Orient Overseas International Ltd (OOIL) completed a 29 million share placement yesterday (Wednesday) in a bid to bring its freefloat back to the 25% mark. UBS led the $66 million transaction, which accounted for 5.6% of the company's issued share capital.
The deal was priced at HK$15 per share, representing a 5% discount to the stock's HK$15.80 close. The offering follows an announcement in early August that the company was buying back 9.08% of its issued share capital from two subsidiaries of Cheung Kong and Hutchison Whampoa.
As a result of the buy-back, OOIL's freefloat dropped to 19.4% and the new deal sees the Cheung Kong stake being re-sold to the market. Neither of the Cheung Kong or Hutch stakes were ever freely traded on the open market.
They were purchased by OOIL at HK$9.80 a share - a 4.4% discount to the stock's close on August 6. Observers say OOIL always intended to sell the shares into the open market, but wanted to handle the process itself so it could ensure placement to long-term institutional investors.
As such, the lead is believed to have targeted a couple of key accounts for an order book that went on to close two times covered with an investor list topping 20.
OOIL is one of the best performing stocks in the Hong Kong market this year and the buy-back gave it a further boost since it is EPS and ROE positive. Having started the year around the HK$4 level, the stock is now nearly four times higher.
Some analysts also believe it has some way to go yet. Prior to the placement, UBS, for example, had a buy recommendation and in a research report from late August commented that, "While the share price may look to consolidate as the capital structure and freefloat are addressed, OOIL holds good potential to be re-rated at or closer to peers multiples over the medium term (1.3 to 1.5 times book).
OOIL is currently trading at just over one times book.
The family of the Hong Kong CEO will see their stake drop from 80.61% to 75.01% as a result of the sale.