IPO Review: MREIT (MEG REIT) | AB Capital Securities

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MREIT, Inc.
Raising PhP27.3B from REIT offer
BPO-centric asset vehicle

Overview

MREIT, Inc. is a full-owned subsidiary of Megaworld Corporation. The assets to be injected in the REIT company include assets in estates in the 18.5Ha property in Eastwood, Mckinley Hill (50Ha), and Iloilo Business Park (72Ha). The total 10 properties in the REIT company will comprise of an aggregate GLA of 224,430 sqm, with an appraised value of PhP49.3B, or equivalent to an NAV of PhP19.47/sh, a 13% premium to the indicative offer price. Nevertheless, this offers investors recurring dividends from its rental income.

Summary offer
MREIT is looking to sell as much as PhP27.3B from the offering, selling 1.078B shares, with an over-allotment option of 161.7M shares at a price of up to PhP22/sh. Post-offer, Megaworld Corp. will end up with a 50.6% ownership, leaving a public float of 49.4%.

Dividend yield
At an indicative offer price of PhP22/sh, MREIT will have a dividend yield of 4.1-4.6% for 2022E, and 4.5-5.0% for 2023, lower than its peers in the country.

Recommendation
Despite the low dividend yield of MREIT compared to its local as well as its regional peers, it provides an alternative to other yielding assets. The NAV of the preliminary injected assets is only at PhP19.92/sh. At the low end of the range, this will only translate to a dividend yield of 5% based on 2023E earnings. Rating- Neutral.

Overview of MREIT, Inc.

MREIT, Inc. is a full-owned subsidiary of Megaworld Corporation. The assets to be injected in the REIT company include assets in estates in the 18.5Ha property in Eastwood, Mckinley Hill (50Ha), and Iloilo Business Park (72Ha). The total 10 properties in the REIT company will comprise of an aggregate GLA of 224,430 sqm, with an appraised value of PhP49.3B, or equivalent to an NAV of PhP19.47/sh, a 13% premium to the indicative offer price. Nevertheless, this offers investors recurring dividends from its rental income.

SOURCEAB Capital Securities
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