Short version: Prime Infra’s IPO and another market update

Central Bank of the Philippines (BSP) https://news.google.com/rss/articles/CBMiemh0dHBzOi8vd3d3LnBoaWxzdGFyLmNvbS9idXNpbmVzcy9zdG9jay1jb21tZW50YXJ5LzIwMjMvMDUvMTYvMjI2NjcxNC9xdWljay10YWtlLXByaW1lLWluZnJhcy1pcG8tYW5kLTEtbW9yZS1tYXJrZXQtdXBkYXRl0gF_aHR0cHM6Ly93d3cucGhpbHN0YXIuY29tL2J1c2luZXNzL3N0b2NrLWNvbW1lbnRhcnkvMjAyMy8wNS8xNi8yMjY2NzE0L3F1aWNrLXRha2UtcHJpbWUtaW5mcmFzLWlwby1hbmQtMS1tb3JlLW1hcmtldC11cGRhdGUvYW1wLw?oc=5 Gov. Felipe Medalla said the BSP is “literally bribing banks to subsidize small transactions” by offering to lower reserve requirements in exchange for a blanket waiver of bank-to-bank transfers for small transactions . Mr Medalla said the aim is to reduce reserve requirements to at least 10% (from the current 12%) and that this would be offered as a sort of “cost-sharing scheme” that could give a boost to the banks’ board of directors for scrapping small transaction fees .

MB Quick Take: Take a look at the banks’ most recent full-year and quarterly results for fiscal year 2022 and the first quarter. You are more profitable than ever. They don’t need an additional 200 billion pesos of capital allocated for loans just to forego predatory small account transaction fees. The BSP is the regulator of the banking sector and could ban banks from charging these fees if they wanted to. The BSP does not have to negotiate with the banking sector about something it can do unilaterally. The BSP clearly wants to lower the RRR (which it has wanted to do for years) and is trying to find a cool/populist reason to do so at a time when pumping liquidity into the market could exacerbate inflation.

First class infrastructure capital [PFR pre-SEC] https://news.google.com/rss/articles/CBMiemh0dHBzOi8vd3d3LnBoaWxzdGFyLmNvbS9idXNpbmVzcy9zdG9jay1jb21tZW50YXJ5LzIwMjMvMDUvMTYvMjI2NjcxNC9xdWljay10YWtlLXByaW1lLWluZnJhcy1pcG8tYW5kLTEtbW9yZS1tYXJrZXQtdXBkYXRl0gF_aHR0cHM6Ly93d3cucGhpbHN0YXIuY29tL2J1c2luZXNzL3N0b2NrLWNvbW1lbnRhcnkvMjAyMy8wNS8xNi8yMjY2NzE0L3F1aWNrLXRha2UtcHJpbWUtaW5mcmFzLWlwby1hbmQtMS1tb3JlLW1hcmtldC11cGRhdGUvYW1wLw?oc=5 According to BDO Capital, one of the co-insurers of the deal, the company is still pushing for an IPO in Q3 23. Enrique Razon wants to raise over 33 billion pesetas through the pure primary listing, with the majority of the proceeds going to the Terra Solar power plant, which PFR is building as part of a joint venture with Leandro Leviste SP New Energy [SPNEC 1.40; 89% avgVol].

MB Executive Summary: Despite continued market weakness, PFR is increasing the size and price of its offering from what it was already contemplating in mid-2022, before inflation and market volatility dashed those plans. Until then, it should be the papa IPO of the season SM Prime [SMPH 33.00 1.8%; 101% avgVol] started talking about a possible Pta 55 billion IPO of a mall REIT. I’m not really the size king type; To me, the value is in the primary/secondary split and the potential for the proceeds to be transformative. This is definitely where I noticed that Mr. Razon is becoming even more aggressive in terms of both offering size and price. However, there is still a long way to go. A lot can change and Mr Razon has shown he’s ready to pack up and go home if the conditions aren’t right.

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Merkado Barkada’s opinions are for informational purposes only and should not be construed as a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, therefore each investor must conduct their own due diligence before trading as the facts and figures in each individual article may have changed.