D.M. Wenceslao: An IPO Bust


Aftermath of an ill-timed public listing

The first Philippine initial public offering (IPO) of the year has succumb to the overall bearish mood of the market.

With an initial offering price of 12 peso per share, shares of the Philippine integrated property developer fell 14.5% to 10.26 peso per share by market close.

D.M. Wenceslao (ticker DMW) was the biggest decliner among all the Philippine stocks on Friday.

The proud Wenceslao-led property firm has over 50-year heritage and has one of the dominant players in land reclamation and infrastructure construction in the Philippines.

Having raised the money, the company intends to use it for development of its pipeline projects, acquire land assets through potential share acquisitions, develop infrastructure within Aseana City and for other general corporate purposes.

At what was initially planned an IPO price of 22.90 per share just a month ago, and now having fallen to current price levels.

DMW now has an estimated 35 billion php in total market capitalization. This is far less when compared to what was a possible planned 77.8 billion php initial target (before the change to 12 php IPO price from 22.9 php).

Investors could not blame DMW’s determination to go public alone as the Philippine stock index has recently entered the bear market, and has been the worst performer in the Asia Pacific.


Philippine Composite is down 15.95%

China Shenzhen Composite is down 15.36%

To add, nearly $8 trillion worth has been wiped out in the emerging market stock markets since its recent bull market high this year.

Focusing back on DMW at 10.26 a share**, the property developer has an estimated price-earnings ratio of 22x, price-book ratio of 3.4x, and price-sales ratio of 11.6x.

**all valuations derived using 2017 financial figures disclosures. Much accurate if second half of 2018 figures were used.

In comparison, Megaworld (ticker MEG) has a trailing price-earnings ratio of 10.4x, and price-book 0.97x. Ayala Land (ticker ALI), meanwhile, has price-earnings ratio of 20.9x and price-book figure of 3.5x.

Nonetheless, DMW has a healthy balance sheet with debt-equity ratio of 0.26x compared to Megaworld’s 0.52x and Ayala Land’s 1.15x.

At current price levels, however, DMW may still have further to fall if overall investor sentiment does not change.

Disclosure: No shares in any of the companies mentioned.

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