Vol. XX, No. 148
Thursday, February 22, 2007 |
Today’s Headlines
By JENNEE GRACE U. RUBRICO, Sub-Editor
Holding firm Balabac Resources now property developer Eton Properties
Taipan Lucio Tan has listed his newly established property development firm at the Philippine Stock Exchange - and he did so via the back door.
In a special meeting called yesterday by publicly listed Tan firm Balabac Resources and Holdings Co. Inc., stockholders approved a change in name to Eton Properties Philippines Inc. Stockholders also changed the firm’s primary function to property development from a holding company that had oil exploration interests.
During the meeting, all Balabac officials resigned and were replaced by
By changing Balabac’s name and primary function, Eton Properties, a firm that BusinessWorld reported that Mr. Tan created to be his vehicle for property development, became a publicly-listed company without having to comply with stock exchange requirements for companies planning to go public.
The PSE’s listing guidelines state that firms seeking to stage an initial public offering should have a track record of profitable operations for three years, a market capitalization of P500 million, and a five-year operating history.
Other requirements include a cumulative consolidated pre-tax profit of at least P50 million, and a minimum pre-tax profit of P10 million for each of the three years immediately preceding the application for listing.
Asked if the move was indeed a backdoor listing, an
The company also said its first project will be to develop the building owned by Philippine Airlines Inc. - also a Lucio Tan firm - in
"We are already talking with PAL. The condominium project will be called Eton Greenbelt Residences," Eton Properties President Danilo Ignacio said.
Danilo A. Antonio, Asian Institute of Management property expert, said Mr. Tan was in a hurry to list at the bourse to give Eton
"Being listed assumes that a firm has financial discipline. This legitimizes Mr. Tan’s real estate presence, and shows that he is now serious in real estate," he said.
Being listed also provides the property firm easier access to funds and an exit mechanism, making the firm attractive to investors, he said.
Mr. Antonio also said a listed property developer is believed to have strong credibility, allowing it to sell projects easily.
"By having a listed presence for real estate, Mr. Tan is now a complete taipan, as he was for the longest time the only taipan without a presence in real estate," Mr. Antonio added.
Analysts, however, noted that volatility in Balabac’s share prices.
"The share price is quite volatile. Investors don’t really want to move in too much yet, the recent move from P3 to P2 is just too much," Jasper Jimenez, a broker from BDO Securities Corp., said.
Shares in Balabac reached as high as P3 on Tuesday before closing at P2.48. The shares closed yesterday at P2.20, down 11.29% or 28 centavos. The PSE had not indicated as of press time whether there was a need to suspend the trading of the new company’s shares.
"We have yet to find out the strategy of its management, but it’s a stock to watch out for. However, if you look at the track record of most of Lucio Tan’s companies, they’re usually not that liquid," said Astro del Castillo, managing director of First Grade Holdings, Inc.
Ron Rodrigo, head of research for Unicapital Securities, Inc., said Balabac’s shift in focus would help the company in the long term.
"It’s a good move, the property uptrend is not here for the short term. Property companies are earning well in both the business process outsourcing and residential segments, and this phenomenon might be here for quite some time."
Ed Bancod, head of research for brokerage ATR-Kim Eng Securities, Inc., said the entry of a new and active company could be a boon for the local bourse.
"From the investors’ standpoint, as long as you’re increasing the depth and breadth of the market, it’s good for the market. For the longest time, the dilemma of the stock exchange was that there weren’t enough companies listed. Now there are a lot of follow-on offerings, while small companies are turning into real investment possibilities."
He added that the company’s shift to a high-growth sector was likely a good move.
"We’re at the early stages of the upswing in the property sector, property is expected to grow at a rapid pace in the next five years."
He noted that listed companies could also benefit from tax incentives, as well as raise additional capital in the future.
The Securities and Exchange Commission (SEC) said Mr. Tan did not violate any rules in renaming Balabac and changing its purpose. Commission Secretary Gerard M. Lukban said changing the name of a listed company and its line of business is permitted as long as the company’s owners remain the same.
"If he (Mr. Tan) owns Balabac and he decides to change its name and purpose, it’s still the same company," he said.
But he added that the firm would have to apply for an amendment of its articles of incorporation at the SEC, unless its new purpose was listed as the original firm’s secondary purpose.
While Balabac’s primary purpose is as a holding firm, it lists real estate development as among its secondary purposes.
Claire Quiray, an analyst from Accord Capital Equities Corp., said the PSE was unlikely to significantly penalize the company.
"The PSE has always monitored companies that don’t disclose enough information. They can put brokers and listed companies under increased surveillance, but aside from that, it won’t be able to do much. The rules on backdoor listing are rather vague."
Eton Properties Philippines carries the name of Mr. Tan’s property firm in
Allied Bank’s statements of condition show that the bank owned or acquired properties amounting to P5.6 billion as of December 2006, from P4.13 billion as of December 2006. PNB, for its part, owned or acquired P19.3 billion worth of properties as of December 2006, from P25.7 billion in December 2005.
The firm is not the first property company of Mr. Tan. The group has an existing real estate firm, Landcom Realty Corp., which acquires and manages property for Mr. Tan and his companies. Mr. Tan also owns Century Park Hotel in
http://www.bworldonline.com/BW022207/content.php?id=001&src=1
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