Exercise* Those Rights: Robinsons Land


Investors should not think twice about exercising their rights

Last week, Robinsons Land, a ₱108.3 billion Ortigas-based real estate developer, released its final terms for its stocks rights offer of 1.1 billion shares.

According to the 37-year-old mall/hotel developer, the majority of the proceeds will be used to finance land acquisitions in various parts of the Philippines.

Reminder: this offering is for Robinsons Land shareholders before to January 26, 2018.

Robinsons Land will offer its shareholders ONE ₱18.20 per 3.7217 existing share.

So if one had 100 shares of Robinsons Land, he has the right to purchase roughly 27 more Robinsons Land shares at a price of ₱18.20–a good 14% discount from the company’s stock price of ₱21.15 at the time of writing (1/28/2018; 12pm CST).

The offer will start on February 2, 2018, to February 8, 2018.

There could be no other reason that Robinsons Land would not be able to raise its targeted amount of ₱20 billion (1.1 billion shares multiplied by ₱18.20/share). JG Summit, a Gokongwei-controlled Philippine company, owns 61% of Robinsons Land will purchase the remaining unclaimed offers, followed by BPI Capital–Robinsons Land selected underwriter.

At ₱18.20/share, those investors who would be exercising their rights would technically be paying at a price-earnings multiple of 15.9x, which is lower than the average multiple Robinsons Land had in the past five years (~19x). Also, this price indicated a price-book value of 1.44x (vs. industry’s 1.73x).

In review, Robinsons Land actually delivered decline in revenue (negative 3% or ₱476.7 million lower compared to year-earlier period) in its recent nine months of operations that ended in September 2017.

In particular, Robinsons Land experienced 17% decline (~₱1 billion drop) in sales of its Residential division, which according to filings develops and sells residential condominium spaces, as well as high-end horizontal residential projects.

The company’s residential division represented ~30% of Robinsons’ business.

Other than that, the company was able to grow its book value by 5% since December 2016 to ₱65.7 billion. Robinsons also raised its overall debt by ₱7.3 billion to ₱46.7 billion (0.71x debt equity).

Investors should keep an eye on Robinsons’ residential division if it still fails to stop declining as this could mean a slowdown on a major part of the firm’s business.

In the past three years, the company raised ₱20 billion in financing activities and generated an accumulated free cash flow of ₱14.3 billion.

In estimation, I put a fair value of ₱18/share. COL Financial, a reputable broker/advisor, placed a fair value of ₱31.05/share (with an early 9.5% to 12.1% reduction estimates post share offering) having stated that Robinsons’ residential segment has already turned positive on a quarter-quarter comparison.

So yes, if you are a current shareholder of Robinsons Land, use your right to buy more shares not just to prevent your ownership diluted but also to support the growing company.

Disclosure: I do not have shares of any of the companies mentioned.

*Earlier title of this article was Practice Those Rights: Robinsons Land.

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