Corporate News

By Keith Richard D. Mariano,

Strong local demand for Wilcon Depot IPO

Posted on March 06, 2017

WILCON Depot, Inc. is receiving strong demand from local investors for its initial public offering (IPO) amounting to P7.92 billion, making an international pitch unnecessary.

The home improvement and construction supplies retailer will only market the 1,393,906,200 common shares comprising its IPO within the country, founder and chairman William T. Belo told reporters last Tuesday.

BDO Capital & Investment Corp., one of the lead underwriters, noted separately that demand from local investors appears enough to cover the entire offer priced at a maximum of P5.68 per share.

“The demand is strong,” BDO Capital President Eduardo V. Francisco said in Filipino, noting that Wilcon will nevertheless consider the outcome of an ongoing bookbuilding in setting the final price of the maiden share sale.

The company tapped BDO Capital to underwrite the IPO together with First Metro Investment Corp., which also serves as issue manager and bookrunner. RCBC Capital Corp. and Penta Capital Investment Corp., meanwhile, were appointed co-lead underwriter and participating underwriter.

Wilcon intends to run the offer on March 20-24 and debut on the Main Board of the Philippine Stock Exchange (PSE) under the ticker symbol “WLCON” on March 31, based on the latest version of the prospectus.

The Securities and Exchange Commission (SEC) on Feb. 23 approved the maiden share sale that will pass 34% of the company’s 4,099,724,116 common shares to public hands.

Frank Gerard J. Barboza, trader at AP Securities, Inc., cited the “solid” balance sheet and “strong growth potential” of Wilcon with the expansion of its store network following the fund-raising exercise.

At the maximum price, Wilcon expects to net P7.58 billion from the IPO. It intends to disburse P6.11 billion for store network expansion until 2021; P972.4 million for debt repayment until 2018; and P500 million for general corporate purposes until 2018.

The company plans to open 29 stores within the next five years in Cavite, Butuan, Zamboanga, Iloilo, Tacloban, Cabanatuan, Bicol, General Santos, Davao, Lucena, Isabela, Tagum, Tuguegarao and Surigao.

As it expands, Wilcon looks to sustain a double-digit improvement in sales and earnings. In the first nine months of 2016, it posted a 10% year-on-year increase in net sales to P11.73 billion, while its net income surged 50% to P483 million.

In an earlier interview, Wilcon Chairman William T. Belo and Chief Financial Officer Mark Y. Belo had estimated the company’s net sales to have increased by 7% to more than P15 billion last year and net income by at least 67% to more than P900 million.

Wilcon should manage to achieve a 15% jump in net sales to around P18 billion by yearend and sustain a 13-15% growth over the following four years, as proceeds from the IPO would allow the company to accelerate its expansion, Mr. Belo had noted.

“However, I see headwinds primarily in its ability to grow come a higher interest rate environment as most of the market serviced by Wilcon is from the robust real estate market,” Mr. Barboza said in a mobile phone message.

“A slowdown on construction expansion and a possibility of the BSP (Bangko Sentral ng Pilipinas) running on lower reserves could signal a bottleneck for outperformance,” Mr. Barboza added, assuming tighter monetary policies that may restrict construction firms’ growth prospects.

The trader further noted a fair valuation of Wilcon’s common shares point to “a more introductory price” within the P4.50-P5 range.

Asked whether Wilcon should consider pricing the IPO below the maximum, Mr. Francisco said: “We’ll see because we’re still doing the bookbuilding... but if there’s going to be a demand and then we’ll just see.”

More companies are seeking to join the PSE this year. Just last week, Eagle Cement Corp. sought approval from the SEC to offer 575 million common shares to the investing public for a maximum of P9.20 billion in May.

The cement manufacturer follows the application of homegrown property developer Cebu Landmasters, Inc., which looks to raise P3.8 billion in May.

Also pending before the SEC are applications from Bermaz Auto Bhd, Pure Energy Holdings Corp., Xeleb Technologies, Inc. and Audiowav Media, Inc., which proposed to raise P1.24 billion, P1.58 billion, P751.8 million and P2.66 billion, respectively.

Beverage maker The Big Chill, Inc., meanwhile, announced a plan to debut on the PSE with a P600-million maiden share sale.