Largest Philippine IPO Since 2016 Likely to Gain in Debut, Analysts Say

(Bloomberg) -- Shares in AllHome Corp.’s initial public offering, the biggest in the Philippines in three years, stand a good chance of gaining when they start trading Thursday, according to analysts and investors.

That’s because the home improvement and furniture retailer priced its IPO at the lower end. Also, with overseas demand exceeding the allocation limit for non-locals, foreign investors could provide support for AllHome’s share price, they said.

The lower IPO price made AllHome’s valuation “attractive” while “there’s pent-up demand from foreigners,” who didn’t get all the shares they wanted, said Noel Reyes, chief investment officer at Security Bank Corp.

AllHome is the nation’s biggest IPO since Pilipinas Shell Petroleum Corp.’s $390 million flotation in 2016. It’s the third company go to public this year in the country, while the nation awaits its biggest IPO from Metro Pacific Investments Corp.’s hospital unit. Axelum Resources Corp., a coconut products producer that sold shares before AllHome, was priced at the lower end of its range and sank 6.2% when it began trading on Oct. 7.

Allhome’s IPO raised 12.94 billion pesos ($250 million) from the sale of 1.125 billion shares at 11.50 pesos each - the low end of its indicative price, with the top end at 16 pesos a share. The amount doesn’t include an additional 168.75 million shares set aside as an over-allotment option.

At its IPO price, valuation is at 28 times estimated 2020 earnings, making AllHome comparable with Wilcon Depot Inc., a retailer of hardware and home building materials, according to Rachelle Cruz, an analyst at AP Securities Inc.

Here’s what analysts are saying:

• AB Capital (Gerard Abad)
  • “Stock could follow Wilcon’s performance, which began weak then started to climb as it delivered on store expansion and earnings”
  • “Those buying the IPO are entering a business that’s still at the ground floor. AllHome will use the money for expansion and plug holes in its business model”
• Papa Securities (Manny Cruz)
  • “It belongs to an industry that’s growing with consumer spending so there is demand for the stock but this will be tempered by valuation and market sentiment”
  • Wilcon’s good performance could indicate that AllHome’s stock price will go up as many investors will compare the two stocks
• Security Bank (Noel Reyes)
  • “AllHome offers a more complete lineup than Wilcon, so it offers an alternative. Aside from building materials, it sells appliances, linen, furniture and builders”
  • AllHome’s expansion won’t be hampered by negotiations and lack of location since Vista Land has commercial properties in its more than 150 residential projects
• AP Securities (Rachelle Cruz)
  • “Many local institutional investors took up their allocation upon hearing that AllHome generated strong interest abroad”
  • IKEA’s entry in 2020 will provide additional competition to AllHome
  • Estimates 2019/2020 earnings of 956 million pesos/1.52 billion pesos, weaker than guidance as sales at new stores may not pick up as fast as management estimates

To contact the reporter on this story: Ian Sayson in Manila at isayson@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Margo Towie

©2019 Bloomberg L.P.