A long-term shareholder in Comfortdelgro, the Singapore-listed bus and taxi operator, last night raised S$3329.8 million ($262 million) from a block trade.
The seller was the Singapore Labour Foundation, a state-owned entity that was set up in 1977 to help develop the trade union movement in Singapore and improve the welfare of union members. It derives its funding from a combination of membership fees and returns on investment and has owned shares in Comfortdelgro since 2003.
The sale comes after a strong run in the share price since early November, which has intensified in the past month on the back of a couple of small acquisitions and good first quarter earnings. The gains — it is up 37.1% since November 10 and 22.5% so far this year — have pushed the low-volatility stock above its long-term trading range between S$1.20 and S$1.65 and it is currently trading at six-year highs.
But, according to a source, there hasn’t been a single block trade in this stock since 2006, so this was a rare opportunity to buy it at a discount.
And it was offered at a pretty chunky discount of between 6.9% and 11% versus yesterday’s close of S$2.18. This did attract just over 50 investors, although some of them were supposedly only interested if they could get their hands on the stock at the full 11% discount — which is perhaps not too surprising since most of the shareholders do hold the stock for the relatively high dividend yield.
The seller offered to dispose of 170 million shares, which accounted for about two-thirds of its total holdings and close to 8.1% of the company, according to the latest annual report. The shares were offered at between S$1.94 and S$2.03 each, and in the end the price was fixed at the bottom for the maximum 11% discount.
The source says the deal was comfortably covered and attracted a good balance of long-only accounts and hedge funds. Some existing shareholders took the opportunity to top up their positions, but there were also some sizeable orders from investors that were new to the name. The deal was fully covered by investors based in Asia, but this was then complemented with a couple of good orders out of the US, the source says. European investors were less interested, however.
The sale will reduce the Singapore Labour Foundation’s holdings in the stock to about 3.9% from 12% previously. Its remaining shares will be locked up for 90 days.
Comfortdelgro is one of the world’s largest transport companies with operations in seven countries. Aside from the operation of buses and taxis, it is also involved in railway services, car leasing and rentals, automotive engineering services, driving centres, insurance broking services, outdoor advertising and car dealerships. Its global fleet consists of about 45,800 vehicles, according to its website.
In April it announced that it will buy part of FirstGroup’s London bus business and assets for £57.5 million ($87 million), which will increase the number of buses it operates in London to about 1,700, from 1,200 today.
And on Monday this week, it said it will buy a family-owned Australian bus company, Melbourne-based Driver Group, for approximately A$22 million ($21.6 million). Comfortdelgro already operates bus services in Australia, but has been looking for opportunities to grow. Nine months ago it also bought a long-haul bus operator. The latest acquisition will see it take over five metropolitan routes and a fleet of 42 buses.
Aside from Australia and the UK, the company also has businesses in Ireland, Vietnam, Malaysia, China and in its home market of Singapore. In the first quarter this year, 38.2% of its revenue was generated outside of Singapore.
Revenues grew by 1.8% in the first quarter to S$870.8 million, while net profit improved by 7.9% to S$57.7 million.
UBS was the sole bookrunner for the transaction, which came in a busy week in the equity capital markets. On Monday there were no fewer than six deals, including two convertible bonds and a $1.1 billion block trade that marked Goldman Sachs’s exit from Industrial and Commercial Bank of China. That was followed by a $177 million block in Thai TV broadcaster BEC World and a small trade in Beijing Jingneng Clean Energy on Tuesday. And last night Comfortdelgro was accompanied by two more sell-downs below $100 million, in China Yongda Automobiles Services and Indonesia’s Media Nusantara Citra.
At the same time, investors and other market participants are keeping a close eye on the trading debuts of China Galaxy Securities and Sinopec Engineering this week. Being the two largest IPOs in Hong Kong so far this year – they raised $1.1 billion and $1.8 billion respectively – their performance in the secondary market will be highly important. If they do well, it is likely to support the investor appetite for other market newcomers.
And Galaxy Securities set a good benchmark when it started trading yesterday. After a delayed start due to a black rainstorm warning, the share price gained as much as 11.3% before easing back somewhat. It finished the day at HK$5.62, which was 6% above the IPO price of HK$5.30.
The debut was helped by the fact that its closest comparable, Haitong Securities, had gained 8% since the pricing of the IPO last week, making Galaxy Securities look relatively more attractive. About 30% of the shares sold in the IPO changed hands during the shortened session.
It will be followed today by Sinopec Engineering. It too looks set for a solid debut, based on indications in the grey market where it was trading about 8% higher late yesterday afternoon.
