AREIT debuted in the market with a 27 per share public offering. At that time we said that buying AREIT at 27 could inflict capital loss as the market will have to price it down to set the appropriate yield for AREIT which could be around 5.5% to 7%.
At the time AREIT was listed in the market, dividends were not set, so we anticipated that AREIT will have to move down towards a zero dividend yield until dividends are declared. AREIT indeed plunge to a low of 24.10 a share.
AREIT eventually declared dividends and set a dividend policy. At the current level of dividends and at the current price of 25.60 a share, AREIT’s yield is at 4.82%. AREIT may still move downward towards a yield of 6% to 7% inflicting holders further capital loss.
Double Dragon Properties Corp. (DD) had issued cumulative, non-voting, non-participating, redeemable at the option of DD, convertible at the ratio of 1 preferred share to 1 common share, perpetual Preferred Shares now trading as DDPR. DDPR is currently trading at a premium at 103.40 a share. Despite trading at a premium DDPR’s dividend yield is still at 6.38%.
As of the end of June 2020 (1H 2020), DD’s consolidated total assets stood at 118.25 Billion Pesos while total equity reached 47.86 Billion Pesos. Debt-to-equity now stands at 0.94x far below its loan covenant debt-to-equity cap of 2.33x which translates to an unutilized debt capacity of 66.47 Billion Pesos.
DD just recently successfully concluded last July 21, 2020 its maiden US$75,000,000 5-
year dollar bond issuance which is now listed in the Singapore Exchange Securities Trading
Limited (SGX) and trading above par. The fresh funds from the bond offering would bring its total consolidated cash balance to almost 8 Billion Pesos, well above its operational requirements for the coming years. This means that dividend for DDPR is secured. Default on the DDPR dividends could damage the credit of DD so DD will have to secure the dividend payment of DDPR. No dividends to the common share of DD will be declared and paid unless DDPR dividends are distributed.
Disclaimer: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent perspective. Accuretti Systems Inc. does not hold any shares of AREIT and Double Dragon Properties Corp.