SINGAPORE (THE BUSINESS TIMES) - Emperador, the Philippines' largest liquor company, could potentially be included on the Straits Times Index (STI) if its secondary listing in Singapore goes through, according to analyst Brian Freitas of Periscope Analytics, who publishes on Smartkarma.
In a note on Wednesday (April 13), Mr Freitas noted that the company, which is listed on the Philippine Stock Exchange (PSE), is a "borderline inclusion" to the index on three criteria: free float, liquidity and market capitalisation.
He noted that its potential inclusion puts ComfortDelGro at risk of deletion from the index.
The spirits giant announced last August that it was planning to pursue a secondary listing on the Singapore Exchange (SGX) mainboard by way of introduction and said in a PSE filing on Wednesday that it has obtained a conditional eligibility-to-list (ETL) from SGX.
The stock rose 22 per cent on Wednesday following the announcement.
Mr Freitas noted that Emperador would be mainboard-listed and hence eligible for inclusion on the STI, but it remains a borderline situation for the other eligibility criteria.
In terms of liquidity, the STI requires counters that have traded for 21 days before they become eligible for inclusion to the index, and they need a median turnover of at least 0.1 per cent of its free float shares during this period.
Mr Freitas noted that the trading volumes in Emperador's PSE listed stock "have not been great" but it has exceeded the 0.1 per cent threshold over the past 12 months.
"While liquidity could be high in the first few trading days on the SGX, we are not sure if it can sustain for 21 trading days and over longer periods of time," he said, noting that this makes it a borderline case for the liquidity criterion.
Emperador's current free float of 15.01 per cent is also slightly above the minimum threshold for STI inclusion. Companies with a free float of 15 per cent or less are excluded from the index.
Companies would also be included on the STI, if their market cap ranks within the top 20 among all the stocks in the index universe that meet the other inclusion criteria.
Mr Freitas noted that Emperador would rank 21st in the universe, with its market cap of $7.06 billion, based on Wednesday's closing price. However, he added that the counter needs only to outperform Mapletree Industrial Trust by 0.24 per cent to take the 20th spot, making it a borderline criterion.
"If Emperador's secondary listing makes it through all these borderline cases, it will be added to the STI," Mr Freitas said.
This would put ComfortDelGro at risk of deletion, with the company currently the smallest counter on the index with a market cap of $3.3 billion.
Mr Freitas noted that Emperador would need to be listed for 21 days before the index review date to be eligible for inclusion, and it is unlikely that the counter could be listed in time for a June inclusion. If it passes the three borderline criteria, it could be added to the STI during the September review, he added.
Emperador's ETL is subject to fulfilment of conditions, including the submission of certain confirmations and undertakings by the company to SGX. Emperador also said the secondary listing is subject to factors including prevailing market conditions, and its board would consider the appropriate time to proceed with the secondary listing.
Emperador is a holding company in the business of producing spirits and other alcoholic beverages, which are distributed in over 100 countries. It sells brandy under the Fundador and eponymous Emerador brands, as well as whisky brands such as The Dalmore and Jura.
Emperador's chief executive, Mr Winston Co, said in a statement on Wednesday: "We believe that our entry into the SGX should pave the way for other Philippine companies with a global reach to list on the SGX, providing greater access to international investors."
