Lessons for IPO issuers from FILRT

The pandemic has been creating volatility in stock markets since it first began last year. As we continue living in everchanging times, it may not be as easy for businesses to make huge decisions such as publicly listing their companies, due to potential risks it entails.

Filinvest REIT Corp. (FILRT), however, took the leap and pushed through with its initial public offering (IPO) even during a time with the local stock market was on a downtrend and while the country’s capital was under an enhanced community quarantine (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,” Filinvest Land, Inc. (FLI) president and CEO and FILRT chairperson Josephine Gotianun-Yap said during the virtual IPO listing ceremony.

On the day of its IPO launch, the Philippine Stock Exchange (PSE) index fell by 1.67 percent. However, FILRT was able to close above its IPO price of P7.00 per share, closing at P7.02 on its first trading day.

According to COL Financial Group chief equity strategist April Lee Tan, an insight that can be gained from FILRT’s successful IPO is the importance of having good assets and attractive valuation.

“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,” Tan said.

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 P48.5 billion.

Tan also highlighted the important role of retail investors in the success of FILRT’s launch as it was also well-received by more than 8,000 retail investors.

“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,” Tan said.

Despite the strong reception from retail investors, FILRT’s offering mostly drew institutional investors.

Gotianun-Yap said there was strong domestic demand from qualified institutional buyers (QIBs), especially among insurance and  bank trust accounts who look at the long-term potential of an offer.

Moreover, FILRT president Maricel Brion-Lirio also stressed that the sustainability features of some of the developments in FILRT’s portfolio also attracted investors, who adhere to the Environmental, Social, and Governance (ESG) principles of investing.

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