After a couple of weeks of light placement activity, the market got a boost last night with two sizeable deals. And it was probably not a coincidence that they came from two of the best performing markets in Asia this year. With full-year and first quarter earnings reports now largely out of the way, issuers are taking advantage of the share price gains to raise fresh capital.
The first company to hit the market yesterday was International Container Terminal Service Inc (ICTSI) out of the Philippines. Supported by good demand both before and after launch, the deal was upsized in full and ended up raising Ps8.19 billion ($199 million).
It was followed a couple of hours later by a combined primary and secondary share sale in Central Pattana, the Thai commercial property developer. This deal too attracted strong interest and priced above the bottom of the range for a total deal size of Bt10.85 billion ($366 million).
Equity investors have been keen to increase their exposure to both the Philippines and Thailand this year and the two markets are up 25.8% and 16.6% respectively. And both ICTSI and Central Pattana have outperformed the benchmark indices in their respective markets with gains of 35% and 30.3%.
Aside from a couple of re-IPOs in Philippines and the IPO of a business trust backed by ticket revenues from BTS’s Bangkok Skytrain system in Thailand, which all priced in April, there have been few capital markets deals in these two markets in the past few months for investors looking for good entry points. This is particularly true when looking at discounted overnight trades, which carry a lot less market risk than an IPO or a fully-marketed follow-on that take weeks to complete.
The last overnight trade of size in the Philippines was the $298 million top-up placement in Ayala Land on March 6, while in Thailand, there have been no blocks or placements since February 21 when Charoen Pokphand Group reduced its stake in its CP All subsidiary through a $315 million block trade.
International Container Terminal Service
ICTSI initially offered 70 million shares with an option to sell an additional 20 million in case of sufficient demand. And as noted, there was. The deal was upsize in full, by 28.6%, to 90 million shares. At the final size the deal accounted for 4.4% of the company and about 65 days of trading volume.
Some 59% of the shares were new and sold in the form of a top-up placement, while the rest were treasury shares that were offloaded by the company. Both types of shares raised fresh capital for ICTSI, however, which it will use to fund its earlier announced capital expenditure programme.
The shares were offered in a tight range between Ps91 and Ps92 apiece, which translated into a discount of 7.95% to 8.95% versus yesterday’s close of Ps99.95.
The final price was fixed at the bottom for the maximum 8.95% discount, which was no real surprise when considering that the deal was upsized by close to 30% and the stock finished yesterday’s session within one peso of last Friday’s record close of Ps100.50 (the Philippine market was closed for a holiday on Monday).
The company was also supposedly focused on being able to do the full deal size, while the price was secondary. And given that the price range was so tight to begin with, the difference was really only a couple of million dollars.
According to sources, the bookrunners had demand indications for more than three-quarters of the base deal size, and the transaction was said to be comfortably covered at the enlarged size when the order books closed at 9:30pm Hong Kong time.
The buyers included domestic and international long-only funds as well as hedge funds, with about one-third of the demand coming from domestic funds. In all, almost 80 investors submitted orders, but, according to one source, the allocations were skewed towards the anchor accounts.
The deal came after ICTSI reported strong first quarter earnings late last week. Supported by last year’s acquisition of two ports in Jakarta and Karachi, container throughput increased by 12% year-on-year, revenue improved by 20% and net-profit was up 15% to $40.7 million.
The company, which is controlled by billionaire Philippine businessman Enrique Razon, said its capital expenditures in the first quarter amounted to $93 million, or approximately 17% of its $550 million capex budget for this year. That budget will be mainly used to complete two terminal development projects in Argentina and Mexico, as well as the ramp-up of construction activities in Colombia and in Davao in southern Philippines.
Set up in the late 1980s to develop and manage the international container terminal in Manila, ICTSI is now a major global operator of container ports, providing a variety of cargo handling and related services. According to its latest earnings report, it is involved in 27 terminal concessions and port development projects in 19 countries around the world.
The placement was arranged by CLSA and UBS.
Central Pattana
The Thai real estate developer and two of its existing shareholders offered a combined 213.824 million shares, which was equal to about 4.9% of the company. Some 61% of the shares were new, while the rest were existing shares sold in the form of non-voting depositary receipts (NVDRs) by two members of the Chirathivat family, which is the company’s controlling owners.
The two sellers, Khunying Suchitra Mongkolkitti and Sukanya Promphan, where described as not really affiliated to the company though. Both of them sold their entire remaining stakes, supposedly for retirement purposes. One source noted that the pair had been interested in selling for quite some time and when they learnt of the company’s plan to issue new shares they were happy tag along.
The shares were offered at a price between Bt50 and Bt52 apiece, which translated into a discount of 2.3% to 6.1% versus yesterday’s close of Bt53.25.
Like on ICTSI, the bookrunners had lined up a lot of indicative demand and sources said almost the entire deal was covered when the order books opened around 6pm Hong Kong time yesterday. The demand was described as very price sensitive, but even so, one source said the final price was fixed slightly above the bottom of the range at Ps50.75 for a discount of 4.7%.
This looked pretty tight, especially for a stock that trades only about $5 million to $8 million per day, but the share price had come off 5.3% in the past couple of sessions and based on the five-day volume-weighted average price of Ps55.38, the discount was a significantly wider 8.4%.
Central Pattana is a pretty volatile stock, however, and a 5.3% move in two days is not really that exceptional. Last Tuesday the stock jumped 10% in a single session, only to fall 6.1% on Wednesday and then gain another 4.2% on Thursday. One source said the stock has a historic volatility of about 50%.
The deal was well supported by domestic institutions and high-net-worth individuals, but overall there was a slight demand overweight from foreign investors, one source said. More than 50 foreign accounts participated in the transaction, he added. There was no information last night about the number of domestic investors that submitted orders.
This deal seemed to be a bit more opportunistic than ICTSI, as the company said it will use the money from the new share sale for general corporate purposes and to pay down existing debt.
On its website, the company describes itself as Thailand’s biggest retail developer, with a leading 24% share of the retail market in Bangkok. Central Pattana owns and manages 21 shopping centres, seven office buildings, two hotels and two residential projects.
Its latest shopping mall started operations in early April and it currently has six other retail projects under development throughout Thailand.
Central Pattana reported a net profit of Bt1.656 billion ($56 million) in the first quarter, which was up 56% from a year earlier and 77% from the previous quarter, excluding a one-off gain from the transfer of an office property to a listed trust in late 2012. Revenues increased by 24% from a year earlier.
This came on the back of a 39% gain in revenues and a 130% jump in net profit in 2012. Aside from the cash received from the transfer of the property leasehold to the CPNCG trust, it attributed the profit gain mainly to the launch of new projects and a steady rise in rental rates for existing projects, as well as efficient cost and expense control.
Bank of America Merrill Lynch and UBS were joint bookrunners for the transaction together with domestic securities firms Bualuang Securities and Phatra Securities.
