• Eagle Cement rallies 6.67% in strong debut, finishes up 2%


    Eagle Cement Corporation, the 4th largest cement producer in the Philippines, rallied 6.67 percent in opening trade on its first trading day on the Philippine Stock Exchange (PSE) on Monday from its initial public offering (IPO) price of P15.

    The stock, traded on the PSE under the ticker symbol “EAGLE,” pared its gain toward the end and closed at P15.30 per share, up 2 percent from its IPO price.

    Regina Capital Corporation Managing Director Luis Limlingan said Eagle’s strong debut “is a testament to the company’s perceived intrinsic value.”

    “Despite Eagle Cement capturing only a particular market in the overall Philippine cement industry, it is still the leading brand within Northern Luzon. This is due to the accessibility of their market to the cement manufacturing site, which makes it more accessible for them to place orders,” Limlingan told The Manila Times.

    “Looking at their operations, we can see that both the company’s return on equity [ROE] has been registering above 20 percent, with higher expectations for 2018 due to the completion of their third-line plant,” he added.
    Eagle sold 500 million common shares by way of primary offer with an overallotment option of up to 75 million secondary shares.

    It initially expected to raise P9.20 billion from the IPO, based on its application with the Securities and Exchange Commission (SEC).

    “We are very pleased with the book-building results. The issue was well received by institutional investors. This is a strong indication of their confidence in Eagle’s fundamentals and potential to be the major driver in the cement industry,” said Noel Dayrit, president of SB Capital, one of the lead underwriters. The others are ChinaBank Capital Corp. and PNB Capital and Investment Corp.

    Net proceeds will be partially used to finance the construction of a 2-million metric ton cement plant in Cebu, and to build marine terminals in the Visayas and Mindanao to facilitate quicker distribution of the company’s products in the two regions, the company said.

    Aims for 25% market share

    In a press conference after the listing, Eagle Cement Chairman Ramon Ang, who also owns, along with his family, a stake of 31.43 percent, said the company aims to expand its market share by 25 percent in two to three years.

    “We hope to become at least 25 percent of the market by two to three years—because of our new factories in Bulacan, because of our new factories in Cebu, to supply Visayas and Mindanao,” he said.

    The completion of its Bulacan plant this year will bring about 25 percent additional production to 7 million metric tons per year, which, Ang said, is “the largest in the country.”

    “Once the expansion is done, you will see the full potential of the company next year. And then two years from now, the Cebu plant will supply Visayas and Mindanao.

    “I think by next year, Eagle should be No. 1 in terms of capacity. With 7 million tons next year, it will be No. 1 right away,” Ang added.

    The plant in Cebu is the company’s fourth production line and its construction is expected to be finished by 2020.

    To date, Eagle Cement has 14 percent of the market and trails market leader Holcim.

    Market performance

    Though Eagle’s dividend policy “is still not clear” because of liability payments and allocations for plant expansion, Limlingan said he expects the company “to deliver around 2.8 percent for 2017 [estimated]with a dividend policy rate of 50 percent of the previous year’s earnings as per prospectus.”

    Overall, Limlingan believes the company is running efficiently and will improve further in the long run.
    PSE Chairman Jose Pardo, in his welcome remarks during the listing ceremony, said Filipino businesses can derive inspiration from Eagle Cement’s story.

    “I believe there are local corporations that are ready to expand operations or offer more products to the market. This market debut shows that tapping the stock market is a viable financing option for growth and expansion,” he said.

    In Monday’s trade, Eagle Cement ranked third among the most actively traded stocks, following Pilipinas Shell Petroleum Corp. (up 2.80 percent) and SM Prime Holdings (up 2.13 percent).


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