Graveyard company first to test market in Duterte's Philippines

MANILA(Bloomberg) - The first Philippine company to test the share market since the presidential victory of Rodrigo Duterte runs cemeteries.

Golden Haven Memorial Park Inc., which says on its website that it aspires to be the leader in professional death care, started marketing 778 million pesos (S$22.6 million) of shares on Thursday in an offer that runs through June 22.

It's controlled by Manuel Villar, a former senator who is a political ally of Duterte. Mark Villar, Manuel's son, is the incoming public works and highways secretary.

With six themed memorial parks throughout the Philippines, Golden Haven will test demand in a market that's climbed 9 per cent since the May 9 election amid optimism Duterte can boost economic growth.

It will be the first initial public offering of a cemetery company since 1991 in a country where underwriters are reluctant to take them to market due to beliefs surrounding death that are prevalent among the Chinese-Filipino business elite.

"Nobody wants to get into it because it's about the dead," said Jomar Lacson, deputy head of research at BPI Securities Corp. in Manila.

"But it's a service that somebody has to perform and people are willing to pay for it," he said, adding that he expected there would be sufficient demand for the shares.

The company is offering 74.1 million new shares at 10.5 pesos apiece, amounting to a 15 per cent stake, through Asian Alliance Investment Corp., the sole underwriter. It will use the proceeds to fund land acquisition and expansion of existing cemeteries, columbarium facilities and funeral homes, it says in the sale prospectus.

Golden Haven is targeting a listing on June 29, a day before Duterte takes office.

IPO Timing

The timing of the IPO has nothing to do with Duterte's election win, said Roy Joseph Fernandez, Golden Haven's chief financial officer.  "We've been planning this for a long time," he said. "There's no relation at all with the elections. Demand is strong because the issue size is small and the market is doing really well."

Golden Haven President Jerry Navarrete couldn't be reached for comment, while Chief Operations Officer Maribeth Tolentino didn't reply to several phone calls and text messages.

A spokesman for Manuel Villar said he was out of the country and couldn't be contacted.

Villar controls Golden Haven through Fine Properties Inc., a holding and investment company that's also the majority shareholder of Vista Land & Lifescapes Inc., a residential property developer. Vista's share price has risen 15 per cent since Duterte's election win. Villar's alliance with Duterte "is viewed positively by some investors," said James Lago, head of research at PCCI Securities Brokers Corp. in Manila.

Duterte gained international notoriety during the presidential campaign with foul-mouthed rants and threats to kill criminals. Since his win, he's impressed investors, with economists from Goldman Sachs Group Inc. saying last week his mandate of boosting infrastructure spending, cutting red tape and investing more in farming could lift the country's potential growth rate.

Strong demand for Golden Haven's IPO could bode well for companies such as Cemex Holdings Philippines Inc. and Pilipinas Shell Petroleum Corp. that are also looking to raise capital this year.

"In the first half of the year, issuers and investors said let's wait for the elections," said Eduardo Francisco, president of BDO Capital & Investment Corp., a unit of the Philippines' biggest lender.

"After they saw the results, they're saying, OK let's proceed."

'Steady Business'

Under President Benigno Aquino, the Philippines enjoyed the fastest growth in Asia apart from China, leading to a swelling middle class that can afford plots at cemeteries like those run by Golden Haven. Demand will be supported as the proportion of Filipinos over 60 will rise from 7.3 per cent in 2015 to 14 per cent in 2050, United Nations population projections show.

Golden Haven's revenue increased 16.5 per cent to 692.8 million pesos last year and it's net income rose 4.5 per cent to 151.1 million pesos, according to its prospectus. Based on those numbers, it's offer price is about 34 times its earnings per share, said Lexter Azurin, head of research at Unicapital Securities Inc. in Manila. That compares with a price to earnings ratio of 18.5 for the Philippines benchmark index.

"Death is a steady business," said Azurin. "A lot of people are dying every day."