Philippines ECM rides rebound

IFR 2299 7 September to 13 September 2019
4 min read
Asia
Anuradha Subramanyan

The Philippines is poised for a burst of equity issuance totalling up to Ps119bn (US$2.3bn) as issuers look to capitalise on a resurgent stock market and an upbeat outlook for the economy.

The most eagerly awaited deal is that of Metro Pacific Hospital Holdings, which has been dithering between an IPO and a strategic sale since 2016. The company has now filed a draft prospectus for an IPO of up to Ps76bn or US$1.5bn at a maximum price of Ps182 a share.

MPHH is targeting a launch in November, joining AllHome (Ps18bn IPO), Axelum Resources (Ps7.7bn IPO), Cal-Comp Technology Philippines (Ps9.3bn IPO) and Sta Lucia (Ps7.6bn re-IPO), which are all planning launches between September and November.

MPHH and Cal-Comp are both targeting larger offers than previously planned. In 2016, MPHH was considering a sub-US$500m float while Cal-Comp deferred a Ps6.4bn IPO last year.

Ho Cheun Hon, head of South-East Asia ECM at Credit Suisse, said the timing is good to launch share sales as Philippine stocks have done very well since last year’s underperformance.

The benchmark PSE Index is up 5.9% in the year to-date after a tumultuous 2018 when it fell 13%. It is now the third best performing index in South-East Asia after Vietnam (+9.5%) and Thailand (+6%).

At the maximum price, MPHH would beat San Miguel Food and Beverage’s Ps34bn follow-on offer last year. Although one of the Philippines’ largest ECM deals, SMFB raised less than its initial target and much less than the Ps124bn maximum in its filing. Philippine IPOs are typically priced well below the stated maximum price.

“The domestic consumption growth story in South-East Asia remains an attractive thematic for equity investors, so any deal that plays to this would be looked at favourably,” Ho said.

The five issuers are clear plays on the domestic consumer sector. Metro Hospitals is in the healthcare business, AllHome in home improvement, St Lucia is a property developer, Axelum manufactures coconut products and Cal-Comp electronic products.

HOPES FOR REFORMS

While planned public spending increases were delayed and economic growth slowed down earlier this year, analysts are optimistic that reforms will take off after the government’s victory in May’s mid-term elections. The 2019 budget, announced in late 2018, was finally passed in April after squabbling between the upper and lower chambers of Congress delayed its legislative progress.

There is some scepticism as to whether the market has enough domestic liquidity to absorb the five deals.

“Given that it is the Philippines, the deals will be much smaller when they finally get done,” a Singapore-based ECM banker said. “The Philippines doesn’t have local institutional support for IPOs like Malaysia or Thailand, nor does it attract regional investors like Singapore.”

The MPHH IPO will comprise 35m primary shares and 381m secondary shares. Parent Metro Pacific Investments is the vendor of the secondary shares.

The offer for retail investors and local brokers will run from November 18 to November 22. The draft prospectus gave no details on the timing of the institutional offer.

UBS is global coordinator, and international bookrunner with Bank of America Merrill Lynch, CLSA and JP Morgan. First Metro Investment is the lead domestic coordinator, and domestic bank with BDO Capital and BPI Capital.

AllHome is pre-marketing its IPO between September 5 and September 12 and the offer comprises 1.13bn shares at a maximum price of Ps16. The company plans to offer about 750m primary shares and major shareholder AllValue Holdings will offer 375m secondary shares. There is a greenshoe of 169m shares.

UBS is sole global coordinator and bookrunner with CLSA and Credit Suisse. PNB Capital and China Bank Capital are the local banks.

Philippines ECM rides rebound