The Deutsche Bank-led block trade offered a rare opportunity for investors to buy this fairly illiquid stock in size which, according to one observer, contributed to the strong demand and high quality of the order book. Investor interest was also underpinned by the fact that the sale came amid an improving outlook for the domestic economy.
According to one source, the deal could have priced at the top end of the indicated range without any trouble, but in light of the reports of a military coup in Thailand, which started to emerge during the second half of the bookbuild, the seller decided to leave a bit extra on the table. The final price was set a couple of pesos below the top of the range at Ps443 for a 7.2% discount to TuesdayÆs close.
The 22.427 million shares were offered to investors in a range between Ps437 and Ps445, which equaled a discount of 6.8% to 8.4%. The stock closed at a record high of Ps477.50 yesterday after gaining 51.6% so far this year.
The Philippine Stock Exchange Index, made up of 30 companies, rallied 2.5% on Tuesday to reach its highest close since May 8 amid news of a budget surplus last month, declining oil prices, a modest inflation outlook and expectations that interest rates may come down by the end of this year. The favourable outlook has sent the peso appreciating against the dollar, while the stock market has added 8.6% during five straight days of gains.
Asian investors were said to have been the most prominent with regard to the number of orders, but in terms of ôsignificantö orders those were pretty widely spread between Asia, Europe and the US. About 50-70 investors were believed to have participated in the deal, which was a rarity not just for Ayala, but for the Philippines as well where quick block trades targeted at international investors are few and far between.
No orders were pulled as a result of the events in Thailand, according to people familiar with the offering.
The sale by the Ayala family, through their holding company Murmak Industries, was said to have been part of a portfolio re-arrangement exercise and investors participating in the sale were told that it was a ôone-off eventö and that there were no plans for any further sell-downs. The family will still hold 51% in the company after the sale.
The deal size represented 25.2% of the post-trade free-float and based on the average daily trading volume over the past three months, the transaction equaled 165 trading days.
ôMany investors view this as a one-off opportunity to buy the stock in volumes that would otherwise be impossible without moving the market,ö says one observer. ôThe company also offers a good exposure to the predicted upturn in the economy through its portfolio of businesses that are all pretty much number one or two in their respective space.ö
Aside from its flagship property development arm Ayala Land, the conglomerate is also active within financial services through the Bank of Philippine Islands and in telecommunications through Globe Telecom, as well as in the water supply, electronics and IT, and automotive industries.
And despite the high absolute share price, the stock still looks like good value based on the current 16% discount to its net asset value of Ps570 per share. This is among the widest discounts over the past 10 years, when the stock has on average traded at par to NAV. According to the observer, Ayala traded at a premium to NAV as recently as 2005.
Of the six analysts that are credited with following the stock by Bloomberg Data, four have ôbuyö equivalent recommendations and two are neutral. JPMorgan has the highest target price with Ps530.
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