When PNB Holdings Corporation (PHC) starts trading on the Philippine Stock Exchange (PSE) on September 25, something unusual will happen. 

There will be no initial public offering or IPO, no new shares sold to investors, and no fresh money entering the company.

Reason: PNB Holdings is listing by way of introduction — a market jargon that is simpler than it sounds.

In an ordinary IPO, a company normally becomes publicly traded and raises capital at the same time. A listing by way of introduction separates those events. 

The shares already exist and are already held by shareholders. Listing merely brings them onto the exchange, so buyers and sellers can trade them.

That is what happened here. The Philippine National Bank (PNB) declared 51% of PHC as a property dividend to PNB shareholders. 

Once those shares become tradable, a shareholder who sells gets the buyer’s money; PHC does not. 

Fresh equity reaches the company only if it later issues new shares through a follow-on offering or another capital-raising transaction.

Late regulatory change

Listing still changes a company profoundly. It creates a visible market price, gives shareholders a route to liquidity, and subjects management to the continuing disclosure, reporting, governance, and public-float disciplines of the PSE. 

It also gives the company a publicly traded equity currency that can later be used for acquisitions or capital raising.

PHC will list 46.9321 billion shares at P1.20, implying a market capitalization of P56.32 billion. Its prospectus says there will be no public offering in connection with the listing.  

An expected secondary private placement by affiliates of LT Group Inc. (LTG) on listing day is not open to the public. 

LTG, founded by billionaire Lucio Tan, is a major publicly listed holding company in the Philippines. PNB serves as its primary banking and major financial subsidiary.

Here is where a late regulatory change matters. When PHC prepared its February prospectus, public ownership stood at about 9.86%. 

Affiliates planned to sell up to 6% to lift the float to at least 15%, while PHC asked for up to three years to reach the then-mandated 20%, possibly through a follow-on offering that could help finance the redevelopment of Makati and Pasay.

That 20% assumption is now stale. Effective August 11, the PSE amended its minimum-public-ownership rule. Companies with market capitalization above P50 billion now have a 15% maintaining public-float requirement, and the rule expressly applies that threshold to listings by way of introduction.

At P56.32 billion, PHC is above the cutoff. Its already approved application predates the amendment, however, and the PSE has not publicly explained how the new filing-time requirement is being handled in this transitional case.

Then comes the more interesting question: what is PNB Holdings worth?

Its June accounts carry investment properties at P46.54 billion, but an independent valuer accredited by the Securities and Exchange Commission (SEC) puts their fair value at P85.89 billion: P59.73 billion for PNB Financial Center, P12.83 billion for PNB Makati Center, P13.14 billion for Buendia, and P183 million for other properties. 

The accounting firm Punongbayan & Araullo (P&A) issued a fairness opinion valuing the shares between P1.18 and P1.89. PHC settled on a price of P1.20 per share.

My rough calculation is revealing. Replace the P46.54-billion carrying value with the P85.89-billion appraised value, while leaving the rest of the June balance sheet broadly unchanged, and the adjusted equity comes to about P89.1 billion, or roughly P1.90 a share.

That nearly matches P&A’s upper end. It is not a price target because taxes, liquidity, redevelopment costs, execution risk, and holding-company discounts matter. 

Cheap on land, expensive on income

PNB itself carries its retained 49% stake at P25.1 billion after applying a 16.5% marketability discount, implying roughly P51.2 billion for the whole company on that basis.

And this is where the story becomes contradictory. PHC earned only P209.9 million in the first half. Mechanically annualize that, and the P56.32-billion listing value equals roughly 134 times current annualized earnings. PNB Holdings looks cheap on land and expensive on income.

The operating trend is improving. First-half revenue rose 26% to P634.3 million. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) climbed 40% to P336.5 million and net income jumped 85% to P209.9 million. 

Occupancy rates improved to 90% from 85%. However, the company remains heavily dependent on related parties which generated 54% of total revenue and 51% of rental income and dues, despite their share of rental earnings significantly dropping from 75% the previous year.

The balance sheet gives management room. PHC had P3.025 billion in cash, only P1.12 billion in liabilities, and no interest-bearing debt at end-June. It also had P4.90 billion of contracted future minimum rentals.

Yet, first-half additions to investment properties and equipment were only about P93 million, and the company reported no material capital-expenditure commitments. The big redevelopment spend has not yet arrived.

That is why listing first can make sense. PHC can let the market establish a price, improve the assets, and decide later whether debt, internal cash, partnerships, or fresh equity should finance redevelopment. 

Under the new 15% float rule, a future follow-on offering should no longer be viewed simply as a mechanical journey to the old 20% threshold.

A listed share is not automatically a liquid share, and an appraisal is not cash in the bank. Land must be developed, buildings must earn rent, and management must execute.

But September 25 will give PHC something it has never had before: a daily market verdict.

Most companies arriving on the exchange effectively say: give us your money and we will show you what we can build.

PNB Holdings is reversing the sequence. Here are the properties. Here are the earnings. Here is the balance sheet. You tell us what we are worth. The money can come later.

I welcome your views on these and other issues where decisions made in power shape the country’s economic future. – Rappler.com

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