The company making popular canned meat brands Century Tuna and Argentina Corned Beef is scheduled to be the second company this year to conduct an Initial Public Offering.
Century Pacific Food Inc. (CNPF) is offering up to 229.65 million shares to the public, priced at no more than P14.50 (final price will be announced later today). At this offer price, the company is expected to raise around P3.3 billion.
[Update: The final IPO price has been announced and is set to be P13.75 per share. This means Century Pacific will raise as much as P3.16 billion from the IPO.]
According to the company, it intends to use proceeds of the IPO to finance capital expenditures, pursue potential opportunistic acquisitions, retire debt and support working capital.
Investors may start picking up shares during the offer period scheduled from April 23 to 29. The stock will be listed and will start trading in the Philippine Stock Exchange (PSE) on May 6.
Is it profitable to invest in an IPO?
There is no certainty if an IPO can make you money. In the past, several companies conducted an IPO and had their stock prices shot up immediately, giving instant profits to investors.
In the case of the first IPO of the year, Double Dragon Properties (DD), the stock price rose 50% during its first trading day. (See Double Dragon reaches price ceiling on 1st trading day) The stock currently trades at P3.99 per share — almost a 100% return on its IPO price of P2.00.
Still, there had been instances when stock prices decline after the IPO, taking months or even years to recover. In the case of Cebu Air Inc. (CEB), owner of carrier Cebu Pacific, although the stock price rose during its first trading days, its price has plunged since and still has not recovered since September 2010. As of last week’s trading, the CEB stock trades at P49.65 apiece, more than 60% below its IPO price of P125.00. (See Cebu Pacific IPO in September 2010)
Should you invest in the Century Pacific IPO?
There are no tried and tested formulas to determine if a company’s IPO is worth investing in. But it helps to have guidance from the country’s top stock brokerage firms.
One useful source of information is PinoyInvestor, a premium stocks resource that consolidates stock picks, company analyses, and broker reports from seven (7) of the Philippines’ top stock brokers.
In this week’s issue, the PinoyInvestor Stocks Report offers a comprehensive analysis and recommendation on the upcoming IPO of Century Pacific Food Inc., prepared by one of their partner brokers Unicapital Securities.
Here are excerpts from the Century Pacific IPO analysis in PinoyInvestor:
Century Pacific’s Financial Analysis
Huge part of the company’s revenue is accounted by the Canned and Processed Fish segment followed by Export Tuna segment, which both have low before tax return on sales. The Canned Meat segment is the most profitable among the four segments.
Century Pacific’s Debt-to-Equity (D/E) ratio stood at 1.87x. The IPO proceeds will eliminate PHP 1.29 billion in CNPF’s liabilities, which will bring down the D/E ratio to around 1.40x.
If you want to get the complete and comprehensive analysis of this IPO, sign up to PinoyInvestor.
Registration is free and Free Version members receive weekly Stock Reports with top picks, stock recommendations, and Target Prices, plus access to the PinoyInvestor Academy, a collection of investor education resources available for free.
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