A peek into a company that is set to create excitement in the IPO | Marvin Germo
Audio Wav

A peek into a company that is set to create excitement in the IPO

By: Marvin Germo | May 4, 2017

I just love initial public offerings (IPOs) as it gives investors additional options on where they can grow their money. For those who are not yet into stock investing, when a company goes into an IPO, they are basically selling their shares to the general public so they can raise cash. In doing so, investors who buy shares of the company become shareholders and as long as they hold on to their shares they get to be part of the growth of the company.

WAV Logo 2016

 

As a stock investor, I have been a fan of technology companies for the longest time. From Facebook, Google and Amazon. I really believe that technology companies are the future as there is so much they can do to innovate, make our lives better and I just keep hoping that we see more of our own home grown companies list in our local market.

That’s what makes this post special, because in the next few weeks, we will have another technology company list in our local market. Audiowav Media Inc. is set to do an IPO in the PSE and sell 900 million common shares at around 1.77 to 2.96 Pesos per share. The share sale will allow them to raise around 2.66 Billion Pesos. For those who are not too familiar with what AudioWav does, the company sets up visuals, music, public announcement systems and ambient scenting in 2,420 retail establishments nationwide. If you are not yet too familiar with the company, I’m sure you are familiar with their clients. AudioWav is trusted by the biggest and most well known brands in the country from Kuya J, Chowking, Jollibee, Mercury Drug, Ayala Malls, Tokyo Tokyo, Pancakehouse, Waltermart, Powermac Center, Rustans, Wilcon Depot, Robinsons Malls, Levis and so much more.

What does the company do?

Try to imagine entering a Mercury Drug branch, have you noticed that the sound system and the music is the same no matter what branch you go to? That’s one segment of AudioWav’s business, they create the sound system framework for retail establishments so that each branch have uniform audio that represents their brand well. They also have WAV Scent, which creates a customized scent that is diffused in strategic locations throughout a retail establishment. They are responsible for the leather scent experience when you enter any BMW outlet nationwide

From an investment point of view, the company looks very interesting from the context of where the economy is going. We all know that the Philippines is one of the strongest and fastest growing economies in the region. This is primarily because we have a very strong consumption driven economy. This means that the economy is growing due to an increase of spending by Filipinos. As Filipinos keep on spending, these retail establishments will continue to earn more and will continue to expand further. This in turn will relate to a larger revenue for AudioWav in the future. Imagine, the more retail chains you see popping up, the bigger the client base of AudioWav will be. This is a company right smack in the middle of the growth of our economy.

The company is led by their President and CEO Carlos Hinolan, he brings with him 30 years of industry experience and is the brains behind the Sensory Branding that AudioWav offers to the top hospitality establishments like Solaire, Resorts World and Widus.

IPO Proceeds

As what I always discuss in my talks, you need to be aware of where the proceeds of the IPO will go. This is because you do not want to invest in a company that uses a big chunk of its IPO earnings to pay off debt. What you want is a company that will use majority of its IPO proceeds for expansion, which is exactly what AudioWav is doing! The company plans to use around 71.27% of its IPO earnings to expand in Indonesia and China in the first half of the year, followed by Vietnam, Thailand, Singapore, and Malaysia in the latter half.  It strategically plans to expand in Indonesia and China first because both countries represent a market of over 1.5 billion consumers.

Buying shares of AudioWav allows you to invest in a locally-bred company with multinational operations. This allows you to take advantage of the growth of the Philippines but also the amazing growth potential of Asia as a whole.

To round up the IPO, the remaining 28.73% of the proceeds will be used for general corporate purposes and for research and development. Based on their disclosure, no portion of the IPO would be use to payoff debt, which is good and it makes this IPO a pure expansion and growth story.

Income Growth

The company’s net income has grown from 3.65 Million Pesos in 2013 to 45.59 Million Pesos for the first 9 months of 2016. It would be interesting to see how this infusion of capital would translate into bigger earnings as they get exposed to a larger market outside the Philippines.

If you are in it for dividends, the company intends to declare at least 30% of the prior year’s net income after tax for dividends.

All in all, this is a company that is expanding and growing alongside the local and regional economy. There will always be risks whenever you invest in listed companies, due to market forces brought about by internal and external factors. This post is just a snippet of what the company is and what it plans to do with the IPO. Your goal as an investor is to see if the company fits your own criteria of risk, reward and your own specific investment timelines. It would be great if you study more about the company and that you don’t just jump in without knowing what you are getting into. Profitability in the stock market comes with knowledge about how good the company is and the right conviction of staying the course in spite of the volatility.

My desire is to see you and more Filipinos invest the right way and that you can use the stock market and IPOs like this to help you reach your goals of financial freedom.