SSI maiden offer sparks strong demand

High-end retailer SSI Group has priced its initial public offering at P7.50 a share, hitting the upper end of the indicative range, as investors bet on rising consumer affluence in the Philippines.

The IPO price of P7.50 a share is equivalent to about 20 times of how much SSI is expected to earn per share in 2015. HSBC and Credit Suisse are the underwriters of this offering.

Mimi Concha, country head for commercial banking at HSBC, said the pricing was backed by strong demand from international investors.

In a phone interview Thursday, Concha said that the IPO was oversubscribed by nearly seven times the base offer after SSI wrapped up an international road show spanning Manila, Singapore, Hong Kong and London.

“Demand [from international investors] was close to $459 million, and we were trying to fill in only $67 million,” she said, adding that about 40 overseas institutions participated in book-building.

The retailer led by the Tantoco family has offered investors a “unique” business model that combines a mix of high- and mid-priced lifestyle brands under its retailing portfolio, setting itself apart from most other regional retailers operating businesses anchored on groceries or supermarkets.

“Based on consensus analyst forecasts, that (P7.50 pricing) is 20.1 times 2015 [earnings per share],” SSI head of investors relations Marti Atienza said in a text message.

Taking into account the final pricing and the offering of 864.2 million common shares, SSI’s IPO size is around P6.5 billion, which may be upsized to P7.45 billion in case of strong demand. There is an oversubscription option of 129.63 million shares.

At P7.50 a share, DA Market Securities estimated that price to earnings (P/E) ratio for this year was about 24.5x, but favorably recommended the stock based on a target price range of P8.80 to P10.20 a share.

“SSI IPO is a bet on growing affluence and aspirational behavior of the middle-income market…. SSI ensures more sustainable growth by developing other retail formats through joint ventures in convenience stores (Family Mart) and mid-market department stores (Wellworth), thereby expanding market segment reach and customer base,” DA Market Securities said in a research note.

The IPO will run from Oct. 27 to 31 while inaugural trading on the Philippine Stock Exchange will be on Nov. 7.  Doris C. Dumlao