Home improvement and construction supply retailer Wilcon Depot has priced its initial public offering at P5.05 per share or at the low end of its indicative range, firming up the size of its stock market debut at P7.03 billion.
This pricing sets the company’s offering at close to 16 times the projected company earnings per share this year, based on market estimates.
The first company to debut on the Philippine Stock Exchange this year, Wilcon earlier set the indicative price range for its IPO at P5 to P5.68 per share.
“It seems attractive at around 16 times P/E (price to earnings ratio). It leaves some money on the table for investors without hurting funding for growth capex (capital expenditures),” said Jose Mari Lacson, head of research at ATR Asset management.
“The offering received a strong demand from institutional investors. The entire offering was more than three times oversubscribed and saw orders being placed by institutional accounts from both domestic and offshore markets,” First Metro Investment Corp. (FMIC) executive vice president Justino Juan Ocampo said in a press statement on Friday.
“The Wilcon order book included quality institutional names and offshore investors who were attracted by Wilcon’s very strong prospects. Despite the very high interest in the offering, the Belo family agreed to price the issue at an attractive level in order to ensure a healthy performance of the stock upon listing in the PSE,” Ocampo added.
FMIC is the issue manager and bookrunner, and together with BDO Capital & Investment Corp., also acts as joint lead underwriter for the IPO. RCBC Capital Corp. is co-lead underwriter while Penta Capital Investment Corp. is a participating underwriter.
“(I’m) glad Mr. (William) Belo agreed to pricing at lower range to allow upside. At this price, he is allowing shares to be priced with around 25 percent discount to comparable (issuers),” said Eduardo Francisco, president of BDO Capital.
“We are very pleased with strong demand and interest in Wilcon as it is a consumer and also an infrastructure play,” Francisco added.
The retailer was authorized to sell up to 1.393 billion primary shares, giving it a market capitalization of over P20 billion after the IPO.
Wilcon plans to build a network of 65 stores across the country with a net selling space of around 530,000 square meters in the next five years or more than double the current net selling area of about 250,000 square meters in its 37 stores. At present, Wilcon generates annual sales of about P55,000 to P60,000 from each square meter of selling space.
The 28 new stores to be opened will be in the form of the Wilcon Depot, or large-scale stores carrying 90,000 to 200,000 stock keeping units and catering to middle- and high-income individual homeowners and institutional accounts. Average investment in each store is about P250 million. Each new store typically breaks even after five or six years of operation.
Wilcon is set to list on the PSE on March 31 under the ticker “WLCON” after an offering period to be conducted from March 20 to 24. This equity deal is expected to bring 34 percent of its shares to public hands.
The retailer is pitching to investors strong prospects offered by robust trends on the construction, housing and home improvement industry.
The construction industry has grown by a compounded annual growth rate (CAGR) of 9 percent from 2008 to 2014 while the housing industry and home improvement industries had seen a 15-year CAGR of 8.4 percent and 5.2 percent, respectively.
For its part, Wilcon had seen a three-year pro-forma sales CAGR of 6.8 percent from 2013 to 2015 alongside improving margins and rising net profit. In the first nine months of 2016, its pro-forma sales grew by 10 percent year-on-year to P11.73 billion while pro-forma net income surged by 50 percent to P483 million.
Wilcon chair William Belo noted: “The success of Wilcon’s IPO demonstrates the investment community’s continued confidence in the Philippine retail market. As disposable income of Filipinos increases, a lot more people are now buying houses or improving their existing homes. Wilcon is here to cater to these people’s needs by providing conveniently located one-stop shops for all their home building and improvement needs.”
Lorraine Belo-Cincochan, president and CEO added: “The dedication of our people across all the Wilcon Depots nationwide is the key to our success. For this, I am very thankful to them.”