Why I did not buy me some Double Dragon

First off, congratulations to those who placed reservations early and got some DD's. Enjoy the big profit.

Because of my day job, Ive been aware of Double Dragon early. About two years ago, when I first saw their newly-built office in Ortigas, I thought the company's name is tacky and un-creative. I've played with the famous Nintendo game in the 80's--

I thought it was not right to name buildings after two musclemen punching, kicking, and wielding knives in low pixel.

There's also a chance that DD is just Injap's half-hearted attempt to find a place to put some of his windfall from the sale of Mang Inasal to Jollibee. He needs a company to spend his time on as well, since Jollibee executives have already taken over the day-to-day of Mang Inasal.  It is also hard to think of a newcomer properties company catching-up with the supreme landbanks already established by ALI, MEG, SMPH, and even the second liners like FLI and DMC.

It was late last year, during the time when DD applied for its intended IPO, that I discovered that Tony Tancaktiong was the 2nd dragon. One November to December, we also saw Tony disposing some Jollibee stocks, possibly to add to the war chest of DD, and emphasize his seriousness to support this co-venture.

In any case, I thought Injap, his consistent flat top, and persistence would still be the prime mover of the company. Everyone is saying that Injap can do to DD what he did with Mang Inasal.

I know that Mang Inasal became successful because Injap and MI--
1) found a niche (grilled chicken) and pushed it
2) he maintained the gross profit for his commissary so low to maintain the low selling price to end customers. Believe me when I say that the cost of operations and quirks in preparing Mang Inasal's chicken (with barbecue sticks and all) is more complicated compared to Chickenjoy. The risk on lapsing (the chicken is not shipped frozen, only chilled) is also high, and the suppliers limited (of chilled and dressed chicken in general). But all these considered, he stuck to pricing that's competitive against Cjoy. Mang Inasal commissary was not earning much from store operations.
3) Given the ruling objective to expand fast, he also maintained the franchise cost of MI very low. Any OFW can establish a store, and celebrities bought multiples as well. When Jollibee acquired Mang Inasal, many JFC managers are surprised to see a 95/5 franchise/company owned ratio. It got this way because of almost dirt-cheap franchise cost.
4) He is a marketer of his brand, and even of his own personality. There was a time that Injap accepted all invites for interviews and features in TV shows and magazines, however small. He espoused both Mang Inasal and his upbringing and wok ethic in these same venues. All franchise expos, he was also always present.
5) He's hands-on and wants to understand the ins-and-out of the operations of his company. Injap deep-dives on a particular aspect (like studies on store locations) if that's what's needed.

There was speculation (and there are reasons to believe this) that, early on when he was jumpstarting Mang Inasal's expansion, Injap's mother end-in-mind with Mang Inasal was to sell it to JFC. So the aim was to make Inasal very attractive for buyout, rather than to make it very profitable as his own business for long term. When JFC took over the books, annual operating income is not very attractive compared to other business units that the conglomerate already have (Chowking, Red Ribbon, Greenwich, et al).

Now the questions are: would selling again be the end-in-mind of Injap for DD? And how can he possibly apply these same strategies to properties? I thought that he will implement #1 (low cost) first. The apparent niche is probably condos in emerging provincial cities and lower-cost parts of Metro Manila. As is clear, Injap is willing to gamble very low margin for fast expansion. Small City Malls appear on the right track. But what about housing?

Of course we cannot personally visit their projects in Iloilo to confirm anything, so the best thing to check their first project in the Metro. This is the condo beside La Salle Taft. DD bought this from RFM.

I actually inquired at their sales office. I was presented with a 90% pre-sold units, 100% sold parking slots... these are expected since this project is already standing 7 years. The main thing though that I was interested in is the price. Considering #2 strategy and add to the consideration that the place is not in Ortigas or Makati, I was expecting the pricing at at least 20% off the going rate in business districts. But no, the place is still selling at 105 - 120 K PhP per sq. m., same with the pre-selling rates of RLC's projects in Ortigas (at same turnover dates!) Now, this might be because Injap wanted to recoup whatever purchase cost that he handed to RFM early. Even then, this is still one factor that dissuaded me.

I had the opportunity to buy as much as 50000 shares through channels available to me, because of my day job. But I gave it up also because of the 2 PhP pricing. I thought that P/B was too aggressive at that level. And during the time of offer, our market is just moving sideways with bias towards bearish.

Now, the pros that I shouldn't have ignored are the following:
1) the float being offered became very small especially after other members of the Tan family bought up chunks to support their kuya. The supply in this case became very small. Any up tick in demand will surely jack-up the price.
2) There's a chismis that Tony was 'encouraged' to let go of the CEO reins to his brother because of an extramarital affair with the Korean owner of Caffe Ti Amo, a company that JFC acquired. There might be doubt expressed by the board that his judgment on acquisitions is being mired by women at this time. And that Tony just wants to have something to be busy with after relinquishing his role as JFC's CEO. But in the end, I should have put more weight on the belief that Tony will not bet his money without having a say and having his own friends and confidante (who helped grow JFC). He wont get in to DD without confidence, and I should have entered DD with the same confidence.
3) And that Tony's own brand name is immediately a big attraction ( a 'brand' by this time) around the market.
4) That Injap's plan from the very start, this time around, is to have a listed, solid, and stable company under his name. And he will use his marketing savvy towards this goal, not in the same track as Mang Inasal. And that he have to show profit upfront; cant use the low-cost strategy at IPO (the PSE is not NASDAQ where technology companies can show losses yearly in exchange for growth prospects).

On hind sight, I should have taken half of what was readily available to me, or at least grabbed some shares at opening. I bet the same amount anyway on speculations with worse companies from time to time. But no regrets, since I made my decision based on factors that I considered and thought of fully.

And moving forward, Im now part of the cheerers of Double Dragon. I know the Tan brothers as humble, pays right, rationale thinkers, relies on professionals, and not short-changers to their employees and customers. I also dont care about Tony's one affair; there are worse CEO's in this area. And Im willing to bet that in his case, the Caffe Ti Amo girl was the one who pursued him, he just relented. A man can only resist temptations to a degree :- ). If that inadvertently allowed him more time in his hands, then DD will benefit his focus.

Injap, on the other hand, is persistent and diligent enough with his pursuits. We all hope he's still as hungry to succeed with this 2nd venture.

I intend to place a long-term position in Dragon once the price becomes stable. I'm going to be interested as well on their next projects in Manila that they will start from scratch (not just bought from RFM). I'd like to see a niche that DD will try to find and position to.

Go Double Dragon!