The company bills itself as a local brokerage with experience trading in the PSE and many global markets, like the US, China, Hong Kong, Indonesia, and Japan. CTS Global [CTS pre-PSE] is chaired by Edward Lee, who also chairs COL Financial [COL 3.99 0.25%].
The SEC approved CTS’s application to conduct an IPO to sell 1.37 billion common shares at up to P1.00/share; CTS plans to use the proceeds to expand its global trading operations and update its client management systems.
The offer period is scheduled for March 31 through April 6, with an IPO/listing on April 13.
CTS said that it has “consistently generated profits from its assets under management”, but that “overhead expenses” have, up till now, prevented it from “maximiz[ing] its bottomline profit”.
CTS plans to deploy the proceeds of the IPO into the “global markets” to take CTS “to the next level”.
Currently, CTS has approximately 30 traders managing P550 million in funds across all markets.
MB BOTTOM-LINE
We’ve seen so many SEC-approved IPO schedules get blown up that I’m going to wait for the PSE’s approval to start getting serious about the April 13th IPO date.
On some level, the logic employed by CTS is fairly solid: giving more money to the same traders should amplify the returns that those traders have been generating, without having to pay anything in additional salaries.
Income goes up, while expenses stay flat.
CTS plans to plow the IPO proceeds into global markets to achieve its goal of sourcing at least 75% of its trading revenue from global markets by 2025.
The thing that trips me up, though, is that CTS has generated its historic returns mostly in the Philippine market as a Philippine brokerage: 63% of its 2021 trading revenues came from trading the PSE, with only 37% of revenues coming from its activities on the global markets.
Through 2018 and 2019, over 82% of its trading revenue came from the Philippine market.
In 2020, the distribution was basically even, but as I said, by 2021, the split was again heavily in favor of the Philippine market.
Maybe CTS has internal data to validate its global trading self-confidence, but I don’t see a lot of hard information in the prospectus that would help me, the potential investor, gain that similar level of confidence.
CTS attributes its trading success to an internally-developed trading system that encompases fundamental analysis, technical analysis, sentiment, and risk management, but these are common components of most software-based trading systems.
I feel like I don’t know the hook for this one, yet, so I’m going to stay open-minded and wait to see if CTS updates its prospectus to add more guidance on these issues.
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