CITICORE Energy REIT Corp. (CREIT) has secured approval from the Philippine Stock Exchange (PSE) for its initial public offering (IPO) of shares worth about P10.1 billion for up to P3.15 apiece.
In a PSE notice posted on Wednesday, the exchange said it had given the green light to the initial listing of CREIT’s 6,545,454,004 common shares with a par value at P0.25 each.
Of these, 1,047,272,000 shares will be issued to the public under a primary offering, while 1,741,660,000 shares are allotted for a secondary offering, plus an overallotment option of up to 418,339,000 common shares.
The shares are priced for as much as P3.15 apiece. The final offer price will be determined based on a book-building process. The offer period will begin at 9 a.m. on Feb. 2, and end at 12 noon on Feb. 8, 2022. The target listing date is on Feb. 17.
CREIT’s IPO is said to be the country’s first energy-focused real estate investment trust (REIT). All of the offered shares will be listed on the main board of the stock exchange under the ticker symbol CREIT.
The proceeds from the primary offering will be used to buy properties in Bulacan and South Cotabato, while those from the secondary offering will be used by Citicore Renewable Energy Corp. and Citicore Solar Tarlac 1, Inc. for their future projects.
Citicore Renewable, a subsidiary of Citicore Power, Inc., is one of the company’s sponsors and is a part of the Citicore group of companies. It is said to be a pioneer of agro-solar social concept.
In a media release on Wednesday, CREIT President and Chief Executive Oliver Y. Tan said the business model “is cycle-resistant as solar power generation is an essential industry, further supported by government programs, and has a clear plan for long-term growth.”
“With the search for attractive returns, alongside a strong and effective environment, society, and governance (ESG) advocacy as criteria for a sound market investment, CREIT comes in as a practical alternative,” he added.
Sought for comment, analysts said the IPO might stimulate investor appetite, but whether the business model can be a template for future energy REITs remains to be seen.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said renewable energy-related businesses would continue to benefit from ESG-related investment themes.
“Since this kind of REIT is relatively new, investors would look at future cash flows and overall valuations,” he told BusinessWorld in a Viber message.
Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said in a text message: “Their focus on renewable energy is a good direction as it is where the demand is in the future.”
He added that demand would still depend on how stable the company’s income is, as it shares its profits through dividends, as well as its growth plans.
Meanwhile, COL Financial Group, Inc. First Vice-President April L. Tan said that with the favorable outlook on the power industry and the company’s structure, CREIT is a good REIT that could give stable cash dividends to shareholders.
However, Ms. Tan said the attractiveness of the offer would still depend heavily on its yield.
“At P3.15 per share, potential yield is at 5.66%. This might not be compelling enough since other REITs debuted with similar yields, but with more attractive near-term growth prospects,” she said.
Ms. Tan also noted that the potential for growth through acquisition in the near term is limited because the parent firm still has to build more plants that the company can acquire in the future.
“The fund manager’s role is to look for assets that fit the REIT company’s investment criteria and the easiest way to grow a REIT’s portfolio is by buying the assets of its REIT sponsor. However, if the sponsor doesn’t have assets that meet the REIT company’s investment criteria, then it might be difficult for the REIT to grow through acquisition,” she explained.
In its press statement, CREIT said the Citicore group has a pipeline of 1,500 megawatts of direct current (MWdc) solar plant capacity in the next five years with 120.5 MWdc underway.