PH IPOs few and far between in an anemic stock market

Even with five months still left in the year and three companies so far launching their initial public offerings (IPOs), the Philippine stock market may fail to achieve its goal of six listings for a total equity deal of P40 billion, according to analysts.

Francis Ferdinand Subido, senior research analyst at AP Securities Inc., told the Inquirer on Friday prospective IPO issuers were likely still waiting on the sidelines for catalysts that could jolt tepid trading in the market.

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“Likely, we will fall short of the PSE’s (Philippine Stock Exchange) target,” Subido said, pointing out that the much-awaited listings of major firms—Sy family-led SM Prime Holdings Inc.’s real estate investment trust, Razon-led Prime Infrastructure, and Ayala-backed e-wallet platform GCash—that were originally scheduled this year have been deferred due to market conditions.

According to Subido, these companies were waiting for interest rate cuts while also gauging market liquidity. High interest rates have crimped the spending power of investors, with local equities suffering amid lackluster trading.

The local stock market is now up 1.43 percent from the start of the year. Still, average market value turnover stood at P4.96 billion, down by 18.55 percent from the full-year 2023 value of P6.09 billion, data from trading platform Philstocks Financial Inc. showed.

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“If liquidity remains low, then major issuers will not list since there won’t be enough money going around to handle the size of their offers,” he added.

Astro del Castillo, managing director at First Grade Holdings, also noted that reaching the bourse’s target “will be challenging.”

Below P580-M target

“Market conditions and investor sentiment will dictate the pace,” Del Castillo said in a Viber message. “Factors like lower interest rates, a less volatile geopolitical climate, and a delayed La Niña event could contribute to a more upbeat market, potentially leading to more successful IPOs.”

Such observations emerged after NexGen Energy Corp., the third company to launch an IPO this year, failed to reach its target of raising P580 million.

In a statement on Friday, the renewable energy firm led by businessman Dexter Tiu said it had raised P529 million from the sale of 315 million shares at P1.68 each. This is 8.8 percent below the company’s target.

According to NexGen, which will list on the small, medium and emerging board of the local bourse under the ticker “XG” on Tuesday, July 16, the total already included an additional 15 million shares from its over-allotment option. NexGen had originally allotted 45 million secondary shares in case of excess demand.

Analysts said general market conditions and weak investor sentiment resulted in the below-target turnout.

April Lynn Tan, COL Financial Group chief equity strategist, explained that high interest rates remained a deterrent despite the anticipated rate cut next month, along with the “lackluster performance of the market.”

At the same time, investors were also cautious of the company’s earnings growth, according to Subido.

“None of the 17 projects in [NexGen’s] pipeline are expected to come online until 2026, which means that significant earnings growth is still quite far off,” he said.

The solar and wind power-focused firm also noted that its offer period—July 1 to 8—was “relatively short due to time constraints and the approaching ghost month (August).”

In a statement, NexGen president and CEO Eric Peter Roxas said: “We are grateful to all who supported the IPO because it demonstrates the confidence in XG’s management team to develop and manage the company’s long-term growth prospects.

Funds raised would go to its renewable energy projects in the provinces of Zambales, Cavite and “other parts of the country.”

NexGen is the third company to brave an anemic stock market, following Citicore Renewable Energy Corp.’s P5.3-billion IPO in June and OceanaGold Philippines’ P6.08-billion IPO in May.