STI starts P2.7B stock offer

MANILA, Philippines—STI Education Systems Holdings Inc., the country’s biggest private for-profit education network, is set to begin Monday a P2.7-billion equity offering that will fund its nationwide expansion.

Its follow-on offer price of P0.90 a share, lower than the earlier maximum indicative price of P1.50 each, is mostly seen by stock experts as appealing to investors.

“I am sure it will do well as it is reasonably priced at 17x price to earnings (P/E) in a fast-growing industry, which is well backed by our excellent demographics of 25 percent of population below 50. It is also an assured beneficiary of OFW (overseas Filipino worker) remittances, which continuously grow at more than 7 percent annually and is recession proof,” said Ismael Cruz, president of brokerage house IGC Securities.

“I think it’s a bit on the expensive side but it will appeal to locals because of the price point below P1,” said Joseph Roxas, president of Eagle Equities.

STI’s offering consists of up to three billion common shares broken down as follows: up to 2.63 billion primary shares; up to 105.21 million secondary common shares to be unloaded by minority institutional stockholder Korea Merchant Banking Corp. and an overallotment option of up to 273 million shares.

The company expects to sell as much as 80 percent of the offering to the overseas market and 20 percent to the local market.

“At P0.90, the valuation is undemanding, relatively cheap compared to other listed schools with a great growth story with its multisite platform, which enables STI to expand with quality education and offer affordable tuition fees,” said Paul Joseph Garcia, senior vice president and head of Odyssey Funds at Bank of the Philippine Islands.

Manny Cruz, chief strategist at Asiasec Equities, said the offering was “very attractive” at its below P1 pricing. “It’s the first of its kind in the Philippine equities market,” he said.

“Growing population and expanding economy should support growth of the company. The Philippine market will serve as a mechanism to unlock the true value of the fast growing company STI,” Cruz said.

Local stock brokerage Campos Lanuza & Co., however, said the offer price looked expensive. “Profitability and growth are strong points but difficult to justify full take-up given high multiples,” the brokerage said in its Twitter account.

STI’s offer period runs until October 31 and the listing on the Philippine Stock Exchange is set on November 7.

“As a believer in the market, you want the stock to perform,” businessman Eusebio Tanco, controlling stockholder of STI, told reporters after the company’s local road show shortly before pricing the deal late Monday.

“The books are oversubscribed,” said Lauro Baja, managing director at UBS Philippines, noting that after doing a road show in Hong Kong and Singapore, the London leg was scrapped because “the take-up is very good.”

“This is an Asian game,” Tanco said.

Enrollment in STI network has increased 40.4 percent from 47,988 students in the 2004-2005 academic year to 67,361 students in the 2012-2013 academic year. STI has been in the education business for 29 years. The network to date has 65 STI-branded college campuses and 20 educational centers, two nonbranded colleges and one university.