Chelsea Logistics kicks off IPO on strong note

By Krista Angela M. Montealegre
National Correspondent

CHELSEA LOGISTICS Corp. (CLC) kicks off the offer period for its P5.8-billion initial public offering (IPO) today with strong demand expected as the company owned by Davao businessman Dennis A. Uy hopes to move on from the substantial restatement of the financial statement of 2GO Group, Inc.

BDO Capital and Investment Corp. Senior Vice-President Gabriel U. Lim said in an interview last Friday the issue is now oversubscribed and more orders are coming in after announcing that CLC priced its shares at P10.68 each, a 27% discount from the maximum P14.63 per share. BDO Capital is the bookrunner, sole issue manager and lead underwriter of the maiden share sale.

Asked by an analyst to comment on valuation estimates approaching 40x, CLC President Chryss Alfonsus V. Damuy said in the investors’ briefing: “In our internal valuation, we are not reaching that far. It’s only half of that.”

Mr. Lim said demand was robust even before the final price was determined, but management decided to be “more flexible” after investors were “spooked” by the significant restatement of the financial performance of 2GO where Chelsea Logistics has a 28.15% indirect economic interest.

In his closing remarks at the investors’ briefing, Mr. Uy, who chairs CLC, said the company is “leav[ing] more room for investors to earn,” while assuring them of its “stability, strong profitability and solid business prospects.”

“I don’t think that concern (restatement of 2GO’s financial statement) is major anymore,” BDO Capital’s Mr. Lim said.

“People have started focusing on the price and prospects moving forward.”

AB Capital and Investment Corp. is seeing a 3-4x bid-to-cover ratio on the retail side for the IPO — indicating robust demand — complemented by strong demand from institutional investors as well.

“It’s an integration play,” said Juan Miguel M. Honorico-Lopez, investment manager at the trust and investment division of AB Capital.

“It’s a proxy for a lot of things: you have consumer with the SM group and you have shipping riding on the economic activity. The business is quite segmented and diversified. It’s an integration play that represents decentralization.”

Mr. Uy’s relationship with President Rodrigo R. Duterte has also boosted demand for the IPO.

“It helps in the long term. Shipping is a regulated industry so it helps that they will not suddenly throw a curve ball,” BDO Capital President Eduardo V. Francisco said.

FORESIGHT
Nisha S. Alicer, chief equity analyst at DA Market Securities, Inc., said Mr. Uy’s management and foresight reminds her of DoubleDragon Co-Chairman Edgar “Injap” J. Sia II, who saw the potential of the community mall chain business that attracted retail and mall giant SM Investments Corp. as an investor.

Incidentally, the SM Group is also Mr. Uy’s strategic partner in 2GO. The SM Group has a 34.5% stake in the publicly listed company’s parent, Negros Navigation Co., Inc.

“We’ve been talking about it that e-commerce is really a big thing. Given the growth prospects and liquidity in the market, I think it (IPO) will do well,” Ms. Alicer said.

“The big question is being able to capitalize on e-commerce and being able to go through from e-commerce to shipping,” AB Capital’s Mr. Honorico-Lopez said.

2GO is beginning to unlock synergies with Mr. Uy’s Udenna Corp. and SM following their investment in the company, Mr. Damuy said.

The integrated transport solutions provider has enjoyed better fuel pricing and has started to ferry inventory of SM-affiliated fast fashion brands Forever21 and Uniqlo to the Visayas and Mindanao.

The deployment of bigger vessels and more than P3 billion worth of acquisitions in the coming months should translate to improved efficiencies for CLC and boost earnings per share in the near term, although competition from airlines could challenge growth prospects in the long run, DA Market Securities’ Ms. Alicer said.

CLC is also looking at venturing into the shipyard business preferably through an acquisition in Subic or Batangas, but it is open to building its own at a cost of P5 billion.

Mr. Damuy said it makes sense for the company to enter this business since its fleet of 59 vessels — the largest in terms of capacity — spends P1.5 billion annually for dry-docking services.

The shipyard business easily generates a margin of as much as 20%, he said.

“Such initiatives will make Chelsea even more stable to get through the waves and ride on the opportunities offered by our strongly growing economy and the increasing trade and commerce in the region,” Mr. Uy said.