Cebu Air pegs IPO price at P125/share

MANILA, Philippines - Gokongwei-owned Cebu Air, the operator of budget carrier Cebu Pacific, has pegged its initial public offering (IPO) price at P125 per share, the midpoint of its indicative price range.

With this, the share sale could raise up to P26.8 billion (including the greenshoe option) for the low-cost airline. The company is selling up to 214.63 million common shares (inclusive of the 27.995 million shares for the over-allotment option), 30.66 million of which will be sold through a primary offering while 155.975 million shares will be sold by current shareholders.

Cebu Air, a unit of the listed investment firm JG Summit Holdings Corp., had previously set a price range of P110 to P135 a share for the public offer.

Citigroup, Deutsche Bank and JP Morgan are the joint global lead managers for the share sale, while ATR KimEng Capital Partners is the local lead underwriter.

Junie Banaag, vice-president and head of First Metro Investment Corp.’s Investment Advisory Group, said the final offer price offers some upside but “not much.” 

“At P125, there’s money left on the table but not much. At the expected profit and EBITDA next year, the price-earnings is 12.4 times while the acquisition value or enterprise value to ebitda is 8.4 times,” he said.

Banaag has forecast Cebu Air’s valuation to go up to no more than 14 times P/E (price/earnings) and 9.4 times enterprise value-to-EBITDA (earning before interests, taxes, depreciation and amortization).

Cebu Air, which has a current fleet of 29 aircraft and a manpower of 600 attendants, plans to use proceeds from the share sale to fund its expansion with the acquisition of new planes. Of the estimated total proceeds, P19.496 billion will go to parent firm CPAirHoldings while P4.139 billion will be channeled to Cebu Air to support its massive refleeting program.

The offering period will run from Oct. 12 to 19 with the shares expected to be traded on the Philippine Stock Exchange on Oct. 26 as the original target listing date of Oct. 25 was declared a holiday by the government to give way to the nationwide barangay and Sangguniang Kabataan elections.

Cebu Pacific is spending $1.4 billion for the purchase of 22 brand-new Airbus aircraft scheduled for delivery this year until 2014. Three Airbus A320s will be delivered in the last quarter of the year; another three will be delivered starting June towards the end of the second half of 2011; four units by 2012 ; seven by 2013; and five by 2014.

The offering, touted to be the biggest in local corporate history, was supposed to take place in 2008 but weak market conditions as a result of the global financial crisis forced the carrier to temporarily put it aside.

Cebu Pacific, which carried more passengers than larger rival Philippine Airlines, posted a net profit of $68.4 million in the first half this year.