Philippine property developer Century Properties Group yesterday opened the order books for a follow-on offering that aims to raise between Ps3.5 billion and Ps4.7 billion ($82 million to $110 million), and boost the company’s free-float.
Century Properties, which is controlled by the Antonio family and has a 26-year track record when it comes to the development of residential, office, medical and retail properties, went public last year through a backdoor listing that involved a reverse takeover of East Asia Power Resources Corp. At the time of the takeover East Asia Power was basically a shell company and after a share swap exercise Century Properties’ parent company (Century Properties Inc) currently holds 97% of the listed vehicle.
As a result, the stock is thinly traded and there have been few opportunities for public investors to buy into it since the listing. All but a couple of the company’s top-100 investors are Filipino. In that sense the follow-on share sale is essentially a re-IPO — meaning that it is marketed as an IPO with a management roadshow and a price range that values the company in relation to its peers rather than at a discount versus its current share price.
However, the bookbuilding will be concentrated down to just three days, with the final price expected to be fixed after the close of Asian markets tomorrow. UBS is the sole bookrunner.
The base offering comprises 2 billion shares, or 25% of the enlarged share capital. At least two-thirds of that will be new shares, while the rest will be existing shares sold by the parent company. However, this isn’t set in stone and the primary component may increase, according to a source. The deal also comes with a 15% overallotment option that could boost the free-float further and increase the total proceeds to as much as $127 million.
The shares are offered at a price between Ps1.75 and Ps2.35 apiece, which translates into a 2012 price-to-earnings ratio of 7.8 to 10.4 times. At the lower end of the range this compares favourably to similarly sized developers SM Development and Filinvest, which trade at 11.9 times and 8.8 times this year’s earnings respectively. It is also at a significant discount to the Philippine property development sector as a whole, which is currently trading at an average 14.2 times. However, excluding highly valued outliers such as Ayala the sector average drops to 9.3 times.
The share price shot up to a high of Ps3.93 in July after the reverse takeover was announced, but has pretty much hovered in a range between Ps1.75 and Ps2.50 since the beginning of September. It closed at Ps2.23 yesterday.
In addition to its extensive track record and experience, Century Properties is offering fairly high growth and also has a different marketing and sales strategy compared to its competitors in the sense that it teams up with key global franchises and individuals when it comes to the design to provide “branded” properties that help to capture customers. So far, it has worked together with Gianni Versace, Donald Trump, Paris Hilton and Philip Starck among others.
As of the end of October last year it had completed 20 condominium and commercial buildings with a total gross floor area of more than 548,200 square metres. It was also in the process of developing four master-planned communities that are expected to include 23 condominium and commercial buildings, and 955 detached homes with a total area of close to 1.2 million square metres. The company has a land bank for future development of about 1.97 million square metres in Quezon City and Batangas.
Its residential developments are viewed to be high-end and many of them are targeted at overseas Filipino workers and foreign expatriates. The company is raising money to fund its development projects and to add to its land bank.
Century Properties already has the backing of Dutch pension group APG, which is a keen property investor and bought into the company early last year through a Ps1.6 billion convertible bond. The CB will be converted into shares at the time of the re-IPO, although APG has agreed to a 12-month lock-up before selling any of them.
APG will hold 9.8% of the company if the price is fixed at the mid-point and before any potential exercise of the overallotment option. Parent company CPI will own 65.2% and public shareholders will own 25%.
The management started the roadshow in London last Friday and spent Monday and Tuesday meeting investors in Hong Kong. It will be in Singapore today and tomorrow, before wrapping up and pricing the deal tomorrow evening. As a Reg-S offering, the deal isn’t open to onshore US investors.
The bookrunner is said to have had some shadow commitments when it opened the order books yesterday and, according to a source, investors are quite keen to at least look at the deal in light of the relative outperformance of the Philippine stock market in the past year. Puregold Price Club, which was the only Philippine IPO targeted at international investors to get completed last year, has also done well since its debut in early October.