Sell-off marks PSE debut of ‘relatively overvalued’ stock

By Keren Concepcion G. Valmonte, Reporter

SHARES in Medilines Distributors, Inc. plunged on its debut at the Philippine Stock Exchange (PSE) on Tuesday, closing 30% lower than its initial public offering (IPO) price.

Medilines shares closed at P1.61 apiece, shaving off 69 centavos from its P2.30 IPO price.

MEDIC, the company’s ticker symbol, opened at P1.99, down by 13.48% or 31 centavos.

“Buyers pushed the issue to its intraday high at P2.12, but eventually sellers dominated and brought the stock to as low as P1.68, before moving sideways for the majority of the day,” Timson Securities, Inc. Trader Darren Blaine T. Pangan said in a Viber message.

“During the last few minutes of trading, the stock further slid to end at its floor price of P1.61,” he added.

Meanwhile, Philstocks Financial, Inc. Senior Research and Engagement Supervisor Japhet Louis O. Tantiangco said the stock “is considered relatively overvalued.”

“Our PE (price-to-earnings) Ratio estimates for MEDIC for 2021 and 2022 are at 27.68x and 21.90x respectively. These are above the PE ratio average as of the first half of 2021 of its regional peers of 21.60x,” Mr. Tantiangco said in a separate Viber message.

“With this, MEDIC is considered relatively overvalued. This is the reason we see for its sell-off today,” Mr. Tantiangco said.

Meanwhile, Regina Capital Development Corp. Head of Sales Luis A. Limlingan said the selling of the stock on Tuesday was “overdone.” In another Viber message, he said concern over the Omicron variant of the coronavirus disease 2019 (COVID-19) might have clouded investor sentiment.

Last week, the benchmark Philippine Stock Exchange index (PSEi) dropped to the 6,900-level over worries on the Omicron variant. The 30-member index closed at 7,147.30 on Tuesday, gaining 16.56 points or 0.23%.

Medilines was branded as the country’s first “pure-play healthcare” IPO. The company sold 550 million primary shares and its chairman, Virgilio B. Villar, sold 275 million secondary shares. The company will not receive proceeds from the secondary share sale.

However, it aims to use net proceeds from the P1.20 billion raised to fund the procurement of its existing products, to build up its medical consumables inventory, and to repay debt.

PSE President and Chief Executive Officer Ramon S. Monzon said its listing came “at an opportune time,” noting that the global health crisis put the healthcare system at the forefront.

“The trend towards [a] technology-driven healthcare industry is clearly driving the healthy sales growth of the company,” Mr. Monzon said during the listing ceremony. 

Medilines attracted an “overwhelming reception,” with its offer being 2.5 times oversubscribed.

“The local small investor tranche of the offering at PSE EASy was likewise oversubscribed, thereby providing Medilines with 2,889 retail investors from 64 provinces, 16 countries, and one territory,” Mr. Monzon said.

By the end of the trading day, a total of 387,434,000 Medilines shares worth P692.79 million were traded. Net foreign selling stood at P7.52 million.

“It ended up taking the third spot in the most active issues [on Tuesday],” Timson Securities’ Mr. Pangan said.