SSI Group books covered ahead of IPO

A revised deal and more attractive valuation has resonated well with institutional investors ahead of SSI's IPO, which could net the Philippines retailer up to $166 million.

Books were covered quickly for the IPO of Philippines retailer SSI Group, which aims to raise up to $166 million this month in what would be the country’s largest flotation this year.

The revised deal — the retailer dropped the price range to P7 to P7.50 per share from the P12.50 per share initially — appears to be resonating well with institutional investors, according to a banker close to the deal, who said it was covered just hours after books opened on the first day.

“People generally think the valuation is reasonable, plus there’s very strong interest in the consumer retail sector in Southeast Asia generally,” the banker told FinanceAsia.

HSBC, Credit Suisse and BPI Capital Corp are overseeing the IPO, which will be the third in the country this year. Century Pacific Food raised $71 million in April and DoubleDragon Properties Corp secured $26 million in March, according to Dealogic data.

SSI’s base deal consists of 864.2 million shares — or 26.1% of enlarged share capital. An exercised greenshoe option will bring the total deal size to 993.9 million shares, representing 30% of enlarged share capital.

The new deal puts the company’s p/e at 18.9 times to 20.2 times its 2015 earnings, a discount to its peers.

The lower price range helped the issuer and syndicate secure six cornerstone investors during the roadshow. Capital Research, Macquarie Funds, Government Service Insurance System, Bank of Philippine Islands Asset Management, Havenport Asset Management and York Capital have agreed to purchase 335.6 million shares, or 39% of the base size, and invest a combined $56 million, according to a term sheet.

The deal will price on October 22, with the retail offer period remaining open from October 27 to 31.

Some 80.5% of the base deal is primary with the remainder secondary, set to be sold off by various members of the Tantoco family, who own the majority of the company. The entire greenshoe option is secondary.

SSI Group, which sells 103 international brands including Prada, Gucci, Burberry, Salvatore Ferragamo, Michael Kors, Gap, Zara, and Marks & Spencer and operates convenience stores through the FamilyMart chain, will use the majority of the proceeds towards constructing new storefronts.

Where are the comps trading?
At 18.9 times to 20.2 times its 2015 earnings, SSI Group is being marketed at a discount to main peers Robinson’s Retail and PT Mitra Adiperkasa.

Robinson’s Retail, also listed in the Philippines, is trading at 24.67 times its 2014 earnings, while Indonesian retailer PT Mitra Adiperkasa is currently trading at 29.01 times 2014 book.

Performance for the Southeast Asian retailers is mixed. Robinson’s Retail is up 11% this year, while PT Mitra Adiperkasa is down 8%.

The Philippines Stock Exchange is up 16% in the year to October 16, although it has retreated in recent weeks following a global slowdown in equities. After peaking this year on September 24, the country’s bourse has dropped 6%.

Similarly, the Jakarta Stock Exchange is up 15% year-to-date but has fallen 5% since mid-September.  

Tokyo’s Nikkei 225 is down 8% since mid-September, while Hong Kong’s Hang Seng Index has been on a downward trend since September 3, dropping 9% up to October 16.

Most attribute the global stock market declines to the IMF cutting its 2015 global growth forecast to 3.8% from 4%. Other events, such as the Ebola outbreak and the student-led protests in Hong Kong have also likely weighed on equities.

Tough week
The negative sentiment following the IMF’s revised forecast appears to be affecting a number of recently listed companies. Online payment company MOL Global plunged 38% after raising $169 million in its Nasdaq IPO on October 9.

Hua Hong Semiconductor, meanwhile, fell 5% on its market debut, although it has recovered and is now only down 0.62% since it raised HK$2.57 billion ($330 million) on October 9. Both deals were priced at the bottom end of their indicative ranges.

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