PLUS marks 2005 with Asia's first equity placement

Government agency Socso raises $123 million from divestment in toll road operator.

Malaysia's social security office (Socso) sold 170 million shares in PLUS Expressways yesterday (January 10) in a placement led by CIMB and Credit Suisse First Boston. The deal was timed to take advantage of a potential spike in the company's share price following news that the government has endorsed its scheduled 10% toll rate hike.

Specialists also report that Socso needed to offload some of its PLUS stake for diversification purposes as it was too heavily weighted in the stock. As a result of the sale, equating to 3.4% of the company's issued share capital, Socso has a 1.2% stake remaining.

The deal was completed against a live market and priced at M$2.75, representing a 3.2% discount to the stock's M$2.84 close later in the day. It was launched midway through the morning session and marketed on an indicative range of M$2.17 to M$2.76. This represented a 3.8% to 5.6% discount to the stock's M$2.87 close on Friday.

After opening strongly in the morning, the stock traded down after news of the placement broke, hitting an intraday low of M$2.77 before re-bounding slightly. It closed the day down just over 1%.

Books were kept open long enough to catch one hour of the European day and closed two times covered at 4pm Asia time. About 50 accounts are said to have participated of which just over half came from Malaysia.

The international book had a split of 55% Asia, 30% Europe and 15% offshore US. The five largest Malaysian dedicated funds are all said to have participated.

The transaction represents a fairly weighty 70 days trading volume, but together with a recent exchangeable, should help boost liquidity over the longer term. Back in December, Khazanah completed Malaysia's largest ever equity-linked transaction with a $414.5 million exchangeable into PLUS.

The government investment agency owned 68.7% of PLUS pre-exchangeable, with a further 18.6% in freefloat.

On full conversion, the exchangeable will increase the freefloat by about 50%. It was priced at an 18% premium to the stock's M$2.67 close on December 15.

The new placement expands the freefloat by 20%.

PLUS has performed extremely well since its low of M$2.16 in May last year. It has also traded strongly since a second dip in mid December when it hit a low of M$2.63 on December 11. Since then it has climbed 8% to yesterday's close.

At M$2.84 the stock is trading on a forward valuation of about 15 to 18 times 2005 earnings. It is also trading on a forward dividend yield of 3.17%.

Specialists say prospects for enhanced dividends are one of the main drivers of current stock price performance. The company hopes to enhance its pay-out ratio by releasing trapped cash and is in the process of re-negotiating debt service covenants on its BAIDS (Islamic bonds).

It has sought permission to reduce the interest and principal re-payment reserve ratio from three times to two times. If it is successful, specialists say the dividend yield could be boosted to between 6% and 8%. Key will be whether it is able to do so and maintain a triple-A rating from the domestic rating agency, RAM.

Analysts say the other main stock driver is the toll rate hike. Staggered increases have been pre-set as part of the company's concession agreement for the toll roads it operates. However, the latest increase had faced opposition from some politicians, prompting speculation the government might delay the increase, scheduled to take effect in January.

PLUS operates 69% of the toll expressways in Malaysia including the 797km North South Expressway, the New Klang Valley Expressway and a section of the Federal Highway Route.

Share our publication on social media
Share our publication on social media