Cebu SMEs still not keen on going public

CEBU, Philippines - Despite the active campaign of the Philippine Stock Exchange (PSE) to entice small and medium enterprises (SMEs) to enter into the stock market, through the initial public offering (IPO), majority of these companies are still less interested to get into the equity market.

PSE chief operating officer (COO) Roel A. Refran admitted that PSE still has to work harder in implementing education campaign to attract SMEs to go public.

“They [SMEs] still have to understand how the equity market can help build their businesses. Once they appreciate it, they will go after it. The gestation period takes time. Some are hesitant to give up their control in their businesses, [once they go public],” said Refran in an interview during the PSE 2013 roadshow held at the Cebu City Marriott Hotel.

In Cebu, PSE is working to touch base with SMEs and the Cebuano companies to help them appreciate the equity market to support them in their growth and capitalization requirement.

In the next two years, Refran said at least two Cebuano companies are expected to go public. PSE is also working with the business organizations in Cebu, such as the Cebu Chamber of Commerce and Industry (CCCI) to drum up interest of companies to enter IPO.

Refran mentioned the success of Pancake House restaurant chain, saying before the company went public, its worth was only P10 million in the year 2000. Now, the company’s worth is at P2.9 billion. This is how going public can do to companies in terms of growth.

The most prominent Cebuano company that went public is the Aboitiz Equity Ventures (AEV), the Aboitiz Power, Cebu Holdings Inc. (CHI), Waterfront Philippines, Inc. (WPI) and a few others.

In an earlier interview, Cebu Business Club (CBC) president Dondi Joseph also said that Cebuano businesses are family-owned and most are organized to the scale of doing business in and around Cebu.

Joseph added that many family-run businesses feel they do not need outside capital at the expense of possibility of losing control of most of their business.

“I think it also has to do with knowledge of the benefits of going public and how it can turn short-lived family businesses into sustainable corporations,” Joseph said.

Likewise, in a separate interview with PSE president and chief executive officer (CEO) Hans Sicat, he said that his office is implementing several programs to develop entry of more SMEs to the stock market.

According to Sicat, the reason why PSE has opened a satellite office in Cebu is to encourage Cebu-based businesses to go public and find alternative capital resources in the dynamic equity market.

Sicat said the PSE’s SME Board was purposely created with lesser and relaxed requirements to encourage young companies and SMEs to go public.

“A lot of SMEs are not aware that raising capital in the stock market is much easier than going to the bank,” Sicat said.

Most of SMEs still have the Filipino pre-disposition that the only source of capitalization is the banks, when alternative funding resources are easily available in other channels, such as the capital market. /JMD (FREEMAN)