Eagle Cement sets IPO price at P15/share

Eagle Cement Corp., a local cement firm pitching a story that defies an industry downturn, priced its initial public offering at P15 per share, thereby finalizing the size of its stock debut at P8.62 billion.

The final offer price was confirmed by Eagle chair Ramon S. Ang. He added this was equivalent to about 16 times the likely earnings for the year, comparable to multinational peers Cemex and Holcim.

“It’s also equivalent to buying only four million tons of [cement production] capacity. Starting January next year, [we] will have seven million tons in capacity, so it will have a big increase in value,” Ang said on Friday.

Joseph Roxas, president of local stock brokerage Eagle Equities Inc. (not related to Eagle Cement), said the local cement firm had been proving attractive to investors. Aside from its more efficient operations compared to competitors, Roxas said Eagle Cement would benefit from its affiliation with San Miguel Corp. (SMC), a conglomerate currently involved in large-scale infrastructure-building.

Eagle chair Ang is likewise the president and controlling stockholder of SMC.

“They have a client who looks at them as a preferred supplier. The relationship with SMC is a positive factor,” Roxas said.

Eagle president and CEO John Paul Ang estimated SMC accounted for only 1 percent of the cement firm’s revenues last year. Corporate clients like Makati Development Corp., Filinvest, SM group, EEI and DMCI account for 25 percent of sales while retail demand accounts for 75 percent.

At the same time, Roxas said Eagle was not paying any royalties since it is a local brand and is able to produce cement at a lower price than competitors. “This lower pricing than others will allow it to gain or retain market share,” he said.

Eagle is so far the fourth largest cement-maker in the country. Unlike its multinational competitors, Eagle is not engaged in cement trading as it sells only what it produces domestically.

“I guess the valuation is priced for strong medium- to long-term growth. Shorter term investors, however, may be looking at the recent earnings weakness displayed by the multinational cement players in first quarter as guidance over the prospects of the industry as far as profitability is concerned within their investment horizon,” said Jose Mari Lacson, head of research at ATR Asset Management. —DORIS DUMLAO-ABADILLA