UBS expects surge in IPOs
I.P.O. SURGE A steady stream of initial public offerings is expected over the next 12 months as companies aim to raise more funds from investors, according to UBS Philippines.
One of the biggest players in the local equities capital market predicts a steady stream of initial public offerings in the country over the next year as companies take advantage of the Philippine growth story to raise more funds from investors.
In an interview, UBS Philippines managing director Lauro Baja said that more companies would list their shares on the Philippine Stock Exchange “in the next 12 months,” although not necessarily in the second half of 2011.
“Some will [go public] in the second half of this year for sure,” he added, pointing to imminent deals like the $500-million IPO of San Miguel Global Power Corp. which UBS is underwriting along with Goldman Sachs, Standard Chartered Bank, ATR KimEng Financial and SB Capital Corp.
Baja, who also heads the local investment banking operations of the Swiss financial giant, noted that there remains a strong appetite among investors for Philippine equity issues given the country’s strong macroeconomic fundamentals.
“The [uncertain] global macroeconomic sentiment will continue to influence local markets,” he noted. “But if one were to look just at the Philippines in isolation, one can see significant investment opportunities, and those were the reason why some large deals got done earlier this year despite the global sentiment being less than promising.”
UBS was among the underwriters of San Miguel Corp.’s $970-million secondary share three months ago—the largest issue in Philippine corporate history. The stock had initially languished near its offer price, but has since risen by 20 percent as the conglomerate’s prospects became clearer to investors.
“Investors are investing,” Baja said. “Deals that have been done are performing well, and the macro story for the country looks positive.”
He stressed, however, that the bourse needs to see “more fundamental ‘long money’ and not just ‘short money’”—or portfolio investments—that are quick to sell out of local investments at the slightest hint of uncertainty.
UBS has been the largest arranger for Philippine equity issues over the last five years, accounting for 65 percent of all deals done in the local market. Since 2006, a total of $7.7 billion in equity has been raised through the PSE, with UBS being involved in $5 billion of those transactions.
Looking ahead, Baja said that IPOs that would be offered over the next 12 months should be large enough in scale to attract foreign fund managers that are critical to an issue’s success.
“For an international deal, you need to attract liquidity,” he said. “[Investors] want to make sure that there’s enough liquidity in the after-market. The float has to be big enough. That means at least $100 million.”
“Ideally, it should be closer to $200 million,” he added.
At the same time, the local UBS head pointed out that investors would also be attracted to individual stories of issuers, especially those that offer unique investment opportunities.
