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By Krista A. M. Montealegre, Senior Reporter


IPO hopefuls expected to face valuation strain




Posted on November 09, 2015


METRO RETAIL Stores Group, Inc. reopens today the initial public offering (IPO) tap, but companies eyeing a stock market debut towards yearend could be in for a bumpy ride with investors unwilling to pay a high premium.

It will be a make-or-break week for D.M. Wenceslao and Associates, Inc. and Datem, Inc. in terms of deciding if they will push through with their maiden share sales that will raise up to P21.7 billion and P4.66 billion, respectively.

“I think Nov. 11 is the next PSE (Philippine Stock Exchange) meeting, but I think that’s an important date. If we wait until the next one in November, it’s harder to do it by the end of the year unless there’s a special meeting,” Reginaldo Anthony B. Cariaso, chief operating officer of BPI Capital Corp., told reporters during the company’s investor briefing in Makati City on Friday last week.

BPI Capital was tapped as one of the underwriters of the two IPOs. D.M. Wenceslao and Datem have obtained the approval of the Securities and Exchange Commission (SEC) to conduct their maiden share sales, but they have yet to secure PSE’s green light.

“We’re still going through the regulatory process. We’ll know in a couple of weeks,” D.M. Wenceslao Director Delfin “Buds” C. Wenceslao said in a mobile phone message.

In a separate message, Datem President Levy V. Espiritu said: “Datem is still continuing to make the necessary presentations to ready for the IPO listing.”

The schedule is getting tight for companies to access the equity market with the country hosting the Asia-Pacific Economic Cooperation meetings next week. Add to that the market volatility ahead of the Federal Reserve policy meeting in December, PSE Chief Operating Officer Roel A. Refran said in a phone interview.

Marami pang nakapila (There are many still in line). We’re processing them,” Mr. Refran said.

The next window of opportunity for companies to tap the market may open in the first quarter of 2016, right before the national election in May, he added.

“That’s something we have to talk to the company about, the timing. That (first quarter) will probably be the next window, but no guarantee. It’s something that the company can consider, but it depends on market conditions and other factors,” BPI Capital’s Mr. Cariaso said.

Should IPO hopefuls secure requisite approvals, pricing the deal will be the next challenge as investors demand steep discounts.

Lower-than-expected valuation had prompted former Ambassador Alfredo M. Yao to defer the planned $200-million secondary share sale of Mazy’s Capital, Inc. -- a transaction that was targeted to boost liquidity for Macay Holdings, Inc.

Cirtek Holdings Philippines Corp. and Metro Retail have pushed through with their share sales -- albeit at a significant discount to their ceiling prices -- despite strong investor demand. The maximum price was set prior to the devaluation of the Chinese yuan in August that sent global financial markets into a tailspin.

“Most likely the market will remain volatile, but as you can see, deals still get done. In Asia where deals have started to see the reopening -- if you look at Hong Kong, IPOs started to come out again -- I think Metro Retail is a good way of reopening the market for larger deals,” Mr. Cariaso said.

Metro Retail kicks off its P3.62-billion IPO today -- the largest so far this year -- with the offering of 905.4 million primary shares. This is less than the up to 920 million primary shares it had originally intended to issue.

“We believe the P3.99 per share offers good value for investors in the IPO. While there is enough demand to issue the entire 920 million shares, it was decided for the principals to keep more of the shares,” Mr. Cariaso said in a statement.

Despite only two IPOs this year from Crown Asia Chemicals Corp. (P222.78 million) and SBS Philippines Corp. (P1.16 billion), the bourse has seen capital raised from the stock market rising 28% to P168 billion as of Nov. 6 from P131 billion a year ago, Mr. Refran said.

“Realistically, kaya pa (we can still make it),” Mr. Refran said, referring to the PSE’s P200-billion capital-raising goal for the year.

“We see a very active fund-raising environment. I think we can recover some of the ground we lost in August in terms of activity.”