Kingboard Laminates' parent sells $220 million of stock

A block of Kingboard Laminates shares changed hands on Tuesday, marking the latest in a string of sell-downs in Hong Kong-listed companies. However, this wasn’t a case of an external shareholder trimming its stake, but rather a reallocation of capital within the Kingboard group. The seller was a wholly owned subsidiary of Kingboard Chemical Holdings, which is the parent and controlling shareholder of Kingboard Laminates. 

The upsized deal raised a combined HK$1.71 billion ($220 million) and saw Kingboard Chemicals’ stake drop to about 66% from 73.5%.

The increase in the freefloat from below 27% to 34% helped attract demand for the share sale both from existing shareholders, who welcomed the greater liquidity, and from high-quality long-only funds that were new to the stock. For the latter, the placement was a rare opportunity to get a meaningful position in the stock, given that it is normally quite thinly traded – the deal accounted for about 50 days’ worth of trading, based on the average daily turnover over the past six months, or as much as 75 days’ worth if looking only at the past month.

The share price has also performed well over the past two-and-a-half months, gaining 33% since its latest trough on July 5, and all the analysts who cover the stock, according to Bloomberg, have either a buy or outperform rating on it. Kingboard Laminates is involved in the manufacturing and sale of laminates, which are used primarily in low-end electronic products like toys and clock radios. It also produces a lot of the components and raw materials that go into the making of these laminates.

The deal was fully covered within about 30 minutes of launch, but was kept open to allow US-based accounts to have a chance to participate as well. In all, more than 30 investors participated.

The seller offered 150 million shares with an option to sell a further 75 million in case of demand. That 50% upsize option was exercised in full, resulting in a total deal size for 225 million shares, or 7.5% of the outstanding share capital.

The level of demand also allowed the shares to be priced in the upper half of the price range at HK$7.60, which was equal to a 4.9% discount to Tuesday’s closing price of HK$7.99. The shares were offered in a range between HK$7.40 and HK$7.75, or at a discount of 3% to 7.4%.

The stock did well in the wake of the deal too, falling just 1% on Wednesday from the previous day’s close to a finish of HK$7.91 – well above the HK$7.60 placement price. The Hong Kong stock market was closed yesterday for the mid-autumn festival.

Meanwhile, Kingboard Chemical, which is also listed in Hong Kong, said it would make a capital gain of approximately HK$912 million from the sale. It will use the net proceeds to expand its production capacity and for general working capital.

The deal was arranged by CLSA, which on Friday last week completed a secondary share placement in Philippine-listed Metro Pacific Investments (MPI) together with joint bookrunner UBS. That deal too has already made money for investors.

The MPI placement was also noticeable for the fact that, at Ps6.16 billion ($140 million), it accounted for two days’ worth of trading volume for the entire Philippine Stock Exchange. The deal was launched after the close of Philippine trading at a size of 1.275 billion, but was upsized in full to 1.759 billion. The final size represented about 8.7% of the company and the entire remaining stake of the seller – the Beneficial Trust Fund (BTF) of the Philippine Long Distance Telephone Co (PLDT), which is a retirement fund set up on behalf of PLDT’s employees.

In spite of the large deal size in relation to the daily turnover on the exchange, the shares were offered at a tight discount of just 2.5% to 5% versus the latest close and priced at Ps3.50 for a final discount of 4.1%. 

The order book was of high quality with allocations favouring long-only and existing shareholders who were happy to see the overhang of the trust fund’s shares removed. Investors are also currently quite keen on the Philippine stock market, which is the second best performing market in Asia this year after Indonesia. And within the Philippines, MPI’s refocus on infrastructure investments, including water, toll roads, hospitals and electricity distribution, has also attracted interest. Most of the buyers came from either Asia or the UK.

Since the deal, the share price has continued to gain and yesterday closed at Ps3.70, a 1.4% gain versus the pre-deal close and 5.7% above the placement price.