Premiere Island Power REIT IPO is today
Premiere Island Power REIT [PREIT 1.50] will begin trading this morning at 9:30 AM after a quiet offer period. PREIT earns its money by leasing land to power plants owned by other Villar Group companies, which use diesel and other dirty fuels to supply power to Siquijor Island and Camotes Island. PREIT’s disclosures have estimated its 2023 dividends yield to be 9.56%, based on its IPO price of P1.50/share, but that amount excludes a year-end special dividend based on a revenue sharing clause contained in the lease agreements with the family-owned power plants.
Quick facts: The IPO sold 1.61 billion common shares at P1.50/share, to raise a total of P2.4 billion. All of the shares sold were secondary, meaning that the money raised will go to the selling shareholders (subsidiaries of Prime Asset Ventures Inc. (PAVI), which is owned by Manny Villar’s son, Manuel Paolo Villar), not to PREIT itself. PREIT will start life with a public float of 48.9%.
Development pipeline: PAVI has said that it will use the proceeds to purchase and develop real estate that could be leased to other PAVI subsidiaries. The land may be used to generate renewable energy, and PAVI has said that these projects, should they be completed, could be infused into PREIT at some unspecified time in the future. The PREIT prospectus said that this development pipeline is “expected” to “eventually” make PREIT “a leading renewable energy REIT in the Philippines”.
Market reaction: Sources have said that the offer was “fully subscribed”, which PREIT neither confirmed nor denied. This is not an oversubscription situation, where buyers have requested to buy more shares than are on offer; this appears to be a situation where only the number of shares on sale were actually sold. This is the bare minimum that needs to happen for an IPO to be considered “successful” from the point of view of the selling shareholders.
Retail interest: I had 44 Barkadans respond to the PREIT Allocation Poll. Aggregating the data, Barkadans requested a total of 949,000 shares, and were allocated 875,000 shares, for an allocation rate of 92%. The only brokers that appeared to struggle to provide full allocations were COL Financial [COL 3.3 unch] and AB Capital. All requests through the PSE EASy platform were fully allocated.
Comparison to VREIT: This is the Villar Family’s second REIT IPO; VistaREIT [VREIT 1.6 1.3%] provides a reasonable point of comparison. From a modus perspective, PREIT and VREIT both had their offer prices aggressively slashed to create estimated yields that were by-far the highest relative to peers at the time. Both will IPO with stability funds, and both will IPO after having sold all their shares but failed to achieve “over-subscribed” status. Turning to IPO Allocation Poll results, PREIT’s 44 self-reports is down 50% from VREIT’s 88. Barkadans requested P12.7 million worth of VREIT and were allocated P12 million for an allocation rate of 94%. For PREIT, Barkadans requested only P1.4 million worth, and were allocated P1.3 million for an allocation rate of 92%. Neither offering “sold out” of shares on the PSE EASy platform.
MB BOTTOM-LINE
Retail interest in PREIT is almost non-existent.
This is the worst-performing IPO that I’ve seen based on IPO Allocation Poll results over the past year that I’ve been tracking this kind of data. Does that mean that PREIT will fail and that its IPO investors will be disappointed? Of course not.
There are no definitive signals of failure.
Anything can happen when an IPO is ripped from the comfort of its nursery and exposed to the vulgar push and pull of the open market, and that’s why I love to track and follow this whole process.
At the end of the day, this is a Villar company that leases land to other Villar companies which use the land to house diesel and bunker fuel-powered gensets. Could it become “a leading renewable energy REIT” at some point in the future?
Absolutely, both because the definition of that statement is so broad that it’s useless, and because what PREIT becomes will depend almost entirely on the whims of the Villar Family. If they decide to push renewable energy assets into PREIT, then it will become a renewable energy company.
If they don’t, it won’t. Every investor needs to do their own research before investing.
Don’t take what I’ve written as a recommendation to buy or not buy the stock. It’s entirely possible that this REIT comes around the time when inflation fears are at their peak, and that investors will be riding relatively high yields for years to come as interest rates fall and inflation returns to normal over the coming years.
It’s also possible that things seem to be pretty calm for the duration of the stability fund, and then start to unravel should there be a setback in the fight against inflation and REIT yields are put under additional pressure.
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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.
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