Philippine Bourse Stock Sales Poised to Pick Up: Southeast Asia

Philippine Bourse Stock Sales Poised to Pick Up
Traders work on the floor of the Philippines Stock Exchange in Manila, the Philippines. Photographer: Brent Lewin/Bloomberg

Philippine Stock Exchange Inc. Chief Executive Officer Hans Sicat said share sales are poised to surpass the bourse’s full-year target as transactions accelerate toward the end of 2012.

Sicat sees three more initial public offerings being completed this year, he said in an interview last week, declining to name the companies. That would take the annual total to six, compared with five listings in 2011. There are enough funds in the stock market to absorb new IPOs or share sales by listed companies, he said.

Data supplied by the exchange show Philippine companies raised 91.13 billion pesos ($2.17 billion) through share sales in the eight months to August, compared with the exchange’s 198 billion-peso target for 2012. Offerings reached a record 107.5 billion pesos in 2011. San Miguel Corp., the nation’s largest food and drinks company, has proposed selling 80 billion pesos of preferred shares, while JTH Davies Holdings Inc. and Tanduay Holdings Inc. plan to hold so-called follow-on offerings.

“There’s more than enough time to get everything done so it’s a question of what is in the pipeline and how fast everybody is cooking,” Sicat said on Aug. 29. “If things go well and we process everything that’s in the pipeline, there’s a good chance we may exceed the target. I am reasonably confident.”

The average daily value of stock traded this year is 24 percent more than in 2011 as the benchmark stock index surged 19 percent amid interest-rate cuts and a Standard & Poor’s upgrade to the nation’ credit rating. Philippine Stock Exchange Inc. rose 1 percent to 373.60 pesos at 2:33 p.m. in Manila, poised for its sharpest advance since Aug. 16, while the Philippine Stock Exchange Index added 0.2 percent to 5,206.47.

Strong Demand

Manila-based San Miguel expects to complete its preferred share sale by mid-September, according to filings approved by the Securities and Exchange Commission on Aug. 9. President Ramon Ang said Aug. 30 there is “very strong” demand for the stock, which will be sold at 75 pesos apiece. The company’s common shares ended trading last week at 112 pesos. San Miguel will use part of the sale proceeds to redeem 72.8 billion pesos of preferred shares.

Tanduay, which is being reorganized to buy and hold the other assets of its billionaire owner Lucio Tan, is seeking to sell as many as 3 billion shares this year, President Michael Tan said Aug. 28. The value of the stock based on the shares’ Aug. 31 closing price was 35.76 billion pesos.

JTH Davies, poised to become the nation’s biggest publicly traded school operator with its acquisition of Manila-based STI Education Services Group Inc., may raise as much as 4.5 billion pesos from selling 3 billion shares with a maximum price of 1.5 pesos, it said in an Aug. 29 filing to the SEC.

Narrowing Window

The bourse’s share-sale “target is achievable but companies have to move fast because the window is narrowing,” Alex Pomento, strategist at Macquarie Group Ltd.’s Manila unit, said by phone on Aug. 31. “Given the current excess liquidity, these share sales can easily be absorbed. But if interest rates shoot up and liquidity reverses it will be tough for companies to tap the equities market.”

Rights offers contributed 47.75 billion pesos worth of share sales this year, or more than half of the total, according to stock exchange data. BDO Unibank Inc., the nation’s largest bank, raised 43.5 billion pesos in a one-for-three rights offer in June, which at the time was the largest for the year in Asian markets outside of Japan.

GT Capital Holdings Inc., East West Banking Corp. and Calata Corp. raised 17.89 billion pesos in the nation’s three IPOs this year. Companies raised 15.49 billion pesos through private placements and another 10 billion pesos worth of shares were sold through follow-on offers this year, according to exchange data.

Exchange Rules

Sicat said some of the placements and follow-on offers were by companies seeking to meet exchange rules on the minimum amount of shares they have available to trade.

The bourse has given companies until the end of the year to meet a minimum float requirement of at least 10 percent of outstanding capital stock. The exchange has 27 companies that don’t meet the requirement, compared with 42 in 2010, and a number of these issuers will sell shares to avoid trading suspensions in 2013, Sicat said.

“The interest level and inquiries have increased from last year and we are passing this on to friendly bankers and lawyers,” Sicat said.

Overseas investors have bought a net $2.15 billion of Philippine equities this year to Aug. 30, compared with $1.33 billion of purchases for all of 2011, amid optimism about the nation’s economic growth prospects. Philippine stock trading has averaged 6 billion pesos a day this year, compared with the 2011 average of 4.82 billion pesos, data compiled by Bloomberg show.

Economic Outlook

The Bangko Sentral ng Pilipinas cut its benchmark interest rate to a record-low 3.75 percent this year to spur spending and counter faltering global demand. The $225 billion economy grew 5.9 percent in the second quarter, faster than the 5.5 percent median prediction in a Bloomberg economist survey. Standard & Poor’s raised the Philippines’ debt rating in July to BB+, one step below investment grade and the highest level since 2003.

“The average trading volume is a very good indicator that there are still a lot of available funds out there,” Sicat said. “There are still strong fundamentals for the economy and the market to stand on.”

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