Top Line files for P3.16B November IPO

Top Line Business Development [TOP 0.78 pre-SEC] [link] filed paperwork with the SEC to conduct a November 2024 IPO. According to the preliminary prospectus from the company’s website, the deal is worth up to P3.16 billion through the sale of ~3.683 billion primary common shares and up to ~368 million secondary common shares as part of an over-allotment option at a price of up to P0.78/share. Assuming the full sale of the over-allotment option, TOP’s post-IPO public float will be approximately 33.0%. The proceeds of the primary part of the offer will go toward TOP’s “vertical integration efforts, working capital, and general corporate purposes.” TOP is a Cebu-based commercial fuel trading company servicing “industrial accounts” in the transportation, construction, mining, and agriculture sectors. It recently expanded into the “higher-margin retail market” through its wholly-owned subsidiary, Light Fuels Corporation (LFC), which looks to leverage TOP’s fuel logistics network to serve retail fuel customers in “underserved geographies and markets” where a lack of competition allows for higher pricing/margins. Once TOP receives SEC approval, it will still need to apply to the PSE to obtain a firmer set of dates and its official clearance to conduct the IPO.

MB BOTTOM-LINE: I’ll do a much deeper dive once TOP moves further along in the process, but the basics here are that TOP wants to raise money to build fuel depots in Mactan and Bohol to support receiving and deliveries to those regions, and to build an additional 10 Light Fuels service stations between 2025 and 2026. They’re also looking to buy fuel tankers and fuel trucks to move the product around. What jumps out at me is that there’s a huge chunk of cash (36% of the proceeds) reserved for “general corporate purposes”, which feels excessive and perhaps means that it is acting as a placeholder while TOP develops the IPO and tests the market’s reception. If the reception is good, maybe TOP takes some of the feedback it receives to convert this chunk into more tangible development deliverables (more stations?). If reception is less enthusiastic, perhaps this is the account that TOP will reduce if it decides to trim back on the IPO size. I’m doing my best to resist rabbit-holing on this prospectus! I’ll save that for when it gets a few more approvals.

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