Investment house sees renewed IPO interest

MANILA, Philippines — Many companies are lining up to list in the stock market, but most are still waiting for market conditions to improve before finally pulling the trigger, according to investment house Unicapital Group.

“At this point, we’re getting a lot of feelers from companies wanting to list now, and it’s just a matter of time before that happens,” Unicapital Group president and CEO Jaime Martirez said.

Martirez said that a number of companies have been planning their fundraising through an initial public offering (IPO), but some of them have earlier decided to push back their listing plans because of high interest rates.

“When interest rates start to stabilize, I think we’re going to be seeing rate reductions already, and there will be more to come, then there will be a gradual shift to the equities market. There will be more interest again to pursue their IPO plans,” Martirez said

“Concerning the number of companies planning to do an IPO, it would be tough right now to determine. But is there an interest to do a listing? There is. Companies are just really waiting for the right time for market conditions to improve,” he said.

For 2024, the Philippine Stock Exchange (PSE) has set a target of six IPOs and about P175 billion worth of capital to be raised.

Three companies have so far went public this year: NexGen Energy Corp., OceanaGold Philippines Inc., and Citicore Renewable Energy Corp.

A fourth listing could be from Top Line Business Development Corp., which has filed for a P3.2-billion IPO later this year to fuel its expansion plans.

“We do still see a lot of appetite. Many companies have been preparing for their IPOs and follow-on offers, and I believe it is just a question of timing. We’ve all been waiting for the interest rates to go down,” said Pamela Victoriano, senior vice president for investment banking at Unicapital.

“Some of them are mid-cap sized companies, let’s say P5 billion to P10 billion, and on the big-sized, we’re talking about the multi-billion peso. The good thing about the Philippines is there’s so much growth potential. There are so many sectors that are interesting to investors right now, both local and international,” Victoriano said.

Overall, Unicapital expects a significant improvement in the foundations shaping the country’s macroeconomic landscape, all of which positively impact businesses and encourage more economic activity.

The group projects that there will be a more pronounced easing of key policy rates as early as the next Monetary Board meeting of the Bangko Sentral ng Pilipinas scheduled in October, driven by an overall downward trend in inflation rates.

“The inflation rate is anticipated to drop further in the coming months due to the recent rice tariff reduction from 35 percent to 15 percent. We expect easing key policy rates in the second half of 2024, with up to a 50-basis-points rate cut, driven by a cooling inflation rate,” Unicapital head of research Wendy Estacio-Cruz said.

The investment house also projects a modest growth in the country’s gross domestic product at 5.8 to six percent for 2024, near the low end of the government’s target of six to seven percent.

With an overall positive macroeconomic outlook, Unicapital sees the equities market hitting the 7,000-index target this year.

“We cannot deny that the Philippines has also been affected by geopolitical issues, not to mention that high inflation has been a major factor in the equities market having a very low turnover. Now that we are seeing inflation starting to taper because of interest rates going down, we can see now a more active market,” Martirez said.