Early demand for new issues from Travellers International Hotel Group and Robinsons Retail shows that the Philippines has become a preferred market for foreign equity investors as they run out of choices elsewhere in South-East Asia.

The Philippines has reported strong economic numbers over the past few quarters, winning its third investment-grade upgrade in about five months on October 3, when Moody's moved up the country's sovereign ratings one notch to Baa3.

Equity portfolio managers have taken notice and the two recent IPOs of a combined US$1bn will give them a share of Philippines' accelerating growth story.

"The Philippines is a jewel in the crown among emerging markets for foreign investors," said a banker not involved in the offerings.

In contrast, India and Indonesia are struggling with a currency crisis stemming from the Federal Reserve's indications last spring that it would begin pulling back on its economic stimulus policies, although the Indian rupee has recovered some of its losses. The markets in Malaysia and Thailand, meanwhile, had the support of local investors, while Singapore was more of a developed market, the banker said.

If the IPOs are successful, they will not be the first well-received Philippine floats of the year. In the first half, LT Group sold the biggest Philippine IPO at Ps37.7bn (US$873m), while Cosco Capital raised US$389m and Melco Crown took in US$317m.

In contrast, most offerings from Indonesia have been small in size, ranging from US$40m to US$150m. An exception was Matahari Department Store's US$1.3bn re-IPO in June.

Support for resorts manager Travellers came early. Leads covered the Ps16.8bn-Ps18.7bn IPO on the first day of bookbuilding last Tuesday. The company is selling 1.57bn shares at a price range of Ps10.65-Ps11.88.

The interest, so far, has been from regional Malaysian and Philippine funds because Travellers is a joint venture between Genting Hong Kong and Philippines developer Alliance Global. More international funds are likely to join when the company continues the road shows in Europe and the US this week.

The response has been good, although the IPO is expensive relative to peers. The price range for Travellers' IPO translates to a 2014 EV/Ebitda multiple of 11-12. Local gaming company Bloomberry Resorts trades at an Ebitda of 12 and Melco Crown priced its IPO at a 2015 multiple of 10.6.

"The premium is for the company's better track record," a banking source said.

Travellers' management was keen that the shares trade up after it listed and, as a result, the IPO might be priced between the midpoint of the range and close to the top, the source added.

The international portion of the deal comprises 1.1bn shares and the domestic one 472m. There is a greenshoe available of 235.9m shares. Pricing is expected on October 17 and the listing is targeted for November 5.

Earlier this year, the company was looking at a maximum price of Ps23.38 for the IPO taking the issue size to Ps37bn.

Bank of America Merrill Lynch, CIMB, Maybank Kim Eng, Religare Capital Markets and UBS are the joint global co-ordinators. Credit Suisse, CLSA and Morgan Stanley are the international joint bookrunners. Maybank and UBS are the domestic lead underwriters and BDO Capital is the participating domestic underwriter.

The response is expected to be strong for Robinsons Retail, as well. The issuer plans to start building books for its US$500m‑$750m IPO this week. Pricing details will be announced later.

The company is hoping to secure anchor investors to complete the IPO before the end of October.

In a preliminary filing earlier this year, the company said it planned to sell up to 461.9m shares at a maximum price of Ps86.64 for a total Ps40bn, but the current IPO is expected to be smaller. There is an overallotment option of 22.9m shares.

Deutsche Bank, JP Morgan and UBS are the joint global co-ordinators on the Robinsons IPO.

By S Anuradha

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