PHL companies told to review IPO plans
PHILIPPINE companies should reassess their plans as the country saw a sluggish start in the number of initial public offerings (IPOs) this year, according to professional services company SyCip Gorres Velayo & Co. (SGV).
“It was a slow start for the IPO scene in Asia-Pacific, including the Philippines, in 2024,” SGV Assurance Partner and Philippine EY Private Leader Kristopher S. Catalan said in an e-mailed statement on Monday, citing data from the EY Global IPO Trends Q1 2024 report.
“With a generally cautious optimism with the expectation of modest growth in the global economy, companies must reevaluate their readiness to go public given the shifting investor preferences, and look into whether they have strong fundamentals and business models to offer to public investors, not just a promise of growth in their prospectuses,” he added.
Mr. Catalan said it is important for companies that plan an IPO to be well-prepared to obtain a fair valuation for their companies “when the right conditions are in play.”
The Philippine Stock Exchange (PSE) saw two IPOs so far this year, consisting of OceanaGold (Philippines), Inc. in May and Citicorp Renewable Energy Corp. on Friday last week. The local bourse operator is eyeing to have six IPOs this year and P175 billion worth of capital raised.
SGV data said that IPO activity across Southeast Asia “was lukewarm” for the first quarter with 38 deals raising $1 billion, lower than the 51 deals and $1.4 billion raised last year.
The most active Southeast Asian exchanges in the first quarter were Indonesia (20 IPOs raising $224 million), Malaysia (nine IPOs raising $279 million), and Thailand (six IPOs raising $273 million). The Philippines, Singapore, and Sri Lanka each saw one IPO on their exchanges, raising $202 million, $20 million, and $2 million, respectively.
“The IPO market in Southeast Asia was subdued as high interest rates and inflationary pressures continued to impact the confidence levels of both investors and issuers. This challenging economic environment has prompted companies in the region to recalibrate their strategies, placing a heightened emphasis on achieving profitability,” EY ASEAN and Singapore IPO leader Chan Yew Kiang said.
“As inflationary pressures begin to subside, the anticipated reduction in interest rates is likely to create a more favorable climate for IPOs. A strong performance from the global IPO markets will encourage Southeast Asian companies that have been hesitant to go public to reevaluate their position,” he added.
Globally, SGV said the IPO market saw 287 deals raising $23.7 billion, down by 7% in volume and 7% higher in proceeds compared with last year.
Meanwhile, EY Global IPO Leader George Chan said that those eyeing an IPO should remain flexible and prepared to seize the right moment for their public debuts to succeed in the shifting environment.
“As 2024 unfolds, participants in the IPO market are entering uncharted territory. IPO candidates are influenced by the recent pivot in investors’ preference toward proven profitability in an altered interest rate landscape, and are doing this while facing the intricate dynamics of an intensified geopolitical climate and the buzz around artificial intelligence,” he said.
SGV & Co. is a member firm of Ernst & Young Global Ltd. It is the largest professional services firm in the Philippines.
The EY Global IPO Trends Q1 2024 report analyzed data up to March 18 to identify key IPO market trends and the outlook for 2024. EY analysts utilized data provided by Dealogic, S&P Capital IQ, Mergermarket, and PitchBook. — Revin Mikhael D. Ochave