- Title: PHILIPPINES: Budget airline Cebu Air soars on stock exchange debut
- Date: 27th October 2010
- Summary: MANILA, PHILIPPINES (OCTOBER 26, 2010) (REUTERS) (** BEWARE FLASH PHOTOGRAPHY **) CEBU AIR INC. AND STOCK EXCHANGE STAFF SHAKING YELLOW BALLOONS TO DRUM BEAT STOCK EXCHANGE AND GOVERNMENT OFFICIALS AND CEBU PACIFIC EXECUTIVES ON TRADING FLOOR BELL COUNTDOWN TO BEGINNING OF TRADING/ CEBU AIR PRESIDENT AND CHIEF EXECUTIVE OFFICER LANCE GOKONGWEI RINGING BELL CEBU AIR INC. EXECUTIVES CLAPPING HANDS GERMAN AMBASSADOR CHRISTIAN-LUDWIG WEBER-LORTSCH IN AUDIENCE GOKONGWEI AND OTHER CEBU AIR INC. EXECUTIVES SHAKING HANDS WITH STOCK EXCHANGE OFFICIALS CEBU PACIFIC STOCK ITEM ON ELECTRONIC BOARD (SOUNDBITE) (English) PHILIPPINE STOCK EXCHANGE PRESIDENT AND CEO VAL SUAREZ SAYING "It is the biggest offering that exchanged this year. It is the first transaction in the aviation business and perhaps, more importantly, it is a landmark deal in the low-cost-carrier or LCC sector."
- Embargoed: 11th November 2010 12:00
- Keywords:
- Location: Philippines
- Country: Philippines
- Topics: Finance,Transport
- Reuters ID: LVA7DZW6BF1QAVJ8L2CAVYPYJ8U7
- Story Text: Philippine budget airline Cebu Air Inc jumped as much as 6.8 percent on its market debut on Tuesday (October 26), as the country's largest public offering rode on the back of a broader market that hit a fresh record high.
The airline, a unit of conglomerate JG Summit Holdings Corp and the second biggest Asian budget carrier by market value, raised US$611 million in its IPO including a greenshoe option, making it a record amount in dollar terms for a Philippine listing.
Cebu Air's debut takes place amid a boom in IPOs in Asia as well as strong foreign demand for high-yielding emerging markets such as the Philippines.
"It is the biggest offering that exchanged this year. It is the first transaction in the aviation business and perhaps, more importantly, it is a landmark deal in the low-cost-carrier or LCC sector," Philippine Stock Exchange President Val Antonio Suarez said.
Cebu Pacific gained Internet fame when its female flight attendants danced during their safety demonstration to the tune of Lady Gaga's "Just Dance". The video went viral early this month, with 8 million hits on You Tube.
Cebu Air's shares opened at 132 pesos (US$3.06) after a ceremony that included the cabin crew re-enacting their dance routine on the floor of the stock exchange, as supporters cheered them on with tube balloons in the airline's trademark orange and yellow colours.
The Philippine stock market hit a record high on Tuesday. Upbeat sentiment following presidential elections in May have helped lift the index about 40 percent this year and it is the second best performer in Southeast Asia after Indonesia.
The stock rose as high as 133.5 pesos (US$3.09), before closing at 133 pesos (US$3.08). The airline had sold about 215 million shares at its IPO at 125 pesos ($US2.89) each.
At Tuesday's close, Cebu Pacific was valued at nearly 97 billion pesos or $2.2 billion, larger than rival Tiger Airways at about $723 million but smaller than Malaysia's AirAsia, valued at about $2.3 billion.
Cebu Air CEO and President Lance Gokongwei said he expects the company's international business to overtake its domestic operations in four to five years as it seeks to increase its international capacity by 25 percent yearly via new foreign routes and flight frequencies.
"Our market domestically is almost 50 percent already but internationally we're just scratching the surface, although we carry more than 2 million guests a year, today we're only 15 percent of the market. And we believe we can easily raise that to 30 percent over the next five years," Gokongwei said.
Cebu Pacific, operating on a low-cost structure, flies to 33 domestic and 16 international destinations including Hong Kong, Singapore and Bangkok.
Gokongwei eyes Southeast Asia and North Asia as growth markets, with possible new routes to and from Bali, Busan, Tokyo and Nagoya.
"The Philippines itself is the closest tropical country to China, Korea and Japan, so we should take advantage of our geographical location by offering affordable airfare, air travel, to these North Asian markets," Gokongwei told reporters.
He said the airline's growth also rode on a growing market among overseas Filipino workers who hold high-paying jobs that allow them and their relatives to travel more.
Stock broker Alejandro Yu said the company's plans to increase its flight frequencies could attract business travelers, adding to its present client base of mostly tourists.
The stock market landscape bodes well for upcoming listings in the Philippines, analysts said. Philippine miner Nickel Asia plans to raise $162 million in an IPO next month.
"It's a big boost in confidence now that it has launched. It's quite significant in size -- 20 something billion pesos -- and having launched successfully, the ones that are apprehensive on the sidelines are perhaps now emboldened to come in," said Alejandro Yu, president of brokerage firm R.S. Lim and Co.
Cebu Air plans to use its share of the proceeds to buy more aircraft from Airbus to better compete with rivals regionally and Philippine flag carrier Philippine Airlines. It expects delivery of three more aircraft this year and five next year.
The IPO takes place against a backdrop of a flurry of new listings in Asian markets. Singapore wealth fund's GIC logistics unit GLP started trading last week and AIA, the Asian life insurance arm of AIG makes its debut later this week in what looks set to be the world's third biggest IPO.
Citigroup, Deutsche Bank and JP Morgan are joint global lead managers for the share sale, and ATR KimEng Capital Partners is the local lead underwriter. - Copyright Holder: REUTERS
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