SHARES OF AREIT, Inc. (AREIT) declined barely last week despite its first-time inclusion within the Philippine Stock Exchange index (PSEi) alongside Chinabank.
Data from the Philippine Stock Exchange showed that the Ayala group’s real estate investment trust (REIT) was the 14th most energetic stock of the week, with 20.31 million shares price P801.84 billion changing hands from Feb. 3 to 7.
The corporate’s shares closed at P39.55 on Friday, 5.8% lower than the P42 closing price on Jan. 31. Nevertheless, the close was 4.2% higher than the P39.55 closing price on Dec. 27, 2024.
Last Monday, the corporate entered the PSEi index together with Chinabank, replacing Nickel Asia Corp. and Wilcon Depot, Inc.
As the primary and largest publicly traded REIT within the local exchange, AREIT became the primary of its kind to affix the 30-company index.
“This shows the immense potential REITs have as an investment product and serves as a superb example for REIT issuers that aspire to maximise this particular sort of listing vehicle,” said PSE President and Chief Executive Officer Ramon S. Monzon in an announcement.
“Now that AREIT is an element of the PSEi and has gained broader investor attention, we expect it to keep up a gentle uptrend,” said Jarrod Leighton M. Tin, equity research analyst at DragonFi Securities, Inc., in a Viber message.
Mr. Tin also said that AREIT’s share price rebounded from weakness following Ayala Land, Inc.’s (ALI) P37-per-share block sale last yr, with the stock rallying to P42 on PSEi inclusion expectations after trading below the block sale price.
In December, ALI generated P2.78 billion through a block sale of 75 million AREIT shares priced at P37 each.
ALI holds a 43.33% controlling stake in AREIT.
“Sharp price dips are more likely to be short-lived, as investors may accumulate shares when AREIT’s dividend yield becomes more attractive relative to the present risk-free rate,” Mr. Tin added.
Jash Matthew M. Baylon, analyst at First Resources Management and Securities Corp., said that AREIT’s entry “is like placing the corporate within the stock market highlight.”
“We imagine that this could further strengthen investor interest within the stock, especially vis-à-vis other REITs, as this supports the corporate’s strong financial performance, which might then translate to consistent dividend payouts moving forward,” Mr. Baylon said in a Viber message.
“Notably, AREIT surged 7.69% to P42 on the ultimate day of the PSEi rebalancing, driven by a mark-on-close rally as fund managers rushed to accumulate shares for index-tracking portfolios,” said Mr. Tin.
On Feb. 3, the PSEi plunged by 4.01% or 245.07 points, its lowest finish in 27 months, as a result of the index rebalancing.
“This significantly contributed to the massive sell-off across the board as other index stocks decreased in weight allocation. Because of this more funds have flowed into AREIT, making it more attractive,” said Mr. Baylon.
Mr. Baylon also said that the increasing condo oversupply in the actual estate industry may negatively affect the stock’s performance.
Emptiness levels for office spaces rose to 19.7% as of the fourth quarter of 2024, driven by move-outs from the business process outsourcing sector, corporate occupiers, and Philippine offshore gaming operators, property services firm JLL Philippines said last Wednesday in a briefing.
AREIT’s portfolio as of the third quarter of 2024 consists primarily of office properties at 76%, complemented by retail (11%), industrial land (7%), and hotels (6%).
Its assets are concentrated within the Makati CBD (61%), other areas in Metro Manila (14%), Cebu (12%), other areas in Luzon (11%), and other areas within the Visayas (1%).
AREIT’s investment properties are composed of 20 stand-alone buildings, five mixed-use properties, nine condominium office units, and land parcels.
For the third quarter, the corporate’s revenues grew by 42% to P2.89 billion from P2.03 billion last yr. AREIT also posted P1.96 billion in net income, 58.9% higher than P1.23 billion within the third quarter of 2023.
For the January-September period, AREIT’s revenues soared by 47.4% to P4.82 billion from P3.27 billion last yr. Likewise, the corporate’s net income grew by 42.3% to P7.12 billion from P5 billion in the course of the same period last yr.
“We forecast AREIT’s core net income to grow by 46.83% to P7.2 billion in 2024 (full yr) and by 14.98% to P8.3 billion in 2025 (full yr), driven by revenue recognition from its 2024 property infusions, which expanded its GLA from 918,710 square meters (sq.m.) in 2023 to three,892,204 sq.m.,” said Mr. Tin.
“We forecast AREIT’s revenue for the complete yr 2024 to rise by 40%, amounting to P9.90 billion, higher than the previous yr’s revenue of P7.14 billion,” said Mr. Baylon.
Mr. Tin pegged support for the stock at P38 and resistance at P40.45.
“On the P38 level, this suggests a 6.14% dividend yield for 2025F, aligning closely with the present 10-year BVAL rate of 6.12%,” said Mr. Tin.
“We consider P38.00 because the support, while the brand new 52-week high at P42.00 per share is the resistance,” said Mr. Baylon. — Pierce Oel A. Montalvo
