However, Rizal Commercial Bank CorpÆs (RCBC) two-week roadshow kicked off in the SAR today and will try to get its investment story heard in Singapore and London this week, before hitting New York, San Francisco and Boston next week, and then pricing on March 15.
The Philippines fifth biggest bank by assets û which is controlled by the Yuchengco family and is 45 years old û is the latest stock to participate in the burgeoning theme of the filipino re-IPO. The bank currently has an effective freefloat of 8%, but should the share offer prove successful that could increase to 28%.
The bank is looking to sell 217 million shares, with 173 million dedicated to the international tranche. The offer will raise a maximum of $150 million should a $27 million greenshoe be exercised.
The stock has already had a strong run in recent weeks, surging from Ps23.75 on January 5 to a high of Ps44 on February 6. It closed yesterday at Ps38.50.
The run-up in the stock is largely attributed to the appointment four weeks ago of Lorenzo Tan as CEO. Tan has forged a reputation of something of a star banker in the Philippines having been CEO of Sun Life and helped restructure Philippines National Bank and the United Coconut Planters Bank.
His approach is to split institutions into ægood banks and bad banksÆ. In the case of RCBC he sees massive ægood bankÆ potential from utilising its branch network to sell more consumer banking products. Investors who attend the roadshow will be told that Tan views the Philippines of consisting of five consumer classes û the As, Bs, Cs, Ds and Es. The A and B group comprise 1.7 million, but the sweet spot, Tan reckons, is the C group comprising 36 million consumers who earn between $300-$2,000 per month. TanÆs philosophy is that every successful filipino consumer company û names such as PLDT and Jollibee û focus on the C group.
RCBC currently has one million consumer customers, but Tan will tell investors that he can grow this market. Part of the proceeds of the IPO will be invested in new technology and systems that will enable RCBC to offer more consumer-oriented banking services via phones, mobile phones and the internet.
With property prices going up in the Philippines and the lending environment generally good, investors may agree with this proposition. Indeed, for those fund managers who missed the boat when Banco de Oro began the re-IPO trend, RCBC may be viewed as a second chance.
The sole bookrunner of the offer and international underwriter is CLSA, with RCBC Capital acting as domestic lead underwriter. CLSAÆs adjusted book value for RCBC has it trading at 1.9x versus 2.3x for Banco de Oro, and 3.2x for BPI û making it the cheapest of the top-tier banks.
Investors will also take comfort that TanÆs own share option package has not yet been negotiated û meaning he will be heavily incentivised to steer the stock up from the dealÆs offer price.
The second leg of TanÆs strategy is the æbad bankÆ. RCBC has already sold Ps2.8 billion of non-performing assets but it retains NPLs of Ps8 billion ($167 million) out of a total loan book of about $2.2 billion. These NPLs are mostly thought to be secured against property, and the strategy here will be to maximise recovery rates and sell off property at premium prices.
Should the offer be fully subscribed after the bookbuilding process, RCBC will become the fourth biggest bank by capital, and will see the Yuchengco familyÆs stake diluted to 52%. The next biggest shareholder is emerging market fund manager, Spinnaker Capital, which purchased a 17% stake from Bank of Tokyo-Mitsubishi UFJ û and which is already heavily in the money on its investment.
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