Listings delayed: Initial public offerings are being launched, albeit at a slower pace

A flurry of activity took place on the Philippine capital markets in the closing months of 2010, with a number of companies holding or preparing to hold initial public offerings (IPOs), buoyed by strong economic growth, a rapid rise in equities throughout the year and significant liquidity in the marketplace.

Riding the bull market, the local low-cost airline Cebu Air closed its IPO in mid-October 2010, raising more than $540m by listing more than 186m of its shares on the Philippine Stock Exchange (PSE), with 70% going to overseas investors. The biggest nickel miner in the Philippines, Nickel Asia – which owns a majority share of six mining operations throughout the country – raised some $105.5m in an IPO in November 2010. The company said it was the biggest mining IPO in the Philippines. Furthermore, Credit Suisse was granted trading rights at the PSE, a move the company said would allow it to build on its successes elsewhere in the region.

SETTING THE PACE: Despite the volatility on the local and international markets, companies have continued to push forward with their IPOs, even though some were forced to scale down offerings. The first IPO of 2011 was that of Megawide, a construction conglomerate belonging to the Yuchengco-owned EEI Corporation. The firm listed 292m shares sold at P7.8 ($0.18) each, raising around P2.3bn ($52.2m) in mid-February. In late September, Philippine grocer Puregold Price Club raised P7.5bn ($1.7bn) in its 600m-share offering. Some 70% of the offer was sold to foreign investors and the rest to local investors, including retail players.

Semiconductor manufacturer Cirtek Electronics raised P295.1m ($7m) on an IPO launched on November 18, 2011, consisting of 42.2m shares of common stock, representing 26% of its total issued and outstanding stock. This was much lower than the original plan of selling 61.8m shares to generate P660m ($15m) in gross proceeds, but the IPO was still deemed a success.

Meanwhile, the water utility firm Calapan Ventures pursued the public option the following month, raising P95.2m ($2.16m) in net proceeds with a listing of 42.2m shares on November 24, 2011. The last IPO for the year was launched by Touch Solutions, an open source systems provider that made its debut on the stock market on December 19, 2011, when it offered 22m shares – 39% of its expanded authorised capital stock – to the public. Its shares closed 7.8% below the original offering price, however.

MORE LIQUIDITY: There is no doubt that the troubles in Europe will affect investor sentiment in 2012. There have, however, been announcements for further listings in the first half of the year. PSE president Hans Sicat said he expects more companies to raise funds on the exchange in 2012, despite the market volatility.

Indeed, the upscale property developer Rockwell Land said in December 2011 that it may go ahead with its listing by the first half of 2012. In addition, Ortigas & Co, the developer of the 16-ha Greenhills Shopping Centre, said it is planning to raise at least $200m through a maiden offering of shares possibly in the second quarter of 2012, according to the company. The company had initially aimed to go public in 2011.

To further boost liquidity in the market, Sicat said the exchange is working on measures aimed at encouraging corporations registered with the Board of Investments (BOI) to list on the exchange. Under the Omnibus Investments Code of 1987, BOI-listed firms are required to offer 10% or more of their total subscribed capital stock for sale to the public within 10 years of registration with the agency. This requirement is in exchange for the incentives given to BOI-registered firms.

IN FAVOUR: While the global outlook for exchanges has been grim, the PSE has remained relatively strong. DBP-Daiwa Securities, a brokerage firm, said in a report released in December 2011 that investors expect a “favourable” stock market because the Philippines remains relatively insulated from the European debt crisis due to its strong domestic-oriented businesses. Furthermore, the IPO market is expected to remain active as companies are in a strong pursuit of growth capital and entrepreneurs continue to want to unlock value.