The Philippines' Cebu Air plans to raise around PHP12 billion pesos (USD$262 million) from an initial public offering as it seeks to take advantage of a rebound in demand. Cebu Air operates Philippine budget carrier Cebu Pacific which is expanding its fleet to compete with Malaysia's AirAsia and Singapore's Tiger Airways in the region.
The offer is likely to see strong demand given ample market liquidity and with the aviation sector expected to rebound from a severe downturn, said Grace Cerdenia, research head at F. Yap Securities.
"The company's plan to raise enough cash to finance its expansion programme is something that the market will definitely welcome," said Cerdenia, adding the market expects Cebu Air to launch the IPO ahead of the May national elections.
International air traffic is widely expected to recover this year after a financial crisis-driven slump, but industry group IATA says profit margins will remain under pressure.
Cebu, which started flights in 1996, is raising the money to fund the purchase of more aircraft. It currently has a fleet of almost 30 planes, mostly supplied by Airbus.
AIRLINE IPOS
Cebu Air will offer more than 125 million new common shares at a maximum price of 95 pesos per share.
Cebu Air's offering comes after Tiger's IPO last month which raised USD$178 million to finance the Singapore-based budget carrier's plans to buy planes, set up a new operating base and pay off some debt.
Indonesia flag carrier Garuda Indonesia is also expected to raise about USD$400 million in an IPO slated for the third quarter. Tiger has gained 8 percent from its January listing price of SGD$1.50 a share, while AirAsia shares are flat so far in 2010.
"We've prepared all the documents so that if the opportune time comes and market conditions allow it, we'll be ready," BJ Sebastian, investor relations officer at JG Summit said. The company was waiting for regulatory approvals before setting the exact timing of the IPO, he added.
Sebastian said the company would offer a portion of the IPO to foreign investors but declined to give the exact breakdown pending regulatory approvals. He said most Philippine IPO deals have been structured for a 70-30 offer ratio in favour of foreign investors.
The Securities and Exchange Commission said in a public notice carried by a local daily on Monday that Cebu Air would also sell 110.3 million shares in a secondary offer under the same terms as the IPO, as well as over 20 million new common shares for its employee and executive stock option plans.
JG Summit, owned by tycoon John Gokongwei, has been planning an IPO for Cebu Air in recent years but had to push back the offer due to volatile market conditions bought on by the global financial crisis.