Banco de Oro makes lackluster debut at stock exchange

Newly listed Banco de Oro Universal Bank failed to excite investor interest at its debut yesterday amid a lackluster market and with pricing viewed as excessive, traders said.

The bank, the 13th-largest in the country in terms of assets, offered 106 million shares, up from an original 89 million, to brokers and the public priced at P20.80 each. The initial public offering (IPO) was heavily oversubscribed, raising hopes for an immediate uptick in the price of the stock.

However after opening at P21, the stock had slid back to a low of P20.25 before closing at P20.75.

A Luzon-wide power failure and a technical glitch at the trading floor forced the Philippine Stock Exchange to suspend the afternoon session.

KGI Securities vice-president Henry Ong said large sell orders were lined up from mainly retail investors at P21 and P21.25 in early trade but there were no takers.

"These people bought the shares in the hope that the price would shoot up on listing and they could cash out immediately… however there was a reluctance to buy at that level, it (the price to earnings ratio) is quite expensive at around 20 times (2002 estimated earnings) compared to other stocks in the sector," he said.

The inability of investors to cash out weighed on the broad market, Ong said, as traders had been hoping that funds could be freed up to be channeled elsewhere.

"We were expecting after listing that some funds would be freed up and that liquidity in the market would improve but we have not seen that yet, volumes remain very low.

Despite BDO’s solid fundamentals the stock was hardly a favorite yesterday, in contrast to its pre-IPO billing. In terms of total trade, BDO was only third behind PLDT and La Tondeña.

Turnover was a meager P212.63 million.

Hopes of stock price rise

Ong said the stock could still move up late yesterday if it was supported by individuals associated with the SM group.

Banco de Oro is a member of the group, headed by mall magnate Henry Sy, chairman of SM Prime Holdings Inc. which manages the successful SM mall chain.

"We are still hoping that by the end of the day maybe it could close at P21.25," Ong said.

Banco de Oro raised around P2.1 billion from its IPO, making it the largest public offering in the Philippines in value terms for the past two years.

It was the fourth IPO this year after Citystate Savings Bank, Salcon Power and Highlands Prime Inc.

The proceeds will be used to increase the bank’s trading accounts and to support lending activities.

Banco de Oro president Nestor Tan told Reuters on the sidelines of yesterday’s listing that he was expecting "good loans growth this year which will be a combination of organic growth and possible purchases of loan portfolios."

He declined to give details but said the firm remained on target to achieve its full-year net income estimate of P979 million, even with first quarter earnings only coming in at around P130 million.

"You have to understand that the proceeds of the IPO … as well as the growth (in loans) will normally come in the second half of the year," Tan said, adding the bank’s non-performing loans stood at around 12 percent of its total portfolio, well below the industry average of 18 percent.