Makati Finance to raise P193M via follow-on offer

Makati Finance Corp., one of the leading consumer finance companies in the country, hopes to raise as much as P193.3 million through a follow-on offering of shares.

In an amended prospectus filed with the Securities and Exchange Commission, Makati Finance said it is offering 75.5 million new shares and 21.21 million secondary shares at a price ranging from P1.46 to P2 each share.

The offer shares will represent 36.6 percent of the company’s outstanding capital after the sale.

Net proceeds from the offering will be used to finance the growth of all its business lines, invest in marketable securities and/or acquire receivables from other consumer finance companies, and repay a portion of existing debt.

In particular, Makati Finance will use proceeds to grow the loan portfolio for its Rx Cashline (loans to medical professionals), MFC Factors (receivables factoring services) and MC Financing products (loans to motorcycle buyers).  It will gradually roll out the funds based on the expected target loan production on a monthly basis in 2008. 

Funds not immediately deployed within the roll-out period will be used to invest in high grade marketable securities such as bank bills and commercial papers, Makati Finance said.

Securities purchased will be subsequently liquidated and used for loan expansion in 2009 and 2010.

As part of the company’s treasury activities, Makati Finance intends to have the flexibility to manage its funds in order to maximize spreads and earnings.

Makati Finance has an authorized capital of P300 million consisting of 300 million common shares with a par value of P1 per share.  

The company has tapped Amalgamated Investment Bancorporation as lead underwriter for the offering.

Since it listed on the Philippine Stock Exchange in 2002, Makati Finance has consistently posted positive earnings at a CAGR (compounded annual growth rate) of 11.1 perent to 2006.  It has also consistently declared cash dividends of 30 percent of its net income in the form of cash and stock.

Makati Finance also has a relatively higher return on assets with 6.14 percent compared with 10 other consumer finance companies with similar asset sizes. 

With a growing client base and loyal customers, the RX Cashline contributed 36 percent of Makati Finance’s net interest income in 2006.

Makati Finance expects its earnings to grow significantly in the next two or three years as it aims  to ride the growth of the motorcycle financing industry and tap an underserved base of SMEs that have existing contracts with the top 1,000 corporations in the country.

The company also intends to focus on more aggressive marketing and product development for Rx Cashline as it expands its coverage to untapped areas in Luzon.