Capital market growing — Sicat
More companies are expected to raise funds through the equities and bond markets to finance expansion plans as the country expects to sustain its upward momentum.
Philippine Stock Exchange president Hans Sicat said companies may raise as much as P200 billion in capital from the stock exchange this year, through initial public offerings, listing-by-way of introduction or without public offering, stock rights offerings, top-up offerings, follow-on offerings, exchange traded funds and private placements.
Sicat said he expects 10 companies to conduct initial public offerings this year, including backdoor listings.
The PSE had one listing by way of introduction this year—Top Frontier Holdings Inc., the majority shareholder of conglomerate San Miguel Corp., which was listed in the stock exchange last month.
There are two pending IPOs, namely Frontier Oil Corp., an oil and gas company, which plans to conduct its P2.2-billion public offering in the first quarter of 2014, and DoubleDragon Properties Inc., a property firm jointly owned by Jolllibee Foods Corp. chairman Tony Tan Caktiong and businessman Edgar “Injap” Sia II, which is raising as much as P1.16 billion in April.
Eight companies in 2013 conducted IPOs, namely Philippine Business Bank, Asia United Bank, Travellers International Holdings Inc., Robinsons Retail Holdings Inc., AG Finance Inc., Concepcion Industrial Inc., Harbor Star Shipping Inc. and Discovery World Corp.
One company, Del Monte Pacific Ltd., was listed through listing by way of introduction, while First Metro Exchange Traded Fund was listed through the ETF board.
First Metro Investments Corp. vice president Justin Ocampo said fund raising through the equities market would be opportunistic and selective as valuations had gone down from the previous year’s level.
But several companies engaged in property and retail sectors are also looking to list shares worth P15 billion to P30 billion with the Philippine Stock Exchange this year.
The PSE, meanwhile, expects the trading activities to remain robust for 2014 as it targets average daily trading value to grow 10 percent this year from P11.55 billion from P10.5 in 2013.
“If you believe on the ‘strong fundamental economic story,’ that inflation will continue to be low, and we will continue to post fiscal surplus and that all these factors will drive the domestic economy, then I would say that we should stay on the positive territory [this] year,” Sicat said.
The average daily trading value rose 45 percent this year from P7.25 billion in 2012, while total market capitalization climbed 9.2 percent to P11.93 trillion due to the extended trading hour and more products introduced in the market.
In 2013, the PSEi posted a record high of 7,403.65. Despite falling to its lowest 2013 level of 5,562.13 in August, the main index managed to end the year with a gain of 1.3 percent to close at 5,889.83.
Robust bond market
Philippine Dealing and Exchange Corp., the country’s bond market operator, is expecting more companies to issue bonds this year as companies continue to raise funds to finance expansion plans.
“We should be able to see better numbers than last year. Based on the projected demand from the corporate bond issuers, we may be able to equal or better than number especially now that there is focus on infrastructure projects as well as there are bank issues to comply with Basel 3 so hopefully this will augur well for the capital markets as more instruments will be made available to the investing public,” PDEx president and chief operating officer Cesar Crisol said.
Crisol expects companies to offer bonds with longer tenors to match the deployment of projects.
A total of P83.5 billion worth of bonds were listed by seven companies in 2013, namely GT Capital Corp., Energy Development Corp., Globe Telecom Inc., Ayala Land Inc., Filinvest Land Inc., Rockwell Land Inc., Aboitiz Equity Ventures Inc. and Manila Electric Co.
Filinvest Development Corp. of tycoon Andrew Gotianun was the first company to list bonds this year—P8.8 billion of 10-year fixed rate bonds.
Three more companies are slated to offer bonds within the first quarter of the year. These are Philippine Long Distance Telephone Co., which is issuing P15 billion; ABS-CBN Corp., P6 billion; and JG Summit Holdings Inc., P30 billion.
As of end-2013, a total P344.53 billion worth of bonds were listed by 21 companies with the PDEx.
Last year, P16.5 billion worth of bonds issued by Rizal Commercial Banking Corp. (P7 billion), Ayala Land Inc. (P4 billion) and Metropolitan Bank & Trust Co. (P5.5 billion) were fully redeemed.
First Metro president Roberto Juanchito Dispo earlier said it would be more attractive for companies to raise funds though bond issuances because of the volatility in the stock market. Companies will also take advantage of the current low interest rates.
“There will be a strong demand in power financing and [Public-Private Partnership] projects. Pre-financing is also expected as corporations will continue to take advantage of lower rates. Banks are seen to issue Tier 2 to comply with Basel 3 regulations. Equity is also a financing option but will be challenged by valuations,” Dispo said.
But with interest rates still at currently levels, companies may also look at the possibility of raising funds through bank borrowings to finance their expansion plans.
First Metro is helping arrange least P50 billion worth of corporate bonds issuances and P60 billion worth of bank borrowings, particularly for power generation companies.