Investors can reasonably expect capital-raising activities from five or six companies going public this year but none of them present the kind of excitement seen generated by the planned initial public offering of SM Group’s real estate investment trust (REIT) unit and Enrique Razon’s Prime Infrastructure Inc., stockbroker Abacus Securities Corp. said.
Also, the financial technology firm Mynt-Globe Fintech Innovations Inc. that owns GCash is seen opting for an overseas listing instead of raising its capital requirement at the Philippine Stock Exchange, the stockbroker said.
Nicky Franco, Abacus Securities head of research, told clients that PSE president Ramon Monzon previously indicated that some P40 billion may be raised from a series of IPOs this year.
He estimated the capital-raising exercises will likely attract capital funds of around P8 billion each, effectively ruling out the likelihood of an IPO for the REIT arm of the SM Group and billionaire Razon’s Prime Infrastructure.
“So basically that precludes SM Prime which looks to raise around USD1 billion (about P56 billion) for SM REIT. Prime Infra is looking at a very large number as well,” Franco said of Razon’s plan to raise P33 billion from the PSE.
As for Mynt, the fintech arm of Globe Telecom, the odds are high that it will likely tap funds from overseas investors rather than engage in an IPO this year.
“Recall that management said consistently last year that they want to be IPO ready by the end of 2023. Definitely they would have already done a lot of groundwork, preparatory work for that. We believe the odds favor for Mynt to list this year but it will be done overseas unfortunate for us,” Franco said.
He also said this should prove positive for Globe in the long run “because they really need the capital to continue their aggressive expansion strategy.”
According to Franco, the domestic capital market is poised for a leap this year based on the improving fundamentals no matter the headwinds seen over the local and foreign horizon.
It is also likely for the economy to undershoot the target 6 to 7 percent gross domestic product growth for 2023, with last year’s fourth-quarter outturn at the low end of the target range.
“And we’re actually looking at 5 percent for 2024,” he said, prospectively. According to him, the economy last year is still reeling from the long tail impact of the pandemic, the tight monetary policy space, rather high commodities prices, the El Nino and China’s weak economy.
The Abacus official said inflation is waning and the likelihood of an easing in March or April increasingly looks likely.
“As you probably remember, from late 2020 to early 2023, high vegetable prices, particularly for onion, caused significant increases in headline inflation. However, the base effects from high vegetable prices will practically disappear around March or April of this year,” Franco said.
“On the other hand, price pressures from rice is likely to stay at the current level of 19.6 percent or even higher because of tight global supply, especially from the country’s primary supplier, Vietnam. What we’re saying is that when the positive base effect from vegetables disappears in March or April, then the negative impact of high rice prices is going to take over even though we expect the February inflation to be close to 3 percent,” he said.
According to him, inflation could hit 5 percent around mid-year or by the third quarter, still above the target or only 2 to 4 percent for 2024.
“We cannot rule out inflation actually going back as high as 6 percent later this year,” he said.
He projected lower prices for oil and coal to help temper the rise in headline inflation and that the Bangko Sentral ng Pilipinas will likely cut the policy rates by 100 up to 150 basis points this year, the first cut happening around May.
“This is following the potential for the (US) Fed to cut its own policy rate as early as March. I believe that the odds for a rate cut from the Fed in March is at about 70 percent. So that’s a very good number to bet on. And if the Fed does follow through and cut rates in March, then we believe the BSP will start to ease rates in May,” he said.
