‘Rate cut not enough to revive IPO market this year’

August 17, 2024 | 12:00am

MANILA, Philippines —  The Bangko Sentral ng Pilipinas (BSP)’s 25-basis-point interest rate cut on Thursday may not be enough just yet to reinvigorate companies to do an initial public offering (IPO) this year.

While the BSP rate cut is a good first step, China Bank Capital Corp. managing director Juan Paolo Colet told The STAR that it is not expected to revive the IPO market for the rest of the year.

“It takes time for companies to plan and execute IPOs and some of them would like to see better trading multiples and volumes before pulling the trigger. I am optimistic that the IPO market will reopen in 2025,” he said.

Colet said the dovish shift in monetary policy, however, should bode well for the stock market as lower interest rates mean lower borrowing costs and improved equity valuations.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said any pick up in future IPOs would largely depend on more favorable market conditions in terms of higher levels for the PSE index (PSEi).

Ricafort said this would allow companies going public to effectively sell their shareholdings at the highest price possible.

“Thus, better local financial market conditions, especially if the PSEi gains further to above 7,000 to 8,000 levels or even higher in the coming months, would help support more IPOs and other forms of share sales in the country as an alternative source of financing for companies other than through bank loans and bonds,” Ricafort said.

While the recent BSP rate cut could potentially boost preference for IPOs, Regina Capital Development Corp. head of sales Luis Limlingan said that some might still wait for the consumer price index to moderate and further rate cuts before doing so.

PSE president and CEO Ramon Monzon said IPO hopefuls might still be in the search for “better market conditions,” which will include possibly another rate cut before the end of the year.

“But it’s a start. It’s a good start,” Monzon said.

The PSE has set a target of six IPO and about P175 billion worth of capital to be raised this year.

So far, three companies went public this year, including NexGen Energy Corp., OceanaGold Philippines Inc. and Citicore Renewable Energy Corp.

Last year, the PSE saw three IPOs, down from nine in 2022, the most number of IPOs in a single year since 2007.

Highly anticipated IPOs of Enrique Razon’s Prime Infrastructure, SM Prime’s REIT and Ayala-backed e-wallet pioneer GCash have all been deferred and are unlikely to take place this year.

“In terms of listing, our fund raising pipeline at this time includes five FOOs (follow-on offering), one SRO (stock rights offering) and one IPO, which will generate up to P48.36 billion in capital,” Monzon said.

Of the five FOOs, Monzon said that three are expected to proceed in September while the IPO, SRO and remaining FOOs are tentatively scheduled in the fourth quarter.

According to Monzon, fuel retailer Topline could raise up to P3.2 billion, including the overallotment option, for its planned IPO by the last quarter of the year.

Topline, which started in real estate before venturing into the liquid fuel business, has previously expressed plans to do an IPO.

“I heard that there is somebody big also coming (to do an IPO) so hopefully that can come in this year as well,” Monzon said.