Leaving food for retail investors

The ghost month is here and we were told the realms of heaven and hell would open on the 15th day of the seventh month of the Chinese calendar and ghosts would come out.

But even with the spirits of the deceased roaming around, stock market appetite remains strong as investors continue to ride on the recent changes in the benchmark index, pushing some alpha stocks up since last week.

AC Energy Corp.

Ayala’s AC Energy Corp. is one of two companies that will join the 30-member Philippine Stock Exchange index (PSEi) effective Aug. 16.

This isn’t surprising. As I wrote in May, “following the company’s P13.1 billion follow-on offer of new shares, AC Energy’s outstanding shares would grow to 38.2 billion and with the FOO price of P6.50 per share, its market capitalization would grow to P248.5 billion or about $5 billion.” Market cap is now at P346.7 billion.

“At this level – if my estimates are correct – the company may be included in major indices such as the PSEi and MSCI,” I wrote then.

And here it is now

Companies that qualify for inclusion in the PSEi are those with free floats of at least 15 percent, among the top 25 percent by median daily value per month for at least nine out of 12 months, and with the biggest market capitalization.

AC Energy’s shares gained 4.69 percent on the day of the announcement to close at P9.15 per share. Investors have locked in gains, but prices remain high and I’m betting that, with its growth story, this alpha stock will continue to grow.

This is a testament that clean energy investments can work; the company plans to abandon its coal investments by 2030. I hope it can even happen earlier.

Props to AC Energy chairman Fernando Zobel de Ayala and president & CEO Eric Francia.

Converge

Dennis “DHU” H. Uy’s fiber internet service provider Converge ICT also made it to the index, after its market capitalization reached nearly P180 billion last week.

“This was a pleasant surprise to us, as we are really just focused on delivering our commitment to reach the underserved and unserved areas in the country with world-class pure fiber broadband connectivity,” Uy said.

When I congratulated him, he said both foreign and retail investors are surely happier now because when the company was preparing for the IPO in October last year, foreign funds were already willing to buy at P24 per share.

But Uy and the issue managers said there was room to bring the IPO price down, “to leave food for retail investors.”

That decision paid off, as both local and foreign investors have gained by now if they bought Converge at the IPO price of P16.80.

That IPO in October 2020 attracted overwhelming interest from both international and domestic investors, with over P4.856 billion in domestic demand, making it one of the largest domestic IPO takeups in the country.

On the international front, the offering attracted OMERS, Genesis, Thornburg and Macquarie as cornerstone investors.

Cornerstone investment reached P10.93 billion, covering about 40 percent of the base offer, and investments from blue-chip, long-only institutional investors accounted for over 80 percent.

Like AC Energy, there is also room for growth for Converge, Uy said.

“It’s a blue ocean market,” he noted, referring to the vast room for growth in the fiber internet market.

Converge aims to reach 55 percent of Filipino households by 2025.

In the first quarter alone, Converge deployed half a million ports, allowing it to reach more than seven million homes or 28 percent of total households in the country.

Monde Nissin

Monde Nissin, which made its market debut in June, is not yet in the PSEi, but may soon be because as Kevin Khoe of Traders Apprentice Pilipinas said, Monde offers investors “dominance and hyper-growth narratives.”

“Lucky Me!’s position in the instant noodle market is hard to replicate...Monde can leverage its existing cash flow to grow Quorn – a significant player in the global meat alternative category. This is where the company’s growth will come as consumers seek healthier options,” Khoe said.

DMCI

On the other hand, Consunji-led DMCI Holdings was removed from the index, but this could provide investors the opportunity to buy on DMCI’s dips. Note that DMCI’s first-half income surged to P9.5 billion, nearly five times the P2 billion it reported last year. Note, too, that its chairman, Isidro Consunji, is no stranger to crises, having successfully navigated DMCI through the 1997 Asian Financial Crisis.

Retail investors

I hope more retail investors get the chance to ride on these gains, especially in future IPOs.

How about a lock-up period for anchor investors like in Hong Kong? This could protect retail investors from price dips after an IPO and would enable them to really have more food on the table.

For now, both retail and big investors are at least enjoying recent gains from the changes in the PSEi and not even the ghosts of the ghost month could drive them away.

Iris Gonzales’ email address is [email protected]. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com