SHARES OF AREIT, Inc. (AREIT) declined slightly last week despite its first-time inclusion in 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 active stock of the week, with 20.31 million shares worth P801.84 billion changing hands from Feb. 3 to 7.
The company’s shares closed at P39.55 on Friday, 5.8% lower than the P42 closing price on Jan. 31. However, the close was 4.2% higher than the P39.55 closing price on Dec. 27, 2024.
Last Monday, the company entered the PSEi index along with Chinabank, replacing Nickel Asia Corp. and Wilcon Depot, Inc.
As the first and largest publicly traded REIT in the local exchange, AREIT became the first of its kind to join the 30-company index.
“This shows the immense potential REITs have as an investment product and serves as a good example for REIT issuers that aspire to maximize this particular type of listing vehicle,” said PSE President and Chief Executive Officer Ramon S. Monzon in a statement.
“Now that AREIT is part of the PSEi and has gained broader investor attention, we expect it to maintain a steady 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 year, 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 likely to be short-lived, as investors may accumulate shares when AREIT’s dividend yield becomes more attractive relative to the current 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 company in the stock market spotlight.”
“We believe that this would further strengthen investor interest in the stock, especially vis-à-vis other REITs, as this supports the company’s strong financial performance, which would then translate to consistent dividend payouts moving forward,” Mr. Baylon said in a Viber message.
“Notably, AREIT surged 7.69% to P42 on the final day of the PSEi rebalancing, driven by a mark-on-close rally as fund managers rushed to acquire 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, due to the index rebalancing.
“This significantly contributed to the large sell-off across the board as other index stocks decreased in weight allocation. This means that more funds have flowed into AREIT, making it more attractive,” said Mr. Baylon.
Mr. Baylon also said that the increasing condo oversupply in the real estate industry may negatively affect the stock’s performance.
Vacancy 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 in the Makati CBD (61%), other areas in Metro Manila (14%), Cebu (12%), other areas in Luzon (11%), and other areas in 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 company’s revenues grew by 42% to P2.89 billion from P2.03 billion last year. AREIT also posted P1.96 billion in net income, 58.9% higher than P1.23 billion in 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 year. Likewise, the company’s net income grew by 42.3% to P7.12 billion from P5 billion during the same period last year.
“We forecast AREIT’s core net income to grow by 46.83% to P7.2 billion in 2024 (full year) and by 14.98% to P8.3 billion in 2025 (full year), driven by revenue recognition from its 2024 property infusions, which expanded its GLA from 918,710 square meters (sq.m.) in 2023 to 3,892,204 sq.m.,” said Mr. Tin.
“We forecast AREIT’s revenue for the full year 2024 to rise by 40%, amounting to P9.90 billion, higher than the previous year’s revenue of P7.14 billion,” said Mr. Baylon.
Mr. Tin pegged support for the stock at P38 and resistance at P40.45.
“At the P38 level, this implies a 6.14% dividend yield for 2025F, aligning closely with the current 10-year BVAL rate of 6.12%,” said Mr. Tin.
“We consider P38.00 as the support, while the new 52-week high at P42.00 per share is the resistance,” said Mr. Baylon. — Pierce Oel A. Montalvo
