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Tencent-backed game-streaming firm Huya launches $343-million follow-on offering

HONG KONG — Chinese game-streaming company Huya Inc., backed by Tencent Holdings Ltd, has launched a follow-on share offering of about $343 million to raise funds for investment in its content and e-sports partners.

Huya, which went public last year in New York, is part of a growing trend of Chinese tech companies returning to capital markets for cash soon after their initial public offering (IPO).

Huya is selling 13.6 million primary shares, the game-streaming firm company said in a stock exchange filing. At the same time, social media platform YY Inc. is selling 4.8 million of Huya shares, the filing showed.

Based on its closing price of $25.23 on Monday, the combined sale could raise as much as $464 million.

There is an over-allotment — or greenshoe option — of up to 15% for Huya’s share sale, meaning the firm could raise as much as $394 million if exercised. There is likewise a 15% over-allotment for YY’s stake sale.

Huya is China’s biggest live-streaming game platform, according to the offering prospectus, competing with Douyu which plans to go public in New York this year.

Huya’s shares have risen about 65% since the firm’s IPO in May, in which it raised $180 million.

Other companies from the 2018 IPO cohort returning for more funds include electric vehicle maker NIO Inc., video streaming company iQIYI Inc., e-commerce firm Pinduoduo Inc. and video platform Bilibili Inc.

Bankers are pinning their hopes for 2019 on additional capital raising through follow-on offerings or convertible bonds as the crop of Chinese companies looking to go public thins out after a blockbuster 2018 in terms of IPOs.

Huya will price its follow-on offering after New York markets close on Tuesday.

Citigroup, Credit Suisse, Goldman Sachs and Jefferies are joint bookrunners for the deal. — Reuters

AboitizPower secures $300-million loan facility

ABOITIZ Power Corp. has signed a facility agreement with four foreign banks to obtain a loan amounting up to $300 million, the energy company told the stock exchange on Wednesday.

“The proceeds of the loan will be used to partially finance the acquisition by AboitizPower of 49% voting stake and 60% economic stake in AA Thermal, Inc.,” the company said.

The lending banks are DBS Bank Ltd., Mizuho Bank, Ltd., MUFG Bank, Ltd., and Standard Chartered Bank.

AboitizPower signed the share purchase agreement to acquire the AA Thermal stake for $579.2 million on Sept. 26, 2018 with Arlington Mariveles Netherlands Holding B.V., an affiliate of the Ayala-led AC Energy, Inc.

The AA Thermal platform initially consists of AC Energy’s limited partnership interests in GNPower Mariveles Coal Plant Ltd. Co. and in GNPower Dinginin Ltd. Co. where AboitizPower, through its subsidiary Therma Power, Inc., already holds direct partnership interests.

The acquisition was approved by the Philippine Competition Commission on Feb. 28, 2019, and completion is based on satisfaction of the remaining conditions precedent.

AboitizPower bought AC Energy’s thermal platform as part of its goal to reach 4,000-megawatts (MW) in net attributable capacity by 2020 through a balanced mix strategy.

GNPower Mariveles is the owner and operator of an operating two-unit coal plant in Mariveles, Bataan each with a capacity of 316 MW. GNPower-Dinginin is developing a supercritical coal-fired power plant with two identical units with a net capacity of 668 MW each.

Once the transaction is completed, the acquisition will increase AboitizPower’s ownership in the Mariveles coal plant to 78.325%, and in the Dinginin coal plant project to 70%. The Mariveles plant has been operating since 2013

The first unit of the Dinginin plant is expected to go online in October 2019, data from the Department of Energy show. The second unit is expected to start commercial operation in June 2020.

On Wednesday, shares in AboitizPower rose 3.10% to close at P36.60 each. — Victor V. Saulon

ERC approves NGCP’s P644-M transmission line

THE Energy Regulatory Commission (ERC) has approved the application of grid operator National Grid Corporation of the Philippines (NGCP) to build a P644-million, 69-kilovolt (kV) transmission line project in northern Philippines to address the risk of overloading in the area, the agency said on Wednesday.

“The NGCP’s new La Trinidad-Calot 69 kV Transmission Line will address the expected transmission overloading and will serve as a back-up in times of contingency or a failure in the transmission system. The project involves the construction of a transmission line using new right-of-way and de-commissioning of some portions of the old circuit line,” ERC Chairperson and Chief Executive Officer Agnes VST Devanadera said in a statement.

The project aims to provide a single outage contingency as required in the Philippine Grid Code and improve the reliability and transfer capacity of the transmission line. The approval of the project is subject to optimization based on its actual use and/or implementation during the reset process for the next regulatory period, as stated in the Rules for Setting the Transmission Wheeling Rates (RTWR) and other ERC issuances.

Optimization involves the removal of redundant assets and over-capacity, including inefficient design and “gold-plated” engineering within the existing network. NGCP is also required to conduct competitive bidding when buying major materials for the proposed projects.

The agency said the remaining old or existing line that will be dedicated to Benguet Electric Cooperative, Inc.’s sanitary camp and Irisan should be reclassified as subtransmission asset and be divested to the distribution utility.

Under Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA), NGCP is required to seek ERC prior approval of any plan to expand or improve its facilities to meet its mandate to construct, install, finance, improve, expand, rehabilitate, and repair the country’s transmission system and the grid.

“ERC approved this application of the NGCP for its La Trinidad-Calot 69 kV Transmission Line based on our evaluation that the benefits of the project outweigh its cost. Electricity consumers will be benefited with this NGCP project in terms of having sustainable electricity and continued economic growth, not only in the Province of Benguet, but in the entire Luzon region,” Ms. Devanadera said.

On Monday, ERC announced the approval of NGCP’s Cebu-Lapu-Lapu transmission project, which is estimated to cost around P1.884 billion. The facility will form part of the planned 230-kV transmission backbone in the Visayas and will serve as an outage contingency to the existing Cebu-Mandaue-Lapu-Lapu transmission corridor. The project is to be implemented from 2019 until 2020. — Victor V. Saulon

An Easter Tea Party

THIS Easter, TWG Tea offers Tea Party Tea from the Haute Couture Tea Collection. With packaging delicately designed in hues of pastel green, gold, and emerald, with an Alice in Wonderland bunny serving tea, the tea itself is a rich, golden black tea inflected with notes of pineapple and Mediterranean orange. For the ideal afternoon fête, the Tea Party Tea is perfect served iced or hot, paired with an assortment of tea-infused macarons, tea cakes, sandwiches and petit fours. To set the mood, there is TWG Tea’s Tea Party Tea Scented Candle, an addictive perfume inflected with notes of sweet violet and handpicked raw green tea buds. The Tea Party Tea in the Haute Couture Tea Collection retails for P1,895 and the Tea Party Tea Scented Candle is P3,895. They are available at all TWG Tea Salons & Boutiques in the Philippines.

Amazon Go faces unlikely challenge from Portuguese checkout-free start-up

GROCERS, alarmed at Amazon.com Inc.’s rapid growth in Europe, are considering fighting back with the help of a tiny Portuguese start-up.

Sensei, a 16-month-old technology company based in Lisbon that’s backed by Germany’s Metro AG and Portugal’s Sonae SGPS SA, is pitching its technology to European supermarkets as they race the e-commerce giant to open the region’s first checkout-less stores.

Sensei says three major European grocers, including a UK supermarket operator, have tapped its technology for stores they plan to open this year — potentially getting in ahead of Amazon. The US behemoth has reportedly scouted space for its Amazon Go stores in London, but has not announced any openings.

Amazon operates 10 Go stores in Seattle, Chicago and San Francisco and plans to open as many as 3,000 more by 2021, people familiar with the situation have said. It also owns Whole Foods Market, which has seven stores in London. As consumers shop more online and Amazon pushes into food, Sensei sees an opening.

“Amazon Go is the best thing that happened to us,” Vasco Portugal, Sensei’s co-founder and chief executive officer, said in an interview. “It would have been much more difficult for us if they didn’t exist, because this is an emerging technology and they are putting pressure on the market to move in this way.”

AUTOMATIC PAYMENT
The start-up uses overhead cameras and artificial intelligence (AI) software to detect what’s picked off shelves and calculate the bill. It can also determine whether products are put down again anywhere in the store, so that shoppers aren’t charged. Customers check in with a payment card or mobile-phone code when they arrive, and the store automatically takes payment when they leave.

Sensei’s technology may be cheaper to deploy. It’s easier to retrofit existing stores with AI driven, camera-only approaches than with multi sensor systems, said George Lawrie, a principal analyst with research firm Forrester.

Checkout-less systems still face hurdles. Both Amazon and Sensei’s systems work only with packaged items, yet grocers are coming under growing pressure from environmental groups and politicians to cut back on plastics. Sensei says grocers could solve the problem with a small number of employees in the fresh-food aisles, scanning loose produce.

Sensei’s technology also requires retailers to provide examples of every item they sell, which they then photograph from multiple angles to train the computer-vision algorithms that underpin its software.

Sensei declined to identify the grocers it’s working with, but said they’re planning to open one store each to start, ranging up to more than 5,000 square feet. Portugal said the company is talking to about a dozen retailers in Europe. — Bloomberg

Banks’ rediscount borrowings increase in March

BANKS TAPPED more loans via the central bank’s rediscounting window in March, as credit for businesses and capital purchases rose during the period.

Peso rediscount borrowings totalled P17.406 billion last month, lower than the P20.433 billion loans secured in February, the Bangko Sentral ng Pilipinas (BSP) said yesterday. These debts are well above the P1.226 billion secured by lenders in March 2018.

The central bank’s rediscount facility allows banks to get hold of additional cash by accepting a lender’s collectibles as collateral for short-term credit. The lenders can then use the additional money supply — either in the peso, dollar or yen — to grant more loans for corporate or retail clients, as well as service unexpected withdrawals.

Rediscount credit lines amounted to P52.301 billion from January to March, versus the P7.036 billion secured by banks during the first quarter of 2018.

In a statement, the BSP said majority of the loans funded commercial credits at 43.97%, with over a third meant for imports while a tenth was used for goods trading. Loans for capital expenses accounted for 38.44% of the sum, followed by credit for other services (9.64%) and permanent working capital (7.95%).

The bigger rediscount lines come at a time when some financial firms are flagging tighter money supply in the system. However, central bank officials have stressed that such “tightness” is temporary as liquidity conditions remain sufficient.

On the other hand, the dollar and yen rediscount window catering to export firms remained untouched as of March, sustaining the trend for the past few years.

For April, rates for peso rediscount loans remain unchanged after the BSP’s Monetary Board voted to keep benchmark yields steady during their March 21 review.

Rediscount rates for peso loans stand at 5.3125% for loans maturing in 90 days or less, while those with a 91 to 180-day term are priced at 5.375%. These are based on the 5.25% ceiling of the interest rate corridor plus a premium.

New BSP Governor Benjamin E. Diokno said last month that the central bank needs to confirm a clear downward trend for inflation before they can pursue adjustments to the policy rate as well as the 18% bank reserve requirement.

March inflation slowed further to 3.3%, but policy makers said they remain watchful about rising world crude rates and the local dry spell for its impact to domestic prices.

Meanwhile, yields levied on foreign currency loans saw mixed movements for the month.

Dollar credit lines come with an even lower rate of 4.59975% for one to 90-day loans; 4.66225% for 91- to 180-day loans; and 4.72475% for 181- to 360-day loans, the BSP said.

Meanwhile, the rates for yen loans climbed to 1.936% for one to 90-day loans, 1.9985% for 91- to 180-day loans, and 2.061% for 181- to 360-day loans.

These reflect adjustments in the global financial markets, with the yields for US Treasuries having inverted by late March. — Melissa Luz T. Lopez

How PSEi member stocks performed — April 10, 2019

Here’s a quick glance at how PSEi stocks fared on Wednesday, April 10, 2019.

 

SC rules expanded IRA payments to start in 2022

THE Supreme Court (SC) denied a government motion to reconsider a key ruling that had expanded the basis for reckoning the size of fund transfers from the national government to local government units (LGUs).

But it also ruled that the new, expanded basis for calculating the LGUs’ share of national government revenue will first apply in 2022, thereby denying a “back pay” claim made on behalf of local governments that had sought to apply the new revenue-sharing formula retroactively to 1992.

Sitting en banc, the court voted 8-3 to deny the government motion to reconsider the original ruling on Internal Revenue Allotments (IRAs), a share of national government revenue which many LGUs depend on for a significant part of their operating funds.

The original ruling had held that LGUs’ IRA entitlement should include all government taxes, and not just those generated from internal revenue. The ruling could oblige the national government to increase its future IRA payments to LGUs, though the court also issued a separate ruling rejecting claims of IRA arrears dating back to 1992, when the revenue structure of LGUs was first defined by the Local Government Code.

The court denied a motion for partial reconsideration filed by Enrique T. Garcia, which had sought IRA back payments to 1992.

“In denying both Motions for Reconsideration, the Supreme Court clarified that the adjustment amounts of the IRAs of the LGUs is deemed effective only after the finality of the ruling of the Court,” SC Public Information Office Chief Brian Keith F. Hosaka said in a news conference.

“Hence, the adjustment amounts will be given to the LGUs starting with the 2022 budget cycle. The Court, in ruling such, reiterated the ‘operative fact’ doctrine,” he added.

On July 3, 2018, the court ruled that the “just share” of LGUs should be based on all national taxes and not only in the national internal revenue taxes.

This stemmed from the petition filed by former Batangas governor Hermilando I. Mandanas in January 2012, who was then a member of the House of Representatives for the second district of Batangas.

In the petition, he claimed that LGUs are owed around P500 billion, covering underpayments of the IRA between 1992 and 2012.

According to Section 284 of the Local Government Code of 1991, LGUs are entitled to a share of the national internal revenue taxes collected by the Bureau of Internal Revenue which include income tax, value-added tax, excise tax, and other taxes the bureau collects.

National taxes should also include remaining taxes collected by the government such as those raised by the Bureau of Customs, of which Mr. Mandanas claimed LGUs received no share. — Vann Marlo M. Villegas

Capital spending still driving economy — DoF

THE Department of Finance (DoF) said government investment in 2018 accounted for 5.4% of gross domestic product (GDP), continuing to drive economic growth and posting rates of return that more than pay off capital costs.

In an economic bulletin sent to reporters Wednesday, the DoF said capital outlays hit P940.4 billion in 2018, up from P685.3 billion a year earlier.

This accounted for 5.4% of GDP in 2018, which the department said was the highest in history.

“Investment expansion has been the driving force of the economy in recent years — pushing up the country’s competititiveness and making up for previous decades of underinvestment,” the Finance department said.

It added that based on data from 2010-2018, national government investment has been “very efficient” with rates of return exceeding borrowing costs, currently at 5.9% per annum based on the 25-year Treasury bond rate.

The DoF attributed the high return on infrastructure spending on the stringent evaluation process of the Investment Coordination Committee, which vets projects costing P2.5 billion. Its members include representatives from the DoF, the National Economic and Development Authority (NEDA), the Department of Budget and Management (DBM), as well as the Executive Secretary, among others.

The return on infrastructure investment was attributed to the open and transparent bidding process embodied in the Philippine Government E-Procurement System as well as a policy preference that projects must be implementation-ready.

“Stringent public investment evaluation, open and transparent procurement and implementation-ready prioritization have increased the efficiency of projects,” the DoF said.

The government embarked on an P8-trillion infrastructure spending program running to 2022 in an effort to boost economic growth to about 7-8% each year.

The Finance department said 44 out of the 75 flagship projects under the “Build, Build, Build” program are in various stages of implementation, while the remaining are undergoing pre-investment study or are up for review. — Karl Angelo N. Vidal

Gov’t targets violators of sugar price ceiling

THE Department of Trade and Industry (DTI) will be issuing notices of violation to sugar sellers who breach the prescribed government price ceilings, the Trade department said Wednesday.

At a Palace briefing on Wednesday, DTI Undersecretary for Consumer Protection Ruth B. Castelo noted that “some” sugar retailers have posted sugar prices above P55 pesos per kilo.

According to the latest Sugar Regulatory Administration (SRA) Price Monitoring Report on the average and prevailing sugar prices in Metro Manila, the retail price per kilo of refined sugar as high as P68.80 on April 2 and April 5. On April 6-9, the highest recorded price was P65 per kilo.

“DTI continues to monitor sugar. We have included that in our list. And we insist that price of sugar should only be at P50, maximum at P55 per kilo. The DTI, in our efforts to help the Department of Agriculture and the SRA, issues notices of violation to retailers selling sugar at a higher price than P55. We inquire from them as to the source and why the price is much higher than the expected retail price,” she said.

Ms. Castelo also said there is no basis for retailers to charge high prices for sugar, considering the current supply situation and stable farmgate prices.

“The SRA has said that there is sufficient supply of sugar in the Philippine market so there is no reason. We understand that some retailers initiated and increased the price,” she said.

In a chance interview, Ms. Castelo also told BusinessWorld that there have been requests from manufacturers to raise the prices of canned sardines and instant noodles.

“The DTI stalled them. At saka nakikiusap kami sa kanila kung pwede wag muna, at kung pwedeng absolute minimum ang requests (We requested a delay, or if any price hikes are resorted to, they should be held to the absolute minimum),” she said.

“Pero minsan naman kasi yung mga request nila vina-validate kasi namin, so yung legitimacy ng requests makikita rin namin. (Sometimes we see the legitimacy of the requests). Sometimes, they just want to compete.”

She cited some manufacturers who have not changed price since June 2018, since which period many raw materials have increased in price.

On the effects of El Niño on agricultural products, Ms. Castelo said at the briefing that a number of efforts are being undertaken to address its impact.

“Another meeting will be held at 2 o’clock today to make sure that government is ready to address the effects of El Niño on agricultural products,” she said.

She said vegetables appear to be the most affected.

“Gulay talaga iyong binabantayan natin (We are keeping an eye on vegetables) because of the drought… We intend to address this through the NPCC [National Price Coordinating Council] by finding out how we can help farmers continue production or minimize at least the ill effects of El Niño.” — Arjay L. Balinbin

World Bank lends $450M to help develop PHL fiscal management

THE Philippines obtained $450 million from the World Bank for a project to improve the country’s fiscal management.

According to the World Bank website, the Fiscal Management Development Policy Loan (DPL) Project for Philippines was approved on March 15, with the Department of Finance designated the implementing agency.

The amount raised will be used to support the “high-level objective” of the government to improve fiscal management with objectives of strengthening tax policy, enhancing public finance management and budget planning as well as strengthening fiscal risk management of public assets.

“This operation responds to a direct request from the government to support the acceleration of fiscal reform efforts in the Philippines,” the World Bank said.

Based on documents posted on World Bank’s website, the specific measures supported by the DPL target improving the equity, efficiency and simplicity of the tax system, which are expected to increase tax revenue collection, specifically from excise taxes on fuel as well as the value-added tax.

The government has a program to reform its tax regime, starting with the Tax Reform for Acceleration and Inclusion Act, which was implemented in 2018. The package updated the income tax brackets, increased take-home pay, and imposed or increased excise tax on certain commodities.

“These reforms will increase the needed fiscal space for higher investment in physical and human capital that would ultimately help achieve more inclusive growth,” the World Bank added.

On the other hand, the public financial management improvements supported by the DPL are expected to bring forward the implementation of the new Budget and Treasury Management System (BTMS), which in turn, would “lead to improvements in efficiency, timeliness and accuracy of budget recording and reporting across government.”

According to the World Bank, at least 10% of total public expenditure is expected to be processed using BTMS by the end of 2019.

“Finally, reforms in support of strengthening the financial risk management of public assets are expected to advance the implementation of a disaster risk financing policy for strengthening resilience to climate and disaster risks, including setting up the necessary institutions and risk insurance instruments,” the bank added. — Karl Angelo N. Vidal

House publishes itemizations ahead of budget signing

HOUSE APPROPRIATIONS committee chair and Camarines Sur 1st District Rep. Rolando G. Andaya Jr. said Congress has included a list of itemized allocations in a fourth volume of the 2019 national budget bill, claiming that the practice makes the bill compliant with Supreme Court directives accompanying its landmark Pork Barrel ruling.

“This is the first time that the General Appropriations Act, once signed into law by the President, is made up of four volumes of budget books. The House leadership has moved for the itemization of the budget for specific programs and projects in compliance with the latest Supreme Court’s decision on the pork barrel issue,” Mr. Andaya said in a statement on Wednesday.

The “itemization” of lump-sum items by House representatives to the bicameral conference committee effectively altered the bicam-approved document, which according to Senators was unlawful, though the House replied that itemized lump sums improved transparency. The dispute delayed transmission of the ratified document to Malacañang.

Cabinet Secretary Karlo Alexei B. Nograles said Tuesday that the 2019 national budget could be signed by President Rodrigo R. Duterte as early as this week and added that he believes it will not be allowed to lapse into law in its current form, raising the prospect of a partial veto.

Malacañang received a copy of the 2019 General Appropriations Act on March 26.

“Records of the bicameral deliberations on the national budget would show that the fourth book was a condition put forward by the House of Representatives during the initial stage of the bicam and accepted by the Senate contingent,” added Mr. Andaya.

He noted that the Supreme Court in 2013 instructed legislators to adopt detailed line-item budgeting for the “full appreciation of the President.”

“Line-item budgeting is our response to the people’s demand for transparency and accountability in the national budget,” Mr. Andaya said. “Lump-sum funds are more prone to corruption and violate many tenets of transparent expenditure of public funds. It is for this reason that the Supreme Court had declared discretionary lump sum funds unconstitutional.”

Further, Mr. Andaya said that the senators may opposed the line-item budgeting approach but it is in full compliance with the law.

“The public release of the new budget law will leave our esteemed senators no choice but to identify their individual realignments which found print in the 2019 GAA. Only by doing so can the public be made fully aware what are the pet programs and projects of the senators they voted into office,” he said.

Asked to comment, Senate President Vicente C. Sotto III said in a phone message to BusinessWorld, “I have no idea what he is talking about. He should stop and wait for the President.” — Vince Angelo C. Ferreras

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