An undisclosed corporate shareholder of International Container Terminal Services (ICTSI) has raised Ps3.46 billion ($83 million) from the sale of its entire 2.6% stake in the Philippine company.
The sale, which was completed after the close of trading on Friday, saw good support from other existing shareholders and was priced at the mid-point of the range for a 5.2% discount to the latest close.
With the Philippine stock market trading at record levels, it is no surprise to see shareholders in Philippine companies join the trend of block trades that have been dominating equity capital markets activity in the region so far this year. The Philippines is the second best performing market in Asia with a gain of 22.8%, trailing only Thailand where the benchmark index is up 26.5%
ICTSI too is having a good year with a 37% gain so far, including a 2.5% increase last week. However, after reaching a record high of Ps77 at the end of May, the stock has hovered in a range between Ps67 and Ps75 and analysts are divided about the potential upside as its business is affected by the slowdown in global economic growth. The company’s profits are also suffering from the appreciation of the US dollar against other currencies, including the Philippine peso.
Of the 13 analysts who cover the company according to Bloomberg, five have a “buy” recommendation on the stock, while six have a “hold”. The remaining two are advising investors to sell.
ICTSI, which is controlled by billionaire businessman and CEO Enrique Razon, posted a 17% increase in net profit to $70.3 million in the six months to June and saw its bottom line edge up 10.7% to $34.9 million in the second quarter. Cargo volumes increased by 8.6% in the first six months and by 3.6% in the second quarter due to modest growth in domestic and international trade, new shipping lines and routes, and an ongoing shift towards the use of containers for break-bulk cargoes, such as bananas.
Set up in the late 1980s to develop and manage the international container terminal in Manila, the company is now a major operator of container ports around the world, providing a variety of cargo handling and related services. According to the Philippine Stock Exchange website it manages a total of six terminals in the Philippines and has overseas concessions or terminal development projects through subsidiaries or affiliates in Argentina, Brazil, Brunei, mainland China, Colombia, Ecuador, Georgia, Indonesia, Japan, Madagascar, Mexico, Poland, Syria and the US.
The seller offered approximately 50.08 million shares at a price between Ps67 and Ps71, which translated into a discount of 2.5% to 8% versus Friday’s close of Ps72.80. As noted, the price was fixed in the middle of that range at Ps69 per share, resulting in a discount of 5.2%.
While the deal size was small in dollar terms and as a percentage of the company, it did account for well over 50 days of trading. In that context, a discount of just above 5% does seem pretty tight.
However, a source said the deal had good support from anchor investors at launch and was fully covered after just 30 minutes, which allowed the bookrunners to move the discount well inside the wide end. When the order books closed at 10pm, after about six hours of bookbuilding, the deal was said to be well covered at the final price. The anchor orders also gave them the confidence to launch the deal on a Friday.
A substantial portion of the shares were allocated to international long-only funds and infrastructure specialists, while the rest went to hedge funds and domestic investors, the source said. About 30 accounts came into the deal. The majority of the demand came from Asia, but there was also good participation from onshore US investors.
The seller wasn’t identified, but was described as a corporate investor that has held shares in the company for a long time. The sale accounted for its entire 2.58% stake.
Southeast Asia saw record ECM volumes of $21.4 billion in the first nine months this year. The Philippines accounted for 14% of that, making it the third most active country after Malaysia and Singapore. The largest deal so far this year is BDO Unibank’s $1 billion rights issue, while the largest overnight transaction is Ayala Land’s $323 million follow-on in July, which was upsized by 28% due to strong demand.
CLSA was the sole bookrunner for the ICTSI transaction.