While the Philippine Stock Exchange (PSE) had originally aimed to add 10 initial public offerings (IPOs) over the course of 2016, by year’s end just four had been issued, valued at a combined P49.37bn ($1.04bn) including follow-ons and secondary offerings. Although the IPO market was fairly subdued overall, with many of the sales priced lower than originally expected, the new listings nonetheless demonstrate the Philippine market’s continued ability to absorb new equity.

This situation is particularly noteworthy given the political uncertainty that characterised much of 2016, as well as the high degree of liquidity in the domestic banking system, which continues to incentivise many firms to finance their expansion through the use of cheap credit rather than equity financing.

A Shakey Year

Golden Haven Memorial Park was the first listing in 2016. The P778.2m ($16.5m) raised from issuing 74m shares will be used to purchase more land, expand facilities and enter into the pre-need business, which will involve the company in all five segments in end-of-life services. Golden Haven’s listing came as something of a surprise, given the market uncertainty. And while the price was lowered ahead of the offering, the adjustment was minor and share price rose almost 50% following the sale.

In July CEMEX Holdings Philippines sold 2.03bn shares at P10.75 ($0.23) each. At $465m, the IPO is the largest in the country since supermarket giant Robinsons Retail Holding’s $621m share sale in October 2013. While share prices were reduced slightly before the sale, it was also widely considered to be the most important listing of the year and was likewise viewed as a test for the new government.

With optimism running high following the election of President Rodrigo Duterte, it was hoped the CEMEX issue would offer evidence of a recovery in the IPO pipeline. The company is seen as an attractive investment and over the long term, is expected to benefit from the sizeable infrastructure investments being planned by the new administration. In early November Pilipinas Shell Petroleum sold shares on the exchange but also had to lower its offering price due to market conditions. The company came out at P67 ($1.42) a share, below the estimated maximum of P90 ($1.90). The funds raised will be used for expansion; the company is planning to increase the number of stations from 966 to 1200. At the end of 2016 the operator of Shakey’s Pizza in the Philippines, Shakey’s Pizza Asia Ventures, sold P3.96bn ($83.8m), including a secondary offering, worth of shares. The IPO permitted approximately 23% of the 1.53bn outstanding common shares of the company to be bought by investors. Shakey’s planned to use the funds raised to expand their 177-store countrywide footprint as of June 2016.

Like many of the sales undertaken recently, pricing was more modest than originally anticipated. The issue came out somewhat lower than the top of the estimated range, as the shares were sold into volatile market conditions, both locally and globally.

IPO Pipeline

A number of IPOs are being planned for 2017. Xeleb Technologies, a celebrity mobile gaming company, had planned a listing for mid-December 2016 but failed to secure the necessary approvals. The P736m ($15.6m) being targeted is earmarked for expansion into other markets in the region. Xeleb’s application was still pending approval at the time of publication. Other companies planning or undertaking an IPO in early to mid-2017 are Green Power Panay Philippines (P1.24bn, $26.2m), Audiowav (P2.66bn, $56.3m) and Gweilo Corp (P115m, $2.4m); Wilcon Builders (P7.9bn, $167.1m) launched in March 2017.

Regional Issuings

The recent trend in ASEAN has been to raise funds locally rather than in regional financial centres, such as Hong Kong or Singapore. This has resulted in increased IPO activity in places like Thailand and Indonesia. While the Philippines largely has been an exception to this trend, there is more room for the relatively low level of activity to expand.