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By Keith Richard D. Mariano

Cemex’s maiden listing provides bright spot amid bourse’s retreat

Posted on July 19, 2016

CEMEX HOLDINGS Philippines, Inc. showed strength on its first day on the Philippine Stock Exchange (PSE), holding out against a profit taking that generally pulled down equities on Monday.

Construction-related firms are expected to grow on the back of the government’s planned hike in infrastructure spending.
Shares in the cement producer closed at P11.10 apiece, rising 34 centavos or 3.16% above its initial public offering (IPO) price of P10.75. This brought the company’s market capitalization to P55.9 billion.

The Philippine unit of Mexican cement and construction materials company Cemex S.A.B. de C.V. traded above its listing price throughout the session, opening at P11.20 and moving from P11.36 to P10.80.

Investors traded 264.9 million shares in Cemex Holdings for P2.94 billion or more than a third of the P8.70-billion total value turnover posted by the market after 1.56 billion shares exchanged hands.

Cemex received strong interest from foreign investors, accounting for P331.68 million or about 67% of the total P497.9-million net foreign buying recorded on Monday.

“I’m very happy with the price because for a large IPO, it’s not like you will see fluctuations because you’re moving P50 billion worth market capitalization,” Eduardo V. Francisco, president of lead underwriter BDO Capital and Investment Corp., told reporters after the listing ceremonies in Makati City on Monday.

The newly listed stock rode on prospects for higher government spending for infrastructure development under President Rodrigo R. Duterte’s administration, Nisha S. Alicer, chief equity analyst at DA Market Securities, Inc., said in a telephone interview.

“Some bullish news in the infrastructure/construction sector by the current administration helped in CHP’s first day of trading,” AP Securities, Inc. equity trader Frank Gerard J. Barboza noted separately, using the company’s stock symbol.

But while it defied the general market retreat, Cemex failed to impress when compared with the performance of Golden Haven Memorial Park, Inc. that reached its ceiling price on the first day.

Ms. Alicer described Cemex’s finish in Monday’s trading as “modestly higher” from the listing price although “much slower” than Golden Haven.

“Cemex had little to show for a rockstar performance if you compare it to the previous issue that just had its IPO: Golden Haven. The main issue was of course the size of its market capitalization and also a relatively expensive price-to-earnings ratio,” Mr. Barboza explained.

Cemex offered 5,195,395,454 shares, representing 45% of its total issued and outstanding common shares in a maiden share sale that was oversubscribed several times. The offer included a stabilization option for 304,947,124 shares.

“The investors, especially international investors, are there for the long term. You buy because you believe that investments in public infrastructure will accelerate, the government will buy more cement, your profit will increase and, therefore, the market cap will become bigger, so you make money from the income this will make and the price appreciation,” Mr. Francisco said.

Cemex’s offering is the first IPO made after country’s June 30 leadership change and is the largest conducted on the local bourse, so far, since Robinsons Retail Holdings, Inc. raised P28.11 billion in 2013 and SM Investments Corp. generated P26.25 billion in 2005. Cemex raised P25.13 billion from the IPO that had two tranches of 70% for international offering and 30% for locals.

Cemex President and Chief Executive Officer Pedro Jose Palomino said the company decided to make an international offering “because of the size of our IPO and also because we realized that there is strong interest in the financial economy for the Philippines.”

“The Philippines nowadays is considered as a shelter for money instead of a risky country. Proof of that is we received a very, very positive acceptance both internationally and domestically,” Mr. Palomino told reporters after listing ceremonies.

Cemex will use an estimated P23.785-billion net proceeds from the IPO to settle short-term debts, allowing the company to finance its $300-million expansion plan for its Solid Plant in Antipolo City, Rizal using internally generated funds, Mr. Palomino noted, adding: “After which, our leverage ratio will be around 2.6 to 2.5 times total debt to [earnings before interest, taxes, depreciation and amortization].”

“This ratio, together with the capital structure of our company, will allow us to finance with our own means the next expansion that we are targeting in the Philippines.”

Cemex intends to invest $300 million until 2019 to nearly double the capacity of the Solid Plant to 3.4 million metric tons (MT) from 1.9 million MT and bring the company’s total capacity to 7.2 million MT from 5.7 million MT.

Mr. Palomino said Cemex preferred to expand its plants instead of importing from its operations abroad, explaining: “We feel that imports... do not generate jobs, they do not provide taxes...”