The U.S. IPO market has been strong over the last month. Despite the tepid performance of some of the recent IPOs, there's a strong investor appetite for new listings. Phillips Edison & Company has also filed for an IPO and is expected to list on July 15. What’s the forecast for the stock and should you buy the IPO?
Phillips Edison & Company is a Cincinnati, Ohio-based REIT that was founded in 1991. In 2017, Phillips Edison Grocery Center REIT I acquired the real estate assets and asset management business of Phillips Edison Limited Partnership and the current company came into being. In 2018, it completed the merger with Phillips Edison Grocery Center REIT II and acquired 86 grocery-anchored shopping centers in a deal valued at $1.9 billion.
Phillips Edison & Company IPO date and price
Phillips Edison & Company is expected to go public on July 15. The company plans to sell 17 million shares and has kept the IPO pricing range at $28–$31. It plans to give the underwriter an option to purchase an additional 2.55 million shares in the IPO.
Phillips Edison & Company went for a reverse stock split earlier this month and the IPO price adjusted for the one-for-three reverse stock would be between $9.33 and $10.33. Morgan Stanley, JPMorgan, and BofA Securities are the lead joint book-running managers for the IPO. The stock will list on Nasdaq under the ticker symbol “PECO.”
Phillips Edison & Company dividend yield
According to Phillips Edison & Company, it's among the largest owners and operators of omnichannel grocery-anchored neighborhood shopping centers in the U.S. It would raise up to $527 million from the IPO, which the company intends to use to repay its $375 million unsecured term loan.
Phillips Edison & Company also intends to use the funds for growth and could acquire more properties from the proceeds. The remaining funds might be used for general corporate purposes. The company intends to pay an annualized dividend yield of 3.5 percent, which is over twice the S&P 500’s current dividend yield.
Phillips Edison & Company properties
Phillips Edison & Company manages over 300 properties and 278 of these are fully owned by the company. At the end of March, it reported a 94.8 percent leased occupancy, which looks healthy. It also said that all of its properties are open for business and its foot traffic in March was higher than the monthly average in 2019.
Most of the company's portfolio is tilted towards neighborhood centers and has a diversified base of 5,500 tenants. These include retailers like Walmart as well as chains like Burger King and Starbucks.
Phillips Edison & Company earnings
In 2020, the company reported revenues of $498 million, which was lower than the $536 million that it reported in 2019. In the first quarter of 2021, Phillips Edison & Company reported revenues of $130.3 million, which were similar to what it reported in the same period in 2020.
Phillips Edison & Company reported a net profit of $117,000 in the quarter, which was sharply lower than the $11.2 million profit that it reported in the same period in 2020. The lower profits were partially due to a one-time impairment of assets.
PECO stock forecast
At the mid-point of the IPO price, Phillips Edison & Company would command a fully diluted market capitalization of $3.7 billion. This would mean a 2020 price-to-sales multiple of 7.4x. The dividend yield also isn't very exciting even though it looks safer than the high yield REITs. Overall, the stock could make sense for someone looking at an alternative to low-yield debt instruments.