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Strong liquidity to drive demand for new listings

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By Arra B. Francia, Senior Reporter

ANALYSTS are positive the market can absorb the torrent of companies seeking to go public this year, thanks to the low interest rate environment and strong appetite from local investors.

Two companies are scheduled to conduct initial public offerings (IPO) this month, namely coconut products manufacturer Axelum Resources Corp. and home improvement supplies retailer AllHome Corp., which are seeking to raise up to P7.695 billion and P20.7 billion, respectively.

Axelum’s offer period will run from Sept. 24 to 30, while AllHome’s will start Sept. 30 to Oct. 4. The companies’ shares will then be listed at the Philippine Stock Exchange by Oct. 7 and Oct. 10, respectively.

Meanwhile, three more firms have pending applications with the Securities and Exchange Commission for their own maiden offerings within the year. These are Taiwanese firm Cal-Comp Technology (Philippines), Inc. for P10.7 billion, Metro Pacific Hospital Holdings, Inc. for P83.3 billion, and Fruitas Holdings, Inc. for P1.2 billion.

“Basically the market can absorb the IPOs because of the liquidity, interest rates are very low… Investors will look at where they can maximize their funds better,” Summit Securities, Inc. President Harry G. Liu said in a phone interview.




The Bangko Sentral ng Pilipinas (BSP) has reduced interest rates by a total of 50 basis points (bps) since the start of the year, with BSP Governor Benjamin E. Diokno hinting at another 25-bp cut in its Sept. 26 policy review.

COL Financial Group, Inc. Research Head April Lynn C. Lee-Tan noted the market can handle the IPOs even if the combined amount for Axelum, AllHome, Cal-Comp Tech, and Fruitas is already at P36 billion, comparing it to fund-raising activities in previous years.

“I think the market can absorb the said IPOs despite the fact that the total amount to be raised is quite substantial. In 2018, FB (San Miguel Food and Beverage, Inc.) was able to raise P39 billion. In 2016, CHP (Cemex Holdings Philippines, Inc.) and SHLPH (Pilipinas Shell Petroleum Corp.) raised P25 billion and P18 billion, respectively,” Ms. Tan said in an e-mail.

Ms. Tan said investors should look at which of the companies have attractive earnings growth prospects and reasonable valuations when deciding which IPO to participate in.

For Summit Securities’ Mr. Liu, investors should assess the price-to-earnings ratios of the companies before deciding to buy.

“You have to look at the future earnings, whether they have good projections in the years to come.”

Regina Capital Development Corp. President Marita A. Limlingan said in a text message that some potential challenges for companies would be the general market sentiment; whether they can justify the use of proceeds; and the IPO price, or whether they can sell at the higher end of their estimate range.

Asked for his assessment on current market conditions, Mr. Liu said he is more inclined to see an upside in the future.

“I think, looking at the range we’re moving in, we’re more positive that the PSE will have an upside. Once we break the 8,000 level, we can only go higher. But if we go below that then we might see it getting lower again,” Mr. Liu said.

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