price.
Like, everything else being equal, would you rather buy DDMPR at a 6.24% yield, or CREIT with a 7% yield?
The more buyers that crowd into CREIT, the higher the stock price climbs, and the lower the resulting yield for subsequent purchasers.
Now you start to get into trickier questions.
Would you rather own FILRT at a 5.84% yield, or CREIT at 6.34%? If buyers continue to select the latter, and crowd harder into CREIT, the price will continue to climb and the yield will continue to fall.
Where the stock price will eventually end up has a lot (everything?) to do with how thousands of investors will answer these and similar questions for the remaining REITs on the table.
It’s possible to jump down any number of infinite rabbit holes when zooming in to conduct a closer, more detailed analysis, and it’s certainly important to know what you’re buying if you plan to purchase CREIT and hold it long-term.
You’ll want to have a working knowledge of how CREIT earns its money, and the potential threats to that income, so that you’re able to properly maintain your investment as time passes.
I mean, you’ll want to do this for any long-term asset that you hold, but I think it just bears repeating here considering how different CREIT is from the other REITs that we’ve grown accustomed to so far.
Click to read more: https://www.philstar.com/business/stock-commentary/2022/02/23/2162820/citicore-energy-reit-jumps-more-11-enthusiastic-debut
