Pilipinas Shell IPO: Good buy or not?

James Ryan Jonas

Are you planning to participate in the initial public offering (IPO) of Pilipinas Shell (SHLPH)?

Before you do, make sure you acquire useful and credible information that can help you make an informed decision.

We already talked about the details of the Pilipinas Shell (SHLPH) IPO here. A few updates, though:

  • Final offer price: P67.00 per share
  • Total shares offered to the public: 291 million (inclusive of 275 million primary and secondary shares and 16 million shares for oversubsubscription option)
  • Total Gross Proceeds: P19.5 billion
  • Offer Period: October 19 to 25
  • Listing Date: November 23


Analyzing an IPO


There is no assurance a company’s IPO will produce instant profits, which is why investors should do an extensive assessment of the offer before deciding to take part in the IPO.

In the past, some IPOs have produced instant millionaires, because a stock reached double or triple the offer price weeks or months after the IPO. Still some IPOs have fizzled, producing capital losses that took months or years to recover.

Thus, investors should consider a variety of factors that can help them arrive at a conclusion whether the IPO is a good buy or not. Some factors to consider:

  1. Growth prospects of the company and the industry;
  2. Company’s planned usage of the proceeds from the IPO; and
  3. Valuation of the company’s stock


Pilipinas Shell IPO Analysis

In analyzing Pilipinas Shell’s (SHLPH) IPO, we refer to the Special Reports published in the premier stock market information portal PinoyInvestor.com.

As regards growth prospects for Pilipinas Shell, demand for petroleum products is said to grow, partly due to expected higher vehicle sales and high demand for air travel in the Philippines.

Oil prices are also expected to further rise, and this could positively affect Shell’s bottomline. However, there is uncertainty whether oil prices will stabilize, especially given the growing oil exports from Libya and Iran and flat oil demand growth from China which could both lower oil prices.

As for Shell’s planned usage of its IPO proceeds, the company stated that the cash proceeds will be used for capital expenditure, working capital, and general corporate expenses.

As regards stock valuation, at the offer price of P67.00 per share, SHLPH is said to be trading at a premium versus its closest comparable Petron Corp. (PCOR). Analysts argue that the premium may be justified due to Shell’s higher margins than PCOR.

Still, the company’s prospects are not all rosy especially since Shell faces a variety of risks apart from the threat of competition and unpredictable oil prices.

The company currently has pending tax cases that could detrimentally impact profits if Shell would lose. In one case, the Court of Tax Appeals has ruled that Shell is liable to pay the Philippine government a total amount of P7.6 billion for unpaid excise taxes from CCG, LCCG, and alkylate from 2006 to 2009. The ruling is not yet implemented since the company has filed an appeal to this claim.


SHLPH IPO: Buy or goodbye?

In the end, it’s not easy to determine if SHLPH is worth investing in, but it helps to get guidance from top local stockbrokers whose job includes evaluating these IPO offers.

PinoyInvestor currently has several Special Reports, prepared by licensed stockbrokers Regina Capital Development Corp. and AP Securities, that tackle in comprehensive detail the Pilipinas Shell IPO. (Link to Special Reports: Pilipinas Shell IPO Analysis)

The information shown above are mere excerpts of detailed analyses that can help you decide whether to take part in the Shell Philippines IPO. If you want access to more comprehensive information, sign up to PinoyInvestor.

Registration is free and members get access to stock recommendations, stock picks and Target Prices, plus access to the PinoyInvestor Academy, a collection of stock market education resources.

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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.