By Ana Olivia O. Tirona, Researcher
MEDILINES Distributors, Inc. underwhelmed last week after its debut disappointed, but investors remain hopeful as healthcare market expectations continue to grow.
A total of 668.16 million Medilines shares worth of P1.15 billion were traded between Dec. 6 to 10, making it the fourth actively traded stock last week, Philippine Stock Exchange (PSE) data showed.
Financial markets were closed on Dec. 8 in observance of the Immaculate Conception of Mary holiday.
The distributor of medical equipment closed at P1.64 per share on Friday. This was down 28.7% from its initial public offering price of P2.30.
“We think that the price action in MEDIC’s IPO (initial public offering) was mainly driven by bearish sentiment brought about by the [coronavirus disease 2019] Omicron variant. Risk appetite understandably receded in past weeks as uncertainty on forward outlook rose,” China Bank Securities Corp. Research Associate Zoren Philip A. Musngi said in an e-mail, referring to Medilines’ ticker symbol MEDIC.
“Other factors that have likely contributed to the price movement are: (1) perceived overvaluation at the offer price, and (2) lack of a stabilization fund/overallotment option to help support prices,” he added.
Founded in 2002, Medilines focuses on distribution of medical devices utilized for diagnostics imaging, dialysis, and cancer therapy. It carries brands such as Siemens, B. Braun, and Varian.
The company is owned by Virgilio B. Villar, the younger brother of real estate tycoon Manuel B. Villar.
Medilines posted an IPO price of P2.30 last Tuesday, which drastically fell by 30% — the local bourse’s maximum volatility floor — to P1.61 at closing.
Net proceeds of the company’s primary offer of 550 million shares will be used to finance the working capital for the procurements of its existing products, for building its medical consumables inventory, and to repay debt.
“While the reason for its plummet is as good as anyone’s guess, the highly anticipated IPO was said to be oversubscribed by long-only domestic institutional investors according to [Philippine National Bank], but many were expecting a similar performance to AllDay Mart’s stellar listing day just last month,” Timson Securities, Inc. Trader Jervin S. De Celis said separately in an e-mail.
The stock’s volatility on its second market day attracted some short-term players for easy gains, Mr. De Celis said.
“While I still have no profit forecast for Medilines, the company is in an industry with bright prospects and when the company books consistent profit in the years to come, then the expensive valuations may adjust to a healthier level,” he added.
Medilines booked a net income of P100.05 million in the six months to June, a turnaround from the previous year’s P13.04-million net loss. During the same period, revenues grew by almost fourfold to P815.09 million.
Mr. Musngi remains to have a positive outlook for Medilines while there is continuous economic growth as well as high expectation and demand for healthcare amid the coronavirus disease 2019 (COVID-19) pandemic.
“We expect selling pressure to remain high in MEDIC over the near term as investors will likely take any rally in the issue as an opportunity to lighten/exit the stock. Immediate resistance is at P1.70 while support is at P1.50,” Mr. Musngi said.
Likewise, Mr. De Celis sees “bright prospects” for the healthcare company.
“Good valuations may attract inflow of funds and may result in price appreciation so, I guess, there is still hope for MEDIC holders to recover in the future” he said.
When asked about their forecast levels, Mr. De Celis pegs a “strong” resistance of P2.00 to P2.12.
