Offshore investors led by Asian-based global funds snapped up shares of retailer Puregold Price Club Inc.
At an initial offering price of P12.50 per share, equivalent to about 12 times the company’s projected earnings per share, the foreign component of Puregold’s offering was three times oversubscribed.
About 420 million of the 500 million Puregold common shares offered plus 90 million in over-allotment option had been forked out to the overseas market.
The take-up was heavily skewed in favor of Asian investors, who gobbled up 73 percent of the offering. Investors from the United Kingdom and the rest of Europe accounted for 19 percent, while 8 percent went to US investors, UBS Asia head of syndication Ross Baildon said in a briefing yesterday.
“At the end of the day they are the guys that are specifically mandated to invest and outperform the region,” Baildon said, adding that two-thirds of the take-up came from Singapore and the remainder from Hong Kong.
UBS and HSBC are lead arrangers of Puregold’s international offering.
Lauro Baja, UBS Philippines managing director, said this was different from the usual offshore equity deals which would historically have an even distribution of shares of a third each among European, US and Asian markets.
“Asia is familiar with the household names in the region. They are familiar with strength and defensiveness of retail consumer play. What’s interesting with Puregold is a defensive play. Even if the economy is not doing well, people will flock to lower priced products,” Baja said.
Puregold, led by the family of businessman Lucio Co, is the first purely retail stock play in the local bourse.
While most retailers in the Philippines are targeting upper income segments, Puregold targets the C,D and E segments.
At a price to earnings ratio of 12x, Baja added that Puregold’s earnings multiple was “attractive” compared to most of its retailing peers in the region.
Puregold sold 600 million common shares—500 million primary shares and 100 million secondary shares to be sold by the Co family. The over allotment option is up to 90 million shares.
About 120 million of the offer shares were reserved for trading participants at the Philippine Stock Exchange equivalent to 902,000 shares per institution, based on the latest count of 133 active trading participants. The domestic offering, arranged by BDO Capital and First Metro Investment Corp., was closed on Friday but the final tally had yet to be announced.
Puregold president Leonardo Dayao said the retailer was planning to open at least 25 stores every year through 2013. Starting next year, the retailer plans to foray into the untapped Visayas and Mindanao region and open about 12 stores there.
As of July 22, Puregold has 72 stores in 20 cities and 22 municipalities in Metro Manila and Luzon, growing significantly from a single-store operation in 1998. This year, 23 more stores will be opened in the remainder of the year.
Dayao added that Puregold, whose shares would be listed on the Philippine Stock Exchange on Oct. 5, would now consider introducing a cash dividend policy. The retailer has so far never declared dividends as retained earnings were plowed back for expansion.
“We should be considering setting up a dividend policy after taking into account funding requirements and after those expansion requirements are met,” Dayao said.