THE Philippine Stock Exchange (PSE) may see two to three companies listing this year amid a challenging equities market environment, according to Ramon Monzon, PSE president.
The PSE approved the initial public offering (IPO) of MerryMart Consumer Group owned by Edgar Sia II which eyes to list 1.59 billion shares by June.
Noting the challenging environment of the equities market at present, Monzon said it is more attractive for companies to raise funds through the debt market given the spate of cuts in interest rates cuts and in the banks’ reserve requirements.
“This makes it cheaper for companies to raise capital from the debt market rather than the equity market,” said Monzon.
Monzon said given the rock-bottom valuation of the stock market at present, few companies if ever will be interested to float their shares in the equities market.
“It would be very difficult for a company to undertake an IPO now because it will be competing with some well-established companies that have been in the market for so many years so they will be more careful,” Monzon said.
“We are not too optimistic there will be many IPOs this year,” he added.
Monzon said the PSE has required MerryMart to revise its final prospectus, particularly on its very optimistic targets on store openings.
The bourse also required the company to make a “very, very prominent disclosure” on controlling shareholders’ acquisition of company shares at P0.05 per share prior to the IPO.
MerryMart is offering to the public 1.59 billion shares at an offer price of up to P1 per share.
It expects to announce its final offering price by May 22, with the offering period running from May 27 to June 5 and tentative listing date on June 15, 2020.
Outlook
April Tan, head of research at stockbroker Colfinancial.com, said while investors look at cheap valuation of stocks at present, the public should be aware share prices could still be far from bottom.
Tan said Colfinancial.com still sees some “downside risks in the short term, with foreign investors still net seller.”
“It’s difficult to sustain a recovery with foreign investors as sellers,” Tan said.
“We should brace for something really bad in the second quarter and as you can see our Q1 (first quarter) GDP was down 0.2 percent,” she said.
Tan said exports remain weak providing for an outlook that “doesn’t look good.”
“On the valuation side, from a 10-year perspective, we are cheap. But no matter how you look at it, markets are really cheap during a bear market,” she said.
“Foreign investors have been a consistent net seller. Foreigners had been exiting the market. If you are a long-term investor, stay invested. But when you are buying the market, there is the temptation to throw caution to the wind. So don’t chase prices. It’s going to be a buyers’ market. When you buy today, think long term,” she added.
