Cebu’s leading homegrown property developer Cebu Landmasters Inc. (CLI) has set its initial public offering at P5 a share, allowing the real estate firm to raise up to P2.9 billion in fresh funds for expansion in Visayas and Mindanao (Vis-Min).
At P5 a share, CLI’s offering is valued at a price-to-earnings (P/E) ratio of only 6.8x. This means investors will pay 6.8 times the earnings per share that the company will likely post this year, giving more room for upside once the stock market knows more about the company—the first Cebu-based company to tap the capital market.
The IPO is thus seen a good bargain compared to other real estate firms. For instance, Megaworld Corp. is trading at 12 times consensus earnings for this year, Robinsons Land at 14 times and Ayala Land at 27 times.
Founded by property veteran Jose Soberano in 2003, CLI will offer 505 million shares. It also earmarked another 75 million for over-allotment option.
CLI’s offering will run from May 19 to 26 while listing on the Philippine Stock Exchange (PSE) will be on June 2. At the offer price, the real estate firm will have a market capitalization of P8.5 billion.
“It looks good because it has a low P/E [ratio]. It’s cheap and it has a growth story,” said Joseph Roxas, president of local stockbrokerage Eagle Equities Inc.
“We are excited to bring Cebu Landmasters to the market at this price,” said Eduardo Francisco, president of BDO Capital and Investment Corp., the issue manager. BDO Capital is also joint lead underwriter and bookrunner together with BPI Capital Corp.
“Demand was strong with several well-respected funds committing to the vision of the Soberano family,” Francisco added.
Francisco said CLI ran an excellent business that served as an inspiration to entrepreneurs aspiring to go public, with the pricing a direct play on the Vis-Min growth story and the company itself. He said this company was poised to deliver its goal to be Vis-Min’s leading developer by 2020.
“Our books are fully covered, but we will set aside shares for retail [investors] to come in during the offer,” he said.
The strong demand and quality of investors reflected the “exceptional property development business the Soberanos have built over the past decade,” said Reggie Cariaso, senior managing director of BPI Capital Corp. “It also shows the market wants more exposure to the fast growing Vis-Min market.”
Primary proceeds will be used to mainly fund land acquisition and development costs for new and ongoing projects, based on the company’s prospectus. Some will also fund debt repayment and general corporate purposes.
In 2016, CLI booked a net income of P702.32 million. It has grown at a compounded annual growth rate (CAGR) of 150 percent since 2012. Sales turnover last year stood at P2.18 billion while operating profit ended at P849.7 million, translating to a CAGR of 61.47 percent and 116.82 percent, respectively.