Petron rejoins PSEi, Cebu Air out

MANILA, Philippines–Oil refiner Petron Corp. is making a comeback at the country’s main stock benchmark Philippine Stock Exchange index (PSEi) effective September 10, replacing budget carrier operator Cebu Air.

The PSE announced late Wednesday that based on its latest twice-a-year index review of 30 companies comprising the PSEi, Petron will again be part of the roster of the country’s most liquid, largest in market capitalization stocks and most closely watched stocks.

As of Wednesday’s close, Petron had a market capitalization of P94.5 billion compared to Cebu Air’s P41 billion, which suggests the oil refiner is valued by the market over twice higher than the Gokongwei-led airline operator.

Petron was previously stricken off the PSEi due to tight trading liquidity as it was the subject of several merger and acquisition transactions that resulted in a tender offering that trimmed public float.

First, the government’s key block was sold by Saudi Aramco to the London-based Ashmore group in 2008 which afterwards also bought out willing minority shareholders at the same price.  Conglomerate San Miguel Corp. obtained a controlling stake in Petron in 2010.

The country’s largest oil refiner and distributor previously had only 7.5 percent of its stocks held and traded by the public, thereby resulting in its ouster from the PSEi.

Last January, however, this was addressed with the sale by its retirement fund of a substantial block at a steep discount.

Petron Corporation Employees’ Retirement Plan sold 695.3 million common shares of the company at P11 per share through the local stock exchange on Jan. 24. This represented a P7.65-billion block price for the 7.4-percent stake placed out by the retirement fund.

To be included in the PSEi, a listed company must satisfy three criteria – the free float level, liquidity and full market capitalization.

Also among the enhancements adopted by the PSE for its index management are new rules for “insertions and removals,” in turn intended to provide stability in the selection of PSEi-member companies.

Under the said rules, a company shall be inserted in the PSEi if it rises above the 25th position by full market capitalization, to replace the company that ranks the lowest.

The same section provides that a company will be deleted in the PSEi if it falls below the 35th position by full market cap and replaced by the company with the highest market cap among those included on the reserve list.

Free float, also known as public float, refers to the portion of the outstanding shares that are freely available and tradable in the market, or those shareholdings, which are non-strategic in nature.

The free float portion should represent at least 12 percent of the outstanding shares of a listed stock.

In order to pass the liquidity criterion for the main index, a stock must be among the top 25 percent by median daily value turnover per month for at least nine out of 12 months.

Full market capitalization on the other hand refers to companies that pass the first two criteria and are ranked from highest to lowest based on volume-weighted average price during the review period.

In selecting companies that will comprise the sector indices,  common stocks of the company must rank among the top 50 percent in terms of median daily trade per month in eight out of the 12 month period in review.

The following 29 other companies comprise the PSEi: Ayala Corp., Aboitiz Equity Ventures, Alliance Global Group Inc., Ayala Land Inc., Aboitiz Power Corp., BDO Unibank, Belle Corp., Bank of the Philippine Islands, DMCI Holdings, Energy Development Corp., First Gen Corp., Globe Telecom, International Container Terminal Services Inc., Jollibee Foods Corp., JG Summit Holdings, Metropolitan Bank & Trust Co., Megaworld Corp., Manila Electric Co., Metro Pacific Investments Corp., Manila Water Co. Inc., Philex Mining Corp., Robinsons Land Corp., Semirara Mining Corp., SM Investments Corp., San Miguel Corp., SM Development Corp., SM Prime Holdings, Philippine Long Distance Telephone Co. and Universal Robina Corp.