Limit Order

Dividend investing is a method of buying stocks of companies that had declared regular cash payouts to shareholders as a reward for holding on to the stock. It can provide a stable income stream to shareholders in addition to the potential capital appreciation. In this regard, Real Estate Investment Trust (REIT) became a popular option for investors considering that it is mandated by law to declare at least 90% of its distributable income as dividends to shareholders in which the dividends should be payable from the unrestricted retained earnings. This is the reason why we commend the lawmakers and the regulators for amending the implementing rules and regulations of the REIT Act of 2009 related to the minimum public ownership requirement from a maximum of 67% to a minimum of 33% of the outstanding capital stock. These amendments persuaded most real estate companies to establish a REIT as a separate subsidiary for the purpose of consolidating its income-generating real estate. But the House Bill 7525 proposes to amend the REIT Act of 2009 that would require the REIT sponsor or promoter to reinvest in the Philippines the proceeds realized from the sale of REIT shares within one year from the date of receipt. Proceeds subject to the reinvestment rule include other securities issued in exchange for income-generating real estate and other proceeds raised from the sale of income-generating real estate that are transferred to the REIT. REIT is required to submit a reinvestment plan to the Philippine Stock Exchange and Securities and Exchange Commission upon registration and should secure an annual certification to demonstrate its compliance with the reinvestment plan. Although the proposed amendments could be beneficial to real estate sector, we should remember that a reinvestment plan should be anchored on a common policy rather than an uncommon strategy. A reinvestment plan provides a platform from which change could be leveraged to minimize the risk and maximize the return so it should be flexible and adaptable enough to manage adjustments to serve the interest of the shareholders. Perhaps the proposed amendments should consider the fact that REIT needs more than one year to reinvest in the Philippines the proceeds realized from the sale of REIT shares from the date of receipt. Any business undertaking goes through the usual process of economic expansion and contraction so we should not propose an order that would limit the flexibility and adaptability of a reinvestment plan.

Oplan Purge

Morality cannot be legislated but behavior can be regulated. Those are the words of Martin Luther King that could be considered relevant to the predominant public sentiment about the Philippine Offshore Gaming Operators (POGO), which are Philippine-based online gambling companies that offer services to customers outside of the country. POGO are registered and licensed by the Philippine Amusement and Gaming Corporation in order to operate as a legal entity. In addition to the social cost that has a tendency to widen socioeconomic inequality among the population, POGO has a propensity to increase criminal activities among its participants. Granted that these adverse consequences are supported by data from socioeconomic-related research studies, the fact remains that POGO contributes a notable amount to the public and private sectors in the form of regulatory revenue, personnel wages, rental income, income taxes and utility bills among others. Based on the research conducted by the Leechiu Property Consultants, the Philippine economy could lose an estimated P190 billion per year if the remaining POGO are shut down. A ban and exodus of the remaining POGO would translate to a foregone P9.5 billion of annual utility bills, P54.3 billion of annual income taxes, P5.3 billion of annual regulatory taxes, P5.8 billion of annual government taxes, P11.4 billion of annual food consumption, P18.9 billion of annual office rental income, P52.5 billion of annual technological upgrades, P28.6 billion of annual residential rental income, 347,000 of displaced direct and indirect workers and 1.1 million square meters of commercial office rental space. How unfortunate that most traditional politicians have been grandstanding about the current state of the POGO while the world has entered a prolonged economic unrest brought about by the tightening monetary policy to reduce the overheated economic growth and escalating inflation rate. Rather than concentrate on the social cost of POGO, most traditional politicians should focus on ensuring that the relevant government agencies have enough human and financial resources to serve and protect the interest of the public. We have to underscore the fact that narrowing socioeconomic inequality is a function of general employment while the decreasing criminal activities is a function of law enforcement. Outlawing the business operations of the remaining POGO would translate to a foregone multibillion worth of annual economic gains as a result of a hysterical political grandstanding by most traditional politicians. Why do some people prefer to burn the house down to get rid of a rat rather than get rid of a rat without burning anything?

Golden Goose

Rather than being considered as an occasional event, the shortage of poultry products brought about by the high feed costs, low feed quality, bird flu outbreak and the changing consumer preference has become a frequent event. This incident turned from bad to worse when major quick-service restaurants which offer meals that require minimal preparation time and delivered through quick services were unable to provide poultry-based menus. Most customers have taken to social media to complain about being unable to buy the popular fried chicken meal that has become synonymous with these quick-service restaurants. We expect the shortage of poultry products to continue considering the decreasing supply and increasing demand situation so we are in agreement with the recent corporate action of San Miguel Food and Beverage Inc (FB), a subsidiary of San Miguel Corporation (SMC), in which it would build a dozen poultry facilities at an estimated total cost of $1.2 billion. Once completed and operational by June 2024, each poultry facility would have an annual production capacity of 80 million chickens so a dozen poultry facilities would have an annual production capacity of 960 million chickens. In addition to the production of processed and ready-to-eat chicken products, the produce from these poultry facilities would be able to serve the growing demand for supersized roast chickens. According to Statista, the poultry products consumption per capita in kilograms in the Philippines increased from 9.32 in 2010 to 13.74 in 2020 or a compound annual growth rate of 3.96%. Based on the aforementioned decade-long compound annual growth rate, FB could be considered as the goose that lays the golden eggs for SMC based on the profit potential of the business undertaking. In addition to the business implication, the business undertaking would be a business diversification for FB considering that its operating segments are concentrated on alcoholic and non-alcoholic beverages. For the comparable years ended 31 December 2021 and 31 December 2020, the contribution by operating income of the alcoholic and non-alcoholic beverages were 74% and 84% while the balance is contributed by the prepared and packaged food. We have a high degree of confidence in the profit potential of this business undertaking because it is anchored on the fact that FB is a master of vertical integration which allows it to streamline its business operations through direct ownership of the stages of the production process rather than relying on external contractors.

Rule Breaker

As a fundamental principle that expression and communication through media which includes but not limited to the traditional and digital formats, press freedom should be considered a right as stated in the 1987 Philippine Constitution. This is the reason why most investors supported the 25-year franchise renewal application of ABS-CBN Corporation (ABS) when it became a subject of contention among the members of the Philippine House Committee on Legislative Franchises whose majority voted against it. Brought about by the rejection of its franchise application, gross revenue decreased by 16.8% to P17.8 billion from P21.4 billion while net loss decreased by 58.1% to P5.7 billion from P13.5 billion for the comparable years ended 31 December 2021 and 31 December 2020. Although we wanted to sympathize with its partisan politics-induced predicament, the recent business behavior of ABS has dented its corporate reputation. ABS was sanctioned by the Philippine Stock Exchange (PSE) for failure to comply with several provisions of Article VII of the Consolidated Listing and Disclosure Rules. According to the PSE, ABS violated Section 1 mandating public companies to adhere to the updated, complete and accurate disclosure of material public information, Section 4.1 requiring public companies to disclose material public information within 10 minutes from receipt of the details, Section 4.2 prohibiting public companies from disclosing material public information to anyone unless such are about to be disclosed to the PSE, Section 4.3 instructing public companies to report any developments that could have a material impact on financial standing, market position and share prices, and Section 16 directing public companies to update prior statements made erroneous by subsequent events within 10 minutes from receipt of the details. The updated, complete and accurate disclosure of material public information is considered as mandatory reportorial requirements by the PSE and the Securities and Exchange Commission hence its prompt submission is expected by the capital market stakeholders which include but not limited to traders, analysts, investors, managers and regulators. But these basic disclosure requirements are not basic for some public companies that cannot submit them due to a broad range of unacceptable excuses that they blame on systematic risk or risk inherent to the market and unsystematic risk or risk specific to the company. Although we expect them to use unsystematic risk or risk specific to the company as an excuse, we believe that ABS is a rule breaker and has no one to blame but themselves.