Corporate News

By Krista A. M. Montealegre, Senior Reporter

Next on PSE: Consumer brand IPOs

Posted on March 23, 2015

IN AN era of large-scale initial public offerings (IPOs) becoming a rare event, investment banks are now chasing the next best thing to join the capital markets: the consumer brands.

KSK Food Products is the company behind flavored corn snack “Boy Bawang.” Consumer companies like KSK are the future initial public offering candidates, according to investment banks. -- ILOVEBOYBAWANG.COM
Consumer brands are riding the household spending-driven Philippine economy -- projected to grow by 7%-8% until 2016 -- so they are attractive targets for investment banks in search of companies to convince about going public.

As an example, the likes of companies behind Pan de Manila, Mister Pullman and Boy Bawang are considered “perfect candidates” to access the equity market and have the potential to become noteworthy names in the Philippine capital market, First Metro Investment Corp. (FMIC) President Roberto Juanchito T. Dispo said in an interview.

The Philippines has a large pool of emerging companies with data from the Department of Trade and Industry showing 99.6% of registered enterprises are SMEs that provide 60% of the country’s total employment.

“Lamentably, the Philippine capital market is dominated by a handful of big matured conglomerates,” Mr. Dispo said.

“For the Philippine capital market to progress, we need to expand it, broaden it, deepen it and that can be achieved only by identifying new entrants to the market.”

Philippine Stock Exchange (PSE) President Hans B. Sicat believes now is the perfect time to bring these SMEs public with the local stock market scaling new heights, a reflection of investor confidence on the domestic economy.

“The issue for an expanding economy is it tells the smaller companies that there are no constraints to growth,” Mr. Sicat said. “You can position yourself for faster growth.”

Mr. Dispo cited the story of Puregold Price Club, Inc., which made its debut on the stock market in 2011 when the supermarket operator had less than 100 stores.

The Lucio Co-led firm has more than doubled its store network to 233 stores at end-September 2014, or three years after listing.

“Now, it’s competing head-on with SM. They start small and eventually graduate to become a conglomerate,” Mr. Dispo said.

While there are still several big companies that have yet to entertain listing prospects, investment banks like FMIC and BDO Capital & Investment Corp. are running after SMEs to help them make their PSE debut.

“We’re talking to a lot, encouraging a lot of them,” BDO Capital President Eduardo V. Francisco said in a phone interview. “There are a lot of smaller companies easily making P100 million a year. There are more than 100 of those companies.”

For its part, FMIC has established an incubator program whereby companies with good potential are identified and prepared for listing, Mr. Dispo said.

“We are currently data mining the client base of [Metropolitan Bank & Trust Co.] and the objective is to identify SMEs with very good business models, profitable, viable,” he said. FMIC is the investment banking arm of Metrobank.

This year, FMIC is set to “harvest” the fruits of that program with the planned listing of property developer Profriends Group, Inc. in the first half of the year.

While it has taken quite a while to convince family-owned companies to go public, more and more of them are warming up to the idea.

“The usual pitch in the past will be savings and taxation, but that has changed over time,” Mr. Dispo said.

These tightly-held companies realize now that going public “assure them professional management will be put in place” and “there will be transparency and adherence to regulations,” he said.

Not all companies, however, are attracted to enter the stock market.

Take for example International Family Food Services, Inc. (IFFSI), operator of the Shakey’s pizza brand.

IFFSI Chief Executive Officer Vicente L. Gregorio said in a phone interview that going public is “not an option in the near future,” with the liquidity in the financial system enough to finance its operations and expansion.

“There is added pressure and challenge to go public. You have to continuously show growth but sometimes it’s a trap -- you make decisions that are not considered prudent and it leads to major problems,” Mr. Gregorio said.

Several big corporations like United Laboratories, Inc., the country’s biggest pharmaceutical company, and Lamoiyan Corp., the firm behind the Hapee Toothpaste brand, have yet to entertain listing prospects in the stock market.

“There is resistance. These are family-owned corporations. They want to keep it private. Some will tell you they have so many resources,” Mr. Dispo said.