Biz Buzz: New triumvirate

Malaysian bank CIMB had once attempted but failed to gain a foothold in Philippine banking when a deal to acquire Bank of Commerce from the San Miguel group fell through four years ago.

But CIMB has not given up on its aspiration to enter the Philippine market. And if it can’t get into full-blown banking business right away, we heard the Malaysian bank’s next step is to set up an investment house and is now talking with formidable partners to get this off the ground.

The buzz is that CIMB plans to own 60 percent of the investment house that it will set up and that talks are underway for businessman Manuel V. Pangilinan aka MVP—who heads the First Pacific—to take a 20-percent interest in the proposed entity (most likely as a personal investment) while the remaining 20 percent will be owned by the group of Malaysian tycoon Robert Kuok.

Why such interest in a start-up investment house? Long before MVP became the big boss at First Pacific, he was an investment banker at Bancom International Ltd., once described as the springboard for any young professional aspiring to build a career in finance in the ’60s and ’70s.
If and when the venture planned by the triumvirate comes to fruition, it is seen becoming a formidable new player in the deal-making industry. —DORIS DUMLAO-ABADILLA

Armscor in the time of Duterte

Things are looking up for homegrown gunmaker Arms Corporation of the Philippines, or Armscor. The Marikina City-based maker of pistols, revolvers and shotguns is optimistic the administration of President Duterte — especially the chief executive’s stand favoring arming more civilians to help deter criminality — will provide a big boost to sales.

More importantly, company chair Severo Tuason said the President was a big supporter of local industries. As such, he expects Armscor (which employs 5,000 people) to benefit from the government’s “buy Filipino” thrust as well, as will the other main industry in Marikina: shoes.

In any case, Armscor is aware it cannot survive alone on selling its firearms to individual buyers and security agencies. Because of this, the company has decided to reposition itself as a full-fledged defense company. This means expanding its product lines to include manufacturing other military equipment like shells for the Philippine Army’s Howitzers, hand grenades and even more basic items like food rations (the so-called “meals ready to eat” or MRE freeze-dried food packs).

Of course, all this bullishness about business in the time of the Duterte administration counts for nothing if the company can’t sell more of its main products: pistols and rifles.

Five years ago, Severo’s brother, Demetrio, was the company chair and he had expressed a great deal of excitement about the prospects of the local firearms industry under then President Aquino, who was a practical shooting aficionado.

But what happened was the exact opposite. A new firearms law enacted in 2013 made the licensing and registration process so cumbersome that gun sales dropped dramatically. According to Armscor officials, their 2013 sales fell to only a tenth of what they normally sold in any given year.

Fortunately for the firm, the Duterte administration seems to be friendlier to the gun industry and sales have since returned to pre-2013 levels, officials said.

What’s next for Armscor? It is planning to bid for a P500-million contract to provide local police and military units with new pistols. The first batch involves supplying 19,000 pistols, but the motherlode of contracts is the second batch which will require up to 100,000 pistols. Given the country’s long history of questionable defense contracts, this is a deal that will be worth watching closely. —DAXIM L. LUCAS

Of anniversaries

We are just a month shy of celebrating President Duterte’s first full-year in office.

Another significant anniversary coming up?

The Land Transportation and Franchising Regulatory Board’s decision to stop accepting applications to accredit drivers of ridesharing companies like Uber and Grab. It wanted to review the rules, and in view of our perennial road congestion issues.

That moratorium is turning one year old next month and ridesharing companies said they had tried their best to keep an open discussion with government officials—not exactly an easy task.

And for all the grievances we throw former Transport Secretary Joseph Abaya’s way (merited in several cases), many agree his team’s decision to recognize ridesharing ahead of other countries was a big step in the right direction.

In a recent meeting with Biz Buzz, Amy Kunrojpanya, Uber’s regional director for policy and communications, shared the kind of growth that Uber was driving for in the Philippines, and strides the company had made in combating traffic.

A key product was the carpooling service uberPOOL and uberHOP, a kind of point to point service, already used by some large companies like San Miguel Corp. and Philippine Airlines.

Being a privately held startup, she declined to provide specific figures ( she did share to government officers behind “closed doors”) but she said the uptake was good and was continuing to grow.

Figures she did share showed the company’s remarkable rise since starting three years ago with about 7,000 drivers serving 685,000 customers across Metro Manila, nearby provinces like Rizal and Cavite, as well as Cebu.

More cities are planned this year, but that would depend on getting the moratorium lifted.

Kunrojpanya told Biz Buzz they nonetheless remained optimistic.

“Infrastructure projects alone are not going to fix the problem. It has to be mind-set, it has to be behavior and it has to be powered by technology,” she said. —MIGUEL R. CAMUS

Twice oversubscribed

It’s a new name in the property industry, not yet well-known to most of Imperial Manila until recently. And it had to come to market at around the same time as Eagle Cement Corp.

But the Soberano family-led Cebu Landmasters Inc., the first Cebu-based property developer to brave the stock market, has been able to hold its own fort. Its recent initial public offering (IPO) was oversubscribed by over two times the base offer. At the trading participant level, the offering was oversubscribed by 10x due to the limited supply.

The respective trust departments of IPO underwriters BDO and BPI accumulated a lot of CLI stocks for their portfolio while some large institutions became cornerstone investors along with high net worth individual investors from the Visayas-Mindanao region who were keen on supporting one of their own.

During the offer period which ran from May 19 to 26, the property developer sold 505 million firm shares plus the overallotment of 75 million shares at P5 per share, bringing the total equity deal to P2.9 billion. The property developer is set to list on the PSE today (Friday, June 2).

At P5 per share, CLI’s offering was valued at a price to earnings (P/E ratio) of only 6.8x. This means that investors paid 6.8 times the earnings per share that the company will likely post this year. The IPO could have been priced higher if it had not coincided with the larger IPO of Eagle Cement, but at the very least, this pricing is seen leaving more money on the table to subscribers. —DORIS DUMLAO-ABADILLA