SEC approves Top Line Business Development’s P2.87B IPO

On Thursday last week, the SEC approved the IPO application of Cebu-based Top Line Business Development [TOP pre-PSE] [link], which seeks to raise up to P2.9B through the sale of ~3.683 billion primary common shares at P0.78/share. There’s also an over-allotment option of 0.368 billion secondary common shares being sold by the Topline Equity Corporation, the Lapasaran Lim Family’s private holding company, which currently owns 77% of TOP (with the Lapasaran Lim Family owning the remaining 23% directly). TOP is a fuel retailer, and it’s looking to spend 36% of the primary proceeds on “construction of fuel depots”, with 11% going to “acquisition of fuel tankers” and 6% going to “acquisition of fuel trucks”. The second-largest line-item is working capital, at 34%. Only 2% of the proceeds are allocated for the “construction of service stations”. The remainder (11%) will go to “general corporate purposes”. TOP believes that the construction of the fuel depots will start next year and that they will be “operational by mid-2026”. The preliminary prospectus says that TOP hopes to set its final price for the offer on October 28, with an offer period between November 6 and November 12, and a listing on November 22. All of those dates are tentative pending the PSE’s ultimate approval.

MB BOTTOM-LINE:  I’m saving my deep dive on TOP for when it’s officially approved by the PSE. I add the dates into my calendar only after PSE approval because that step can take a seemingly random amount of time and nothing is set in (soft) stone until the PSE says so. Aside from that, this is a primary-heavy offer, which I tend to like, because the proceeds from the primary shares are the only funds that flow back to TOP itself. The proceeds from the sale of the secondary shares (if any) will go to the family’s private holdco. Strategically, what sets TOP apart is its interest in operating on the margins by supplying fuel to “underserved” areas and to specialty commercial customers that require fuel deliveries. From that perspective, I like the initial asset-heavy stance of the use of proceeds, which will apply most of the money to building distribution infrastructure to service more of those high-margin clients. A little more direction from the family may help me understand their growth strategy better, however, as a large percentage of the proceeds is earmarked for working capital and general corporate purposes. Even if it’s something unsexy like “refinancing loans”, that will at least give us the ability to infer the potential savings to be had. If I go any further I’m going to jump the gun and get detailed, so I’m just going to let the process work and wait for the next iteration of the prospectus that will come out when the pricing is set!  

Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.