Stock market listing still a challenge, say analysts

Initial public offerings (IPOs) remain challenging at this time given the volatilities of the local market, analysts said, as they highlighted expansion prospects and strong revenues as among the main drivers of investor appetite.

Their comments are in response to news that Metro Pacific Investments Corp. (MPIC) is planning to list its tollways unit on the stock market.

“It would be challenging to do an IPO in the local equities market until we see risk sentiments improve. Perhaps the best time to list would be from mid-2024 or in 2025,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message over the weekend.

MPIC is expected to be no longer part of the Philippine Stock Exchange index (PSEi) starting Sept. 26 as its public float is set to fall below the required level. Its voluntary delisting is expected next month.

After its voluntary delisting, MPIC is expected to work on listing Metro Pacific Tollways Corp. (MPTC) on the stock exchange.

“MPTC would be a very attractive IPO candidate. They have a strong cash-generating business and a visible path for long-term growth,” Mr. Colet said.

He said investors would see the company as a healthy dividend stock and demographic play.

“They could do a straight IPO of MPTC or, alternatively, list their tollway portfolio as a real estate investment trust (REIT), which would be the first of its kind in the Philippines,” Mr. Colet said.

In a good market, MPTC could achieve an IPO valuation of up to PHP 150 billion, he added.

The tollways unit of MPIC also has a significant potential for growth, Mr. Colet said, adding that its investments in Indonesia and Vietnam are catalysts for further expansion overseas.

“We think this is in line with the wider plan to list MPIC’s major business units and unlock their value,” China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said in an e-mail.

MPIC’s plan to list its tollways unit would be an opportunity for investors to gain exposure to other businesses of the company, Mr. Mercado said.

“Particularly for its tollways business, investors are likely to find the recurring income of the business as its key value proposition. This also makes it a prime candidate as a REIT listing,” he said. Mr. Mercado said that with its potential as a REIT candidate, the other factors that could drive investors’ appetite are how its yield would compare to other income instruments and the company’s expansion plans. 

“We think that the conclusion to the Fed (Federal Reserve) and the BSP’s (Bangko Sentral ng Pilipinas) rate hike cycles and possible rate cuts late next year are key catalysts for improving market conditions and trading liquidity — paving the way for re-energized appetite for IPOs,” Mr. Mercado said. MPIC is one of three Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT Inc.

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