Cebu Pacific eyes IPO to fund growth

[Pieter C. 5]

Cebu Pacific Eyes IPO To Fund Growth

 

December 6, 2007

Cebu Pacific, the Philippines' top budget airline, expects to sell shares worth up to PHP12.45 billion pesos (USD$296 million) in a stock market listing in early 2008, with some of the proceeds intended to fund its fleet expansion.

 

The company plans to make its trading debut in the first quarter of 2008, a company source said on Thursday. Cebu will offer 70 percent of the shares to foreign investors and the rest to Philippine investors.

 

Cebu Pacific, a unit of conglomerate JG Summit Holdings, expects to sell new and existing shares in its initial public offering at up to 95 pesos each, according to regulatory documents, a price tag that some analysts say suggests that the deal is largely aimed at professional investors.

 

"At 95 pesos per share, that means the par value would be 50 pesos. This means they are targeting institutional investors," said Jose Vistan, analyst from AB Capital Securities.

 

"That's good, with due diligence by institutional investors, the company would have to give a reasonable price."

 

The country's second-largest airline after privately owned flag carrier Philippine Airlines, Cebu Pacific has benefited from an improving economy, which has seen more Filipinos opt for air travel across the archipelago and the region.

 

The airline has also helped to shake up the local market with cheap deals and promotions and plans to more than double its fleet of 15 aircraft at a cost of USD$1.3 billion by 2013.

 

Local business contributes about two-thirds of its revenue and capacity but the company, which flies to eight Asian destinations and plans to add four new regional routes soon, has said it expects overseas revenues to grow 50 percent in five years from 2007.

 

A large diaspora of foreign-based Filipino workers provides a customer base and Cebu Pacific has said it expected its total passenger traffic to reach 5 million this year from 3.5 million last year, rising to 10 million in 2013.

 

The company plans to offer 72 million primary shares -- new shares -- and 63.43 million secondary shares to the public, resulting in net proceeds of about PHP6.6 billion pesos from the primary offer alone.

 

In Asia, Cebu Pacific competes with Singapore's low-fare airline Tiger Airways and Malaysia-based AirAsia, the region's largest budget airline.

 

Last month, Tiger Airways, which is partly owned by Singapore Airlines, said it was no longer looking at a public share offering to raise cash and was expanding with a joint venture in South Korea.

 

(Reuters)

 

It's rumoured they will start flights to SGN soon.....