The Philippine Securities and Exchange Commission on 20 April approved the launch of two initial public offerings (IPO) on the Philippine Stock Exchange (PSE)—a property developer and cement producer—underscoring the Philippines’ strong economic growth and the incremental progression of its financial markets. These two IPOs bring the year-to-date total to three—four were launched in all of 2016, according to The Manila Times—and approximately four more are anticipated later this year.
- Cebu Landmasters (CLI), a property developer, plans to use the IPO proceeds to fund its expansion plans and reduce its debt, according to The Manila Times. Eagle Cement (ECC), which operates the country’s largest cement factory, plans to use the IPO earnings to help finance a new cement plant that will increase its production capacity by almost 40%, according to Inquirer.net, a Philippine news site.
- On 31 March, Wilcon Depot (WLCON), a home improvement and construction supply retailer, went public on the PSE, listing 1.39 billion shares at Philippine Peso (PHP) 5.05 per share, or USD 0.10, according to Reuters. Demand for the shares tripled the supply, according to the same article, and as of 21 April the shares have increased 3.6% to PHP 5.23.
- Several other Philippine companies are expected to launch an IPO this year, to include Audiowav Media, Pure Energy Holdings, Xeleb Technologies, and The Big Chill, according to The Philippine Star and The Manila Times.
Philippine companies launching IPOs in 2017 almost certainly are emboldened by the country’s strong economic growth, high consumer sentiment, and President Rodrigo Duterte’s ambitious infrastructure spending plan. This favorable environment should benefit companies such as CLI, ECC, and WLCON, as well as many other sectors of the economy.
- Since 2012, the Philippines has averaged 6.6% GDP growth per year, according to annual growth rates provided by The World Bank and The Philippine Star. The International Monetary Fund (IMF) estimates the Philippine economy will expand 6.8% in 2017 and 6.9% in 2018, according to Business World, a Philippine financial newspaper, making it one of the fastest growing economies in Southeast Asia.
- The Philippine Central Bank’s Consumer Expectations Survey reported an 8.7% score in the first quarter of 2017—a reading above zero indicates more consumers are optimistic than pessimistic—according to the Bank’s Department of Economic Statistics. The score of 8.7% is the survey’s second highest rating since its inception in 2007, behind only the previous quarter, which registered a score of 9.2%.
- Over the next five years, Manila expects to spend over PHP 8 trillion, or USD 160 billion, on infrastructure, according to Inquirer.net, which for 2017 should represent 5.3% of GDP, according to Business World. This is a marked increase from the average infrastructure-to-GDP investment of 2.5% from 2000-2014, according to an IMF working paper.
IPOs Strengthen Philippine Financial Markets
The continued transition of Philippine private companies to publicly traded firms will strengthen the country’s financial markets and foster long term economic growth. This transition represents the maturation of a company, brings increased transparency to its operations, and expands the pool of investors, which enables a greater number of investors to participate in the market, make more informed decisions, and allocate capital more efficiently.
- The PSE is the country’s only stock exchange and it trades 245 companies. At the end of 2016, the exchange yielded a total market capitalization of PHP 14.44 trillion, or USD 288.8 billion, according to GMA Network, a Philippine news site; this reflects 92% of its approximate 2016 GDP of USD 312 billion.
- From 2014-2016, the Philippines had one of the fewest number of IPOs in Southeast Asia, ahead of only Cambodia, Laos, and Myanmar, according to the consulting firm Deloitte and a review of the local exchanges for Cambodia, Laos, and Myanmar.
- In April, the consulting firm McKinsey & Company ranked the Philippines as having moderate to shallow capital markets, ranked behind its regional counterparts of Singapore, Malaysia, and Thailand. Increased IPO activity should help improve the Philippines’ ranking.
 This implies a conversion rate of PHP 50 to 1 USD. We apply this rate to all PHP/USD conversions.