Publicly traded ISM Communications Corp., which will soon transform into the holding company of businessman Dennis Uy, released on Thursday further details on its share-swap deal with Uy’s Udenna Corp.
In a comprehensive disclosure, ISM outlined the various entities that comprise Udenna, whose assets span logistics, energy, education and property development.
The filing also gave investors a broad view at the scope of Uy’s growing business empire—including financial details such as Udenna’s earnings and the huge debts it incurred to finance a massive acquisition spree that accelerated between 2016 and 2017.
The latter is significant for investors also because ISM is expected to hold another public offering after its P72-billion share swap with Udenna would cause ISM’s public float, or the portion of its shares held by the public, to drop from 37.3 percent to just under 6 percent. This means it will need to sell shares to the public to meet the minimum 10-percent float required by the Philippine Stock Exchange or risk delisting procedures.
Market observers interviewed by the Inquirer were especially wary of the company’s loans amid a period of rising interest rates, in part due to the government’s drive to combat the rising cost of basic goods and services.
Udenna’s 2017 consolidated financial report showed that interest-bearing loans as of end-2017 reached P85.8 billion, a 200-percent year-on-year surge. Major lenders were BDO Unibank, Philippine National Bank and Beijing-based Bank of China.
Based on the filing, about P51 billion of interest-bearing debt was noncurrent or not due in the next year. Finance charges in 2017 hit P3.74 billion as compared to Udenna’s operating income of P1.88 billion.
Borrowings helped fund a P60.8-billion acquisition binge in 2017—up more than 900 percent. Bigger recent deals included P50.2 billion for Global Gateway Development Corp., which holds a 177-hectare property in the Clark Freeport Zone, P2.2 billion for Enderun Colleges Inc. and P1.68 billion for Starlite Ferries.
Udenna has since increased in size, posting P51 billion in revenue in 2017, or higher by 62 percent. Net income last year hit P4.1 billion against P779.6 million in 2016.
April Lee Tan, COL Financial Group Inc. research head, said on Thursday that she expected Udenna to pare down its debts with the sale of shares in the future.
“After the implementation of the share-swap transaction, the company will take the necessary action (such as making an offer for additional private placements and/or follow-on public offerings) to address the resulting breach of the minimum public ownership requirement,” ISM said in its disclosure.
Udenna, whose most recognizable company is fuel retailer Phoenix Petroleum Philippines, has other investments lined up. It is building a $300-million casino resort on Mactan Island, Cebu. Udenna is also among those that acquired bid documents for the government’s third telco initiative.
The company also wants a bigger share in infrastructure. It recently submitted an unsolicited offer for a monorail project in Davao while subsidiary Chelsea Logistics Holdings Corp., which owns a stake in 2GO Group Inc., won original proponent status via its P49-billion proposal to develop and operate Davao International Airport.