Malaysia Airports raises $205 million from follow-on share sale

Malaysia Airports Holdings, which is majority-owned by Khazanah Nasional, has raised M$616 million ($205 million) from a follow-on share placement. The bookbuilding was launched at around 5.30pm Hong Kong time yesterday and closed after about two hours.

The airport operator offered 110 million shares at a price between M$5.50 and M$5.60, which translated into a discount of 0.9% to 2.7% versus yesterday’s close of M$5.65. The price was fixed at the top for a 0.9% discount. While this looks tight, the share price fell 2.4% yesterday and was also down on Monday, and the term sheet noted that the final price came at a less aggressive discount of 2.4% versus the five-day volume-weighted average price.

However, a tight discount can be justified because of the strong domestic support for the stock, one observer argued.

The offering accounts for 10% of the existing share capital. As less than half a million shares change hands in the stock every day, the number of shares sold represents a large multiple of its average daily trading volume, according to a source.

The deal attracted a good mix of domestic and international investors, including those from Singapore, Hong Kong and London, but in the end about 80% of the deal went to domestic accounts, while the remaining 20% was bought by international investors.

The buyers included a few high-quality domestic insurance companies, as well as some large orders from offshore accounts that were new to the stock, the source said. All in all, there were more than 20 investors in the book.

The private placement plan was first flagged by the company in January this year. In a statement at the time, it said the proceeds will be used partly to finance the additional capital expenditure that will be incurred from the enhancement of the new low-cost carrier terminal at Kuala Lumpur International Airport.

The fundraising will help the company to meet its obligations in connection with the construction of the new terminal, which is scheduled to be completed by April 2013, the company said.

As of December last year, the airport operator was 54%-owned by Khazanah, the state-owned Malaysian investment company. After the share placement, Khazanah’s stake will be reduced to 49.09%.

While major stock markets in Asia suffered a steep fall last year, with Hong Kong and Tokyo losing about 20%, emerging markets fared better and Malaysia’s FTSE Bursa Malaysia KLCI Index eked out about a 1% gain. However, in the first couple of months this year there has been some rotation out of last year’s outperformers in Southeast Asia towards China and India in particular, and while Malaysia is up nearly 3% year-to-date, it is lagging the rest of the region.

Malaysia Airports’ share price is down more than 2.5% this year, extending a 5% decline logged last year.

While global financial markets remain volatile due to the crisis in the eurozone, demand for the transaction was insensitive to what has been driving the global markets recently, the source said, as investors are familiar with the company and the stock is considered very defensive in nature.

Malaysia Airports is the operator and manager of all of Malaysia’s 39 airports and also provides airport management services for Delhi International Airport and Hyderabad International Airport in India, and Sabiha Gokcen International Airport in Turkey.

J.P. Morgan and Maybank were joint bookrunners for the deal.