From Military Engineer to Reclamation Pioneer: D.M. Wenceslao and PH’s First IPO of 2018

Entreprenuer Philippinesl Updated June 18, 2018

From June 18 to 22, real estate developer D.M. Wenceslao & Associates Inc. (DMWAI) will be offering up to 781 million shares for Php12 apiece. The company will then list on the main board of the Philippine Stock Exchange (PSE) on June 29, making it the first for 2018.

With DMWAI’s initial public offering (IPO) being the first in over 10 months, many are keen to see if buying its stocks would be a worthwhile investment. And one key factor every investor should keep in mind before participating in the IPO is the company itself.

So for those who are still deciding whether or not they should buy DMWAI’s IPO stocks, here’s a quick look at the issuer of the country’s first IPO for 2018:

An experienced team

DMWAI was incorporated in 1965 by Delfin M. Wenceslao Sr., a retired military engineer who originally established it as a sole proprietorship five years prior. Today, it is run by his son, Delfin J. Wenceslao Jr., who was the former president of the Philippine Constructors Association and is currently a board member of the International Federation of Asian and Western Pacific Contractors’ Association.

Much of the board is run by other members of the Wenceslao family, such as Delfin Angelo Wenceslao, Wenceslao Jr.’s youngest son, who sits as the company’s CEO. A licensed real estate broker, he has over 17 years of experience in the property sector to his name.

Similarly, DMWAI noted in its prospectus that its senior management team has “an average of over 20 years of experience in the construction and real estate industry.” It further highlighted that these people “are also licensed real estate brokers and possess in-depth knowledge of the Philippine property sales and leasing markets.”

Growth Area

While DMWAI has over 100 construction and infrastructure projects to its name, it is perhaps best known as the developer of Aseana City, a 107-hectare mixed-use development located in the reclaimed area in both Pasay and Parañaque cities. Most of its recent and future projects are located within this development.

The location, commonly referred to as the Bay Area, has been on the radar of property investors and analysts alike in recent years due to its large growth opportunity. This is driven both by large demand from mostly foreign investors as well as the rapid pace of development in the area. It is also benefiting from current and future infrastructure projects surrounding the area, such as the NAIA Expressway and the Southwest Integrated Transport System.

Aside from being behind one of the major developments within the Bay Area, DMWAI is also one of the key figures behind the reclamation of the area itself. In 1991, the company formed R1 Consortium with foreign partners, which was tasked by the Philippine Reclamation Authority to head the 204-hectare reclamation project that would be the foundation of today’s Bay Area. In return, the government gave the consortium around half of the reclaimed land, which is what DMWAI has used to develop Aseana City.

Anchors in the Area

Such a prime location also means that there are several players other than DMWAI who are taking advantage of the opportunity. These other players are by no means small; DMWAI’s fellow developers in the Bay Area include large listed companies such as SM Investments, Megaworld, Filinvest Land and DoubleDragon Properties.

But while DMWAI recognizes the heavy competition it faces in the area, it is also benefiting from Aseana City’s proximity to these competitors’ developments—most notably SM’s Mall of Asia Complex and the multi-developer Entertainment City—as these are main draws to its own spaces. In an interview with Forbes Philippines for its February 2016 issue, the elder Wenceslao recognized Aseana City’s positioning with competitors as advantageous to DMWAI’s strategy.

“You are surrounded by anchors,” Wenceslao said in the interview. “You just find a way to take advantage of the anchors.”

Diversified

DMWAI’s revenue stood at Php3 billion in 2017, growing 38 percent from the year prior. Its net income experienced a similar 30-percent increase to Php1.6 billion.

However, much of these sales is attributed to a single development: Aseana City. While the IPO is expected to benefit this development, as a bulk of the proceeds will be used for the construction of the company’s pipeline projects within Aseana City, it does not have multiple large-scale developments unlike other listed property companies.

In its prospectus, DMWAI addressed this risk by highlighting that it has diversified its sources of income beyond its leasing and sales of land within Aseana City. With numerous residential and commercial projects all expected to be completed in the next five years, these projects are seen to boost DMWAI’s revenues from rental income. It also said that it “may also pursue strategic and opportunistic acquisitions of land and other properties outside Aseana City.”

IPO, finally

Prior to this year’s listing, DMWAI already had plans to list in the PSE in 2015. In fact, it was already scheduled to be listed on December 22 that year. However, it had postponed its IPO weeks before the listing date, citing that it was “very close to the year-end holidays” back then.

DMWAI’s current offer price of Php12 per share is much less than the maximum price of Php22.90 it set prior to receiving SEC and PSE approval for the IPO. A market analyst quoted by the Philippine Daily Inquirer said that DMWAI’s offer price was “very good value for investors,” while a different analyst cited by Reuters described the price as “fair.”

However, the Reuters article also pointed out that the low offer price is “the latest sign of a lack of appetite for share listings in Southeast Asia’s worst-performing stock market.” Indeed, food-and-beverage manufacturer Del Monte Philippines deferred its IPO, which was scheduled to list days before DMWAI, because of “volatile” market conditions.