Philippines Capital Markets Deal

IFR Asia Awards 2016
3 min read
Anuradha Subramanyan

The Ps25bn (US$505m) IPO of Cemex Holdings Philippines, the country’s third-largest cement maker, sailed through a turbulent market at a premium valuation to peers and still traded well after listing.

Cemex’s float was the largest Philippine IPO since 2013 and the country’s third largest in history.

At around 45% of the company, Cemex’s offering was a rare liquidity event, while investors also saw it as an infrastructure play with high growth potential following the election of Rodrigo Duterte as president.

“We are delighted by the strong participation that we have received from institutional investors for our IPO notwithstanding events in Europe,” said Pedro Jose Palomino, chairman and president of Cemex Holdings Philippines. “We take this as a sign of the investors’ confidence in the long-term prospects of CHP and, more importantly, the Philippines as a whole.”

Cemex won the support of six cornerstone investors, including BlackRock, which came as a cornerstone for the first time in a Philippine IPO. The world’s largest asset manager, together with AR Capital, Avanda IM, Fullerton, Target and Wellington bought US$104m of shares.

The biggest challenge came from the UK’s surprise decision to leave the European Union on June 23, less than a week before Cemex’s June 29 pricing. Even though the book was multiple times covered, the management decided to price the IPO at the lower end of the price range to provide comfort to investors.

The offer of 2.03bn shares priced at Ps10.75, from a Ps10.50–Ps12 target range. The greenshoe option of 305m shares was later fully exercised.

That valued Cemex at a 2016 EV/Ebitda multiple of 10.3x, a premium to Holcim Philippines, the largest cement producer in the country, at around 9x. Cemex also priced at a 20% premium to regional cement manufacturers such as Indocement Tunggal Prakarsa and Semen Indonesia and also at a premium to its Mexican parent, Cemex SAB.

The decision to price lower proved to be a winner. The stock rose 3.3% on debut on July 18 and was up 8.1% by mid-November.

More than 70 investors participated in the institutional book. Long-only institutions and sovereign wealth funds were allocated more than 80% of the international tranche.

Around 70% of the offer was available for institutional investors. Of that portion, Asian investors (excluding the Philippines) were allocated 62.2%, Philippine investors 14.1%, while investors from European Union and the US were allocated 15.9% and 7.8%, respectively.

Citigroup, HSBC and JP Morgan were the joint global coordinators while BDO Capital was the local bookrunner.

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