FMIC expects ‘ hectic’ first half full of deals

COMPANIES may scramble to tap the capital market this semester, which also has a robust deal-making pipeline led by firms hunting for acquisitions at home amid cheaper valuations, First Metro Investment Corp. (FMIC) said in a briefing yesterday.

FMIC Executive Vice- President Justino Juan R. Ocampo said the investment banking arm of the Metropolitan Bank & Trust Co. may facilitate at least five bond and equity transactions this semester — a window for companies to lock in their requirements ahead of expected central bank moves to raise interest rates.

The list excludes Wilcon Depot, Inc.’s planned initial public offering ( IPO) of “up to P8 billion,” also expected to be launched in the first six months of 2017, Mr. Ocampo said. The home improvement and construction supplies retailer tapped FMIC as manager, bookrunner and lead underwriter of the share sale.

“We anticipate a hectic first half… We see visibility to be much better in the first half and we expect issuers to take advantage of the rates given the upward trajectory,” Mr. Ocampo said.

The Federal Reserve has kicked off another round of monetary policy tightening after raising interest rates in its last meeting in December — only the second time in the last seven years. The US central bank expects to hike borrowing costs three more times this year.

The Bangko Sentral ng Pilipinas ( BSP) is expected to follow suit with two rate hikes this year amid rising inflation.

FMIC plans to bring “market leaders” to the stock market, with “bite-sized” maiden share sales worth P2-4 billion, Mr. Ocampo said.

Despite the “very healthy” pipeline of fund- raising initiatives, Mr. Ocampo declined to comment if the value that will be raised this year will match last year’s levels.

“Timing is not sure…,” Mr. Ocampo said. “We expect everything to be front- loaded in the first semester because in the second semester, ang daming (there are many) moving parts.”

Infrastructure financing will be one of the main drivers of fund-raising this year, the FMIC official said, even as he stressed that more work must be done to develop the capital market to fund such projects.

Moreover, Philippine companies are increasingly setting sights on potential acquisitions at home, deviating from the previous trend of venturing out for growth. “With lower valuations now, it may be a window for domestic consolidation,” Mr. Ocampo said.

The Philippine Stock Exchange index now has a price-toearnings multiple — a measure of how expensive a market is — at roughly 16.6x, down from the average of 18x in the last five years, FMIC Assistant Vice-President and Head of Research Cristina S. Ulang said in the same briefing.

Even with the expected increase in interest rates in the months ahead, borrowing costs should remain generally supportive of acquisition financing, with banks as the primary source of funding requirements, Mr. Ocampo said.