Solar Philippines’ Trading Debut Clouded by Medilines Tumble
(Bloomberg) -- Solar Philippines Nueva Ecija Corp., which plans to build Southeast Asia’s biggest solar farm, faces “headwinds” when its starts trading on Friday after completing a 2.7 billion peso ($54 million) initial public offering.
While the renewable-energy sector gives Solar Philippines some buzz, analysts say the stock, priced at 1 peso a share in its IPO, may face selling pressure following Medilines Distributors Inc.’s 30% tumble on its Dec. 7 debut.
“It’s a small IPO, but many will probably flip the stock given the meltdown in Medilines, which has also spread to other recent IPOs and share sales,” said Manny Cruz, a strategist at Papa Securities Corp.
AllDay Marts Inc. now trades below its 60 centavo IPO price, while The Keepers Holdings Inc. and Synergy Grid & Development Philippines Inc. are at discounts from their follow-on offers.
Solar Philippines, which has no operating track record, plans a 500-megawatt solar farm in a province north of Manila. The first phase, expected to cost 4.88 billion pesos, comprises 50 megawatts by end of next year and another 175 MW in early-2023 or within nine months after financing closing for the additional capacity, according to the prospectus.
Solar Philippines’ IPO was twice oversubscribed, generating 5.3 billion pesos in orders, according to Abacus Capital & Investment Corp., the sale’s underwriter.
Here’s what analysts say about the stock:
Papa Securities (Manny Cruz):
- “Solar Philippines is in a hot, promising sector but investors are jittery for many got burned with Medilines”
- Though it may pose gains given the IPO’s size, the “main headwind will be a barrage of selling from people who bought with the intention of flipping the stock”
- The company’s lack of a track record is a concern, although parent Solar Philippines Power Project Holdings Inc. and founder Leandro Leviste have developed two solar projects
- Philippine billionaire Enrique Razon’s investment in Leviste’s other solar ventures will help build “market confidence”
AP Securities (Carlos Temporal):
- Stock has “significant potential upside” and will likely “perform better than Medilines but investors would probably take caution and sell on strength because sentiments for IPOs aren’t as strong as before”
- “The main risk is if the company can execute and deliver the project”
- IPO price is at par with 99 centavo a share ascribed value of its under-construction solar farm
- Successful commissioning of 50-MW capacity by 2022 could push share price to 1.29 pesos, with possibility of 2.37 pesos upon reaching additional 175-MW capacity by 2023
- Absent a bilateral supply contract, company may sell in the “lucrative” spot market where prices are seen to remain elevated
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