The 5 Valuable Lessons From FILRT’s IPO Issuance

September 30, 2021

If you're ever wondering what an IPO is and how it can be a good investment opportunity for you, then read the simplified information in this article.

One of the things that I like in my banking career is that I’ve gained a lot of knowledge on how the activities of businesses affect the country’s economy. Take for example an initial public offering or what we commonly hear in the news as IPO. While it may not be relevant to a lot of people, it’s still good for us to have an idea, or at least an overview, of what an IPO is. That way, we don’t get lost in a flurry of alien terms when we read the business section of a newspaper or listen to economic news on TV.

Buildings in Northgate Cyberzone, Filinvest, Alabang

The 5 Valuable Lessons From FILRT’s IPO Issuance


    What is an Initial Public Offering (IPO)?


    An IPO is an activity in which a company sells its stocks or shares to potential investors, which can be other businesses (corporate) and individuals (retail), for the first time. It’s an exercise to raise capital to expand the business. It's also called "going public" because you are inviting outside investors to put capital (or to invest) into your company. 

    As such, an IPO is worth celebrating because it means that there is flourishing economic activity. More IPOs mean more companies are expanding and, therefore, there is a brighter economy ahead.

    Why is that? I won’t go into many details but just point out the two specifics that are relatable for us. One, expanding companies hold the potential to generate more jobs for more people. And two, an IPO is a good investment opportunity for us individuals.

    You can actively trade stocks and earn income when you sell them. You can also choose to keep the shares and give them to your children if you are a parent like me. I know a lot of parents invest their money not for themselves but for their children, which should be the usual case. Stocks are stable investment options that you can add to your family’s financial instruments.

    An IPO is usually announced in newspapers and even on social media pages these days. Just watch out for these announcements to get details on how to buy a company’s shares but these are just usually through stockbrokers. If you have an account with a stockbroker, like in COL Financial, you can buy stocks through the dashboard.

    An IPO amid the pandemic


    An IPO is something that you would not usually expect in a pandemic when businesses are either tightening their budgets, downsizing operations, or even closing shop. However, some companies were able to buck the trend, so to speak. It’s a good indicator or encouraging news that we should be happy about.

    Take for example Filinvest REIT Corp. (FILRT), which made a successful debut on the Philippine Stock Exchange (PSE). last August 12. It was a time when NCR Plus was placed under Enhanced Community Quarantine or ECQ once again. Its share price continued an upward trend and settled at 3% above the initial IPO price on September 27.

    What does that mean? It simply means that investors are confident that FILRT will do good in its business. Investors are convinced that FILRT has a big likelihood to grow. In buying stocks, that’s what you also have to look out for. The higher the stock price, it's almost certain that the company is more profitable.

    In fact, FILRT Chairman Josephine Gotianun-Yap dubbed it “the bravest IPO,” having made history as the first REIT IPO to be listed during an ECQ.

    “It is a vote of confidence not only in our company and this new asset class but also in our country and in what has proven to be a most resilient industry in our economy: the BPO sector,” she said in her speech during the IPO listing ceremony, held virtually for the first time by the PSE.

    What valuable lessons can we get from this IPO listing?


    FILRT’s courageous debut in the stock market actually holds many valuable lessons for investors. The knowledge that we can gain from this IPO can be beneficial for us as we move through uncertain waters in this pandemic.

    Stock market performance
    Photo courtesy of pexels.com

    Here they are:

    1. Quality over quantity


    I think most of us were often told by the people around us, especially those who are older than us, to be more attentive to the quality of our work over the quantity. That’s pretty much self-explanatory because we all want a product that does the job well instead of something subpar.

    “While the reception was mixed, there were investors who responded favorably to the REIT as they focused more on the quality of FILRT’s assets and the high yield of the stock based on its IPO price,” said April Lee Tan, chief equity strategist at leading stockbroker COL Financial Group. The “strong enough demand” for FILRT comes from its good assets and attractive valuation, she added.

    FILRT’s portfolio consists of 17 Grade A office buildings totaling over 300,000 square meters of gross leasable area (GLA). 

    Of these, 16 of the 17 buildings are in Northgate Cyberzone in Filinvest City in Alabang, a PEZA Special Economic Zone, and IT park while another building is located in the gateway of Cebu IT Park in Lahug, Cebu City. The assets were valued by an independent appraisal company at ₱48.5 billion.

    Based on the IPO listing price of ₱7.00 per share, FILRT projected a dividend yield of 6.3% for 2021 and 6.6% for 2022 — higher than the yields of the first two publicly listed REITs. 

    Less than a month since its successful maiden share offering, FILRT already declared a cash dividend of P0.112 per outstanding common share to shareholders as of record date Sept. 15, 2021. The amount is equivalent to a quarterly yield of 1.6% or an annualized yield of 6.4% — slightly higher than its projected dividend yield for the year.

    2. Always be mindful of sustainability


    Sustainability and green living are buzzwords that we often hear these days. In fact, the green movement has been ongoing for many years now. It’s also a fact that many people prefer to support brands that have concern for society, animals, and the environment.

    FILRT differentiated itself as a “green” or sustainability-themed REIT as its portfolio includes two LEED Gold-certified office buildings and 16 buildings are in Northgate Cyberzone in Filinvest City in Alabang, the first central business district in the country and the largest in Southeast Asia to receive Gold Certification from LEED® v4 for Neighborhood Development Plan.

    The buildings are cooled by the country’s largest district cooling system that reduces carbon emissions and energy consumption, the result of Filinvest’s partnership with Engie, a world leader in developing sustainable technology solutions. 

    These sustainability features resonated well with investors, particularly those adhering to Environmental, Social, and Governance (ESG) principles of investing, said Maricel Brion-Lirio, president of FILRT.

    3. Investing for the long haul


    When we invest, we should always think long-term. That's because the longer our money is invested, the higher the possible income.

    The highest share of demand for the FILRT offering came from so-called “long-hold investors” attracted by the yield and growth prospects of the REIT. 

    In particular, Gotianun-Yap said there was strong domestic demand from qualified institutional buyers (QIBs), especially among insurance and bank trust accounts who are “considered more sophisticated investors who look at the long-term potential of an offer.”

    Some of these long-term considerations are Filinvest’s established relationship with its tenants, as well as the growing importance of Alabang as a market, added Ms. Tan

    4. Retail investors are the market’s saving grace


    It’s really encouraging to know that many individuals are becoming savvier when it comes to investing their money.

    While FILRT’s offering mostly drew institutional investors, it was also well-received by more than 8,000 retail investors, one of the highest among REIT and IPO listings since 2020. 

    According to the recently released Stock Market Investor Profile report of the PSE, retail investors now account for 98% of the nearly 1.5 million accounts in the stock market while institutional investors owned 2%.

    “Compared to 10 years ago, there are now a lot more sophisticated Filipino investors who know how to distinguish good-quality companies and who invest for the long-term,” said Ms. Tan of COL. However, she said there is still “a lot of room for improvement” as less than 2% of the population are currently investing in the stock market and taking advantage of attractive investment opportunities.

    5. Relationships matter


    In life, it’s good to have reliable people around us; they can be our friends, colleagues, or business partners. They can help us, even via a piece of simple advice, when we have projects that we want to venture into.

    Calculating earnings from stock trading
    Photo by energepic.com from Pexels

    FILRT relied on reputable investment bankers, both local and foreign, to make its IPO successful. BPI Capital Corporation and UBS AG Singapore Branch served as the Joint Global Coordinators and Bookrunners for the offer (with BPI Capital also acting as the Sole Local Coordinator and Local Lead Underwriter), UBS AG Singapore Branch was the International Bookrunner, China Bank Capital Corporation as Local Lead Underwriter, while First Metro Investment Corporation and SB Capital Investment Corporation were Local Co-lead Underwriters.

    “We were thrilled to have assisted our long-time client Filinvest in the historic listing of FILRT. The high demand from both domestic and international investors during this time of volatility in the international equity markets speaks to the consumer and investor confidence in Filinvest’s properties as well as the attractiveness of sustainable investments in the Philippines,” said James Grandolfo, Global Capital Markets Group partner of the Hong Kong-based Milbank team which advised FILRT on the offer.

    “Our IPO was the culmination of months of hard work, but it’s just the beginning of our journey,” said FILRT president and CEO Maricel Brion-Lirio. “After this experience, we can now collectively write a book on ‘How to Do an IPO in the Time of a Pandemic’.”

    Epilogue


    If there is one piece of financial advice that I’d tell other people, it’s to invest their money. Investing in stocks is a wise move but I understand that not all people have the extra money for buying a company’s shares.

    Nonetheless, there are many investment opportunities out there that are within your budget such as insurance that allows one to earn dividends, time deposit products for those who are not keen on taking risks, and even GCash has GInvest that allows individuals to invest as low as P5,000.

    If you are serious about investing, all you have to do is to look around you. Do your research, watch the news, read up, and even visit the social media pages of financial companies. We need to be prudent in managing our money, especially during this pandemic.

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    Lessons from an IPO issuance

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    27 comments

    1. Great tips about investing in IPOs. I always keep an eye on it right when it drops, like the Coinbase IPO it when up a bit and then tanked big time. Glad I didn't wind up buying when I initially was going to.

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    2. I learned something new about IPO. I also agree n the buy hold sell part. I remember buying company stocks at a discounted price and after a year or so was able to sell at a much higher price. :D

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    3. This is a great post for startups looking to go the IPO way. Thanks for the detailed post.

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    4. This is definitely not my strong suit, and it is interesting to learn more about IPOs and more.

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    5. The finance market sometimes really confuses me so this is helpful. I know I once bought one stock accidentally thinking it was another...you live and you learn!

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    6. These are some really good tips on investing in IPOs.

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    7. I used to work in Banking many moons ago, still feel comfortable with the terminology but not much trust right now in the market in general. What I am interested in gaining more knowledge about is both bitcoin and CBD stocks as investments, what are your opinions of those?

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    8. interesting.. how I wish to have time understanding stock market..

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    9. Investing for long term has been the best advice I received. You're right, the longer we invest our money the higher value it gets

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      Replies
      1. I have been thinking of investing lately. It would be nice to have a cushion to fall back on if we needed it.

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    10. Great investment tips, you explained it very well and sure it will help people who will invest.


      Fransic - https://www.querianson.com

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    11. This may not be my forte,but we need to learn about this ! Excellent on how it was detailed and comprehensive information

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    12. I've been wanting to learn about this. I am planning to invest my money. Thank you for these tips

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    13. While i do not know much about insurance, it is so nice to learn morw about IPO and how it works. I am so glad that despite the pandemic, we can still see some light and companies like FILRT still prosper. Also, i really want to know more about investing to stocks.. I have friends who are into it and i am really intrigued how this works

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    14. IPO sounds like a great option. Nevertheless, I've invested my money pretty conventionally since I had some major problems with investments in the past. But it's always good to hear about further options.

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    15. Great informative article. I had a different IPO in mind. Hmmm... I learned a lot!

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    16. This blog is very informative and such amazing.
      Thank you po for sharing.
      Very helpful for those who are planning to invest this may help a lot.

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    17. There's no better time to buy as much stock as the day of the IPO launch! Kudos to those who did and are still buying.

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    18. Thank you for sharing this Tips for financing, very informative very helpful to us for planning to invest money
      Great tips about investing in IPOs.

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    19. Yes to all these, but there's more to investing to learn also. We started late and we were so enthusiastic, we made some really unwise investments that we lost. But no worries because our mantra is, as long as we breathe, there is hope. :) We will just be faithful in what investment we can afford at the moment as we continue to try to expand our income and create more passive ones, so we can invest in the big ones we're aiming for.

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    20. Thanks for sharing this po , very helpful and informative tips to invest in IPOs. 😍❤️

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    21. By investing in an IPO, you can enter the 'ground floor' of a company with a high growth potential. An IPO may be your window to rapid profit in a short time period. It may also help grow your wealth in the long run.

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    22. Thanks for sharing with us your expertise. I have not much idea about IPO and stock market. Reading your post gives me a lot of idea on investing.

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    23. I don't have much knowledge about IPO, this blog is a nice guide. I like that I learned a lot from this. I agree that we should make some investments.

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    24. I never knew what an IPO was and you explained it in a very simple way! Thanks for this very informative blog and i hope to be smart enough to actually invest my money in something worthwhile.

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    25. First time to hear about IPO and mukhang interesting siya. Will check this out, pag-aralan ko muna hehe

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    26. thank you for sharing. i didnt know na ok pa din some stocks even during this time. ive always wanted to try it out, sabi ko nga one day pag me extra na ako. gusto ko matuto mag stocks. baka sakali lang naman. is it now the right time to do this? lalo na now na we are on our wat to normalcy, so near yet so far, but we know we are almost there...

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