PLC’s present market valuation yields a cash dividend rate of around 16% but that dividend distribution yield is based on last year’s net income and cash generation.
For the first half of 2020 (1H 2020) when PLC faced the full brunt of the COVID-19 pandemic restrictions, it managed not to lose cash to operations. PLC generated a small cash from operations of 122.8 Million Pesos despite suffering a net loss of 27.1 Million Pesos. That would be a testament to the durability of PLC’s business model.
Now that Manila casinos are allowed by the gaming regulator PAGCOR to operate at 30% capacity, it can now be assured that PLC will not bleed cash during these times and its cash balance of 2.1 Billion Pesos is protected. It also helps that PLC is debt free.
For next year’s dividend, PLC can distribute some of its 2.1 Billion Pesos cash balance but PLC could also be prudent and not distribute cash dividends at all.
The issue of PLC is the speed of the country to getting back to pre-covid level of economic activity. Without going back to the pre-covid level of economic activity, PLC might not be able to generate enough cash for distribution to shareholders although it is already quite certain that it will not bleed cash to operations as long as there is operations albeit minimal.
For long-term and dividend investors, it is a good opportunity to lock-in into a yield of 16%. The 16% yield seems protected once we are back to pre-covid level of activities.
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 Premium Leisure Corporation.