Philippines Considers Easing IPO Rules for Infrastructure Firms

The Philippine stock exchange is considering relaxing its listing rules for infrastructure companies amid a dearth of initial public offerings and growing demand for cash to fund roads, power plants and ports.

Infrastructure companies may be exempted from rules requiring three years of profitability, after a similar waiver for renewable energy companies was introduced in 2011, Hans Sicat, president of the Philippine bourse, said in an interview in Hong Kong on Wednesday. The exchange is keeping its target of 10 IPOs and backdoor listings for 2015, even after just one company announced plans for an IPO so far this year.

Philippine economic growth will probably accelerate to 6.4 percent in 2015 from 6.1 percent last year amid increased government spending and investment, according to the Asian Development Bank. Companies going public will enter a stock market trading near the highest valuation in two years after a 9.4 percent gain in 2015 through Wednesday.

“We need to do a more thoughtful analysis of how we can, without sacrificing the suitability requirements that our exchange and the Securities & Exchange Commission want, get a robust amount of IPOs,” Sicat said. “I keep hearing more and more new projects being announced, whether it’s in power, roads, ports, you name it. Clearly, the stock exchange needs to play a big role in helping fund these.”

Key Driver

There’s already a pipeline of consumer, property, banks and conglomerates with infrastructure projects that are in the mid-to-late stages of their application process, Sicat said. Crown Asia Chemicals Corp. is the only company so far to announce an IPO this year.

The government said in February it plans infrastructure investments amounting to 4 percent of gross domestic product this year, which will be increased to 5 percent in 2016.

“Investors are looking at infrastructure companies because infrastructure will be a key driver of the Philippine economy in the coming years,” said Rico Gomez, who helps oversee about $1.8 billion as vice president at Rizal Commercial Banking Corp. in Manila. “There aren’t that many direct infrastructure plays in the stock market now.”

Sicat’s projection for 200 billion pesos ($4.5 billion) of capital raising on the exchange this year would surpass last year’s level of about 150 billion pesos. The relaxation of listing rules for infrastructure companies, if implemented, would be a welcome development because companies tend to take several years to become profitable, said Eduardo Francisco, the Manila-based president of BDO Capital & Investment Corp., a venture of the largest Philippine bank by assets.

“Infrastructure companies, by their nature, don’t make money in the initial years since that’s the phase of capital expenditure,” Francisco said.

In September 2011, the bourse amended rules so that renewable energy firms didn’t need to show a one-year operating history to list on its second board, which is for companies with a market value of at least 250 million pesos.

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