Initial Public Offering (IPO): Harbor Shipping Services Inc. (TUGS)

James Ryan Jonas

Shipping services provider and tugboat operator Harbor Shipping is finally pushing through with its Initial Public Offering (IPO) after deciding to defer it in July 2013 due to market volatility.

The company disclosed to the Philippine Stock Exchange (PSE) that it will offer shares to the public for the first time at no more than P2.50 per share and that the company will be listed and start trading on the exchange on October 30.

Offer Price and Offer Period

The company’s maximum IPO price of P2.50 per share is lower than the P3.27 price initially announced in July. The final IPO price will be announced on September 25.

By issuing up to 181.6 million common shares, the company expects to raise more than PhP454 million in its IPO. The number of shares to be made available to the public represent 30% of the company’s total outstanding capital stock.

According to the company, proceeds will be used to finance the following:

  • PhP175.658 million for acquisition of tugboats for domestic and international expansion and refleeting;
  • PhP70 million for acquisition of LCT barges or tug and barge tandems for lighterage operations;
  • PhP118.552 million for settlement of a bridge loan for the purchase of an AHTS vessel; and
  • PhP45 million for debt retirement

The offer period is from October 16 to 23, and the listing date on the PSE is scheduled on October 30.

Harbor Shipping Services Inc. is expected to trade using the ticker TUGS.

Tugboat and other Shipping Services

In 1999, the company started as a one-tugboat firm offering harbor assistance services at the port of Subic. It now maintains a fleet of 27 tugboats servicing more than 5,000 ships in the Philippines. A tugboat is a boat that moves or maneuvers other water vessels.

Harbor Shipping’s primary services include tugboat towage, harbor assistance, lighterage, ship salvage, oil and chemical spill response, as well as firefighting.

It also provides other maritime services such as underwater repairs, pipe-laying, underwater photography and videography.

Company Owners and Financial Information

Harbor Shipping Services Inc. is primarily owned by Geronimo Bella Jr. and Ricardo Rodrigo P. Bella which own a combined 98% of the company. Their ownership will go down to 68.57% after the IPO.

In 2012, the company booked revenues of PhP807.26 million, a 9.4% increase from its 2011 revenues. It ended the year with a net income of PhP147.8 million.

In the first 3 months of the year, ending in March 31, 2013, Harbor Shipping earned gross revenues of PhP206.98 million and net income of PhP31.46 million.

Deferred IPO

The company initially wanted to conduct an IPO in July earlier this year, with a maximum IPO price of P3.27 per share, to produce total proceeds of PhP593.83 million.

However, due to market volatility in the 2nd Quarter (see PSE suffers worst 1-day loss since 2008) and Ghost Month fears in August, Harbor Shipping decided to postpone the IPO to September.

TUGS is the fourth company to list their shares on the PSE this year. Philippine Business Bank (PBB), Asia United Bank (AUB) and AG Finance Corp. (AGF) all conducted an Initial Public Offering while Del Monte Phils. Ltd. (DMPL) listed by way of introduction.

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James Ryan Jonas teaches business management, investments, and entrepreneurship at the University of the Philippines (UP). He is also the Executive Director of UP Provident Fund Inc., managing and investing P3.2 Billion ($56.4 Million) worth of retirement funds on behalf of thousands of UP employees.