Pepsi loses 19% in PSE debut

Shares of Pepsi-Cola Products Philippines Inc. (PCPPI) went down nearly 19 percent in their market debut yesterday despite a generally upbeat trading session at the Philippine Stock Exchange (PSE).

PCPPI, the first company to go public this year, opened at P3.30 each share and closed at its low of P2.85, down 18.6 percent from its initial public offering (IPO) price of P3.50 per share.

Analysts said the issue failed to stir enough investor interest even as the market cheered the higher-than-expected economic growth data for 2007 and the central bank’s move to slash its benchmark interest rates.

The listing raised just P4 billion after PCPPI priced the offer at the bottom of its indicative range of P3.50-P4.30 and nearly half an initial indicative offer price, due to steep drops on equity markets at the start of the year.

But despite the discounted price, the bottler’s stock kept falling, bucking the positive trend in the local market, which rose over two percent at one stage after Thursday’s 25 basis point interest rate cut and data showing economic growth in 2007 hit a 31-year high.

Analysts said the company had mis-timed its offer and had not persuaded investors that it could gain a competitive edge on larger competitor Coca-Cola Bottlers Philippines Inc., which is 100-percent owned by US giant Coca-Cola Co since last year.

“The perception is in the carbonated sector they are not doing as well as Coca-Cola,” said Spencer Yap, senior analyst at BPI Securities. “The reception during the offering itself was not that hot. The interest just wasn’t there.”

Commenting on the lukewarm listing of PCPPI, Lauro Baja, managing director for UBS in the Philippines, said: “Look at it in the context of what has happened in the global markets. Markets have entered a bearish phase amid heightened worries that a possible US recession will cause a worldwide economic slowdown.”

UBS was the sole global coordinator, bookrunner and underwriter for the IPO while ATR Kim-Eng Capital Partners Inc. and BDO Capital Investment Corp. were the joint domestic lead underwriters.

For his part, PCPPI chief executive officer Micky Yong said the fact that they went ahead with the listing “is already a huge validation of investors’ confidence in our company. You don’t expect share prices to fly in a market like this.”

Baja said the IPO was 1.3 times oversubscribed in the international market with investors from Asia taking up 69 percent of the shares offered overseas followed by US investors (20 percent) and European investors (11 percent).

The Government of Singapore Investment Corp. purchased 350 million shares of PCPPI, equivalent to a 9.5-percent stake in the country’s second largest bottler.

GIC is a global investment management company which invests in equities, fixed income, foreign exchange, commodities, money markets, alternative investments, real estate and private equity.

Out of the total IPO proceeds, P1.2 billion will go directly to PCCPI, primarily for its expansion program which involves the installation of additional bottling lines to increase capacity and the improvement of its distribution facilities to allow it to launch new carbonated and non-carbonated drinks.

The remaining P2.7 billion will go to the selling shareholders, Malaysian-owned Guoco Assets Philippines Inc. and The Nassim Fund.