VILLAR-LED Premiere Island Power REIT Corp. is likely to push through with its initial public offering (IPO) in November as the market conditions should have improved by then, an analyst said, but others have doubts about its timing.
The firm, also known as PremiereREIT, earlier this month disclosed details of its maiden offer at a time when rising inflation and interest rates added to uncertainties faced by investors.
“We think PremiereREIT’s IPO is likely to push through in November considering that market climate may have already started to improve by then,” AP Securities, Inc. Equity Research Analyst Carlos Angelo O. Temporal said in a Viber message.
“Inflation rate [is] expected to peak in October while the market may have already bottomed out towards November after pricing in much of the interest rate uncertainties,” Mr. Temporal added.
However, Timson Securities, Inc. Head of Online Trading Marc Kebinson L. Lood said that “PremiereREIT and other companies planning to go public in the remainder of the year will have a difficult time raising capital in the equity markets.”
He said that because of the current high-interest rate environment, investors are more interested in bond offerings.
“Although PremiereREIT has a bullish outlook [for the Philippine energy sector], with a comprehensive project pipeline and a sizable asset portfolio, valuations are currently quite low, which may explain why some companies have deferred listing this year,” Mr. Lood said in a Viber message.
PremiereREIT, a power and infrastructure real estate investment trust, recently filed the registration statement of its P3.2-billion IPO with the Securities and Exchange Commission with its target listing date set in November.
The company, which is led by Manuel Paolo A. Villar, plans to offer up to 1.4 billion secondary common shares with an over-allotment option of up to 210 million secondary common shares at a maximum offer price of P2.00 per share.
The company’s offer shares will be sold by the subsidiaries of its sponsor, Prime Asset Venture, Inc., such as S.I. Power Corp. and Camotes Island Power Generation Corp.
Recently, Upson International Corp. deferred its IPO from October to the first quarter of next year while North Star Meat Merchants, Inc. deferred its IPO amid concerns about market volatility and inflationary pressures in June.
Mr. Lood said that “it is advantageous for companies to delay the issuance to give investors more time to digest what is happening in the market.”
“Year 2023 would be a better and strategic move to proceed with the IPOs so investors would see complete 2022 figures, which is also good for the firms considering the reopening theme,” Mr. Lood added.
Mr. Temporal said investors are likely to look forward to the second half of 2023 to 2024 as they have already priced in local curbed growth.
“2023 is expected to have normalizing macroeconomic conditions such as easing inflation rates and interest rate concerns and this should be able to bring in a better market climate toward IPOs,” he said.
“We also note that [the] Philippines still stands to remain in its reopening narrative, which could pave the way for upward re-rating of multiples and therefore bolster market sentiment for IPOs further,” Mr. Temporal added.
In terms of PremiereREIT’s success, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that “market conditions globally and locally would be a consideration to maximize the selling price of the shares as well as the proceeds to be raised.”
“The renewable power lease or rental income component of the REIT would be a potential differentiating factor, somewhat similar to Citicore Energy REIT Corp. (CREIT),” Mr. Ricafort said in a Viber message.
“Market is likely to weigh on its valuation by comparing projected dividend yield with that of CREIT, its nearest comparable which currently offers an estimated dividend yield of 8.4% at last traded price,” Mr. Temporal said.
“Investors are likely to seek higher dividend yields for PremiereREIT than that of CREIT given the poor performance of Villar’s recent IPOs. Market appetite therefore will be very much guided by its final offer price and projected yield,” Mr. Temporal added.
Mr. Villar is the eldest son of real estate tycoon and former Senate President Manuel B. Villar, Jr., and is also the president and chief executive officer of Vista Land & Lifescapes, Inc. — Justine Irish D. Tabile
