Investors were reasonably keen on the UBS-led deal which was aimed at increasing the free-float to about 40% from 7% to make the developer more attractive and accessible to international investors. The real estate unit of Gokongwei-led JG Summit Holdings hopes that the transaction will help to reduce what it views as an excessive valuation discount in relation to its peers. A hope that was also instrumental in attracting hedge funds to the deal.
Universal Robina, a producer of consumer foods and a sister company to RLC, has seen its daily trading volume multiply to 2.1 million shares since it completed a similar share sale in February which improved its free float to 40.8% from 3.5%. In the six months prior to the deal, which was also arranged by UBS, the average daily volume was no more than 80,000 shares.
Longer-term investors liked RLC because of its diversified portfolio, which includes the development of office space as well as residential high-rise and housing developments, hotels and malls.
According to sources the book was 2.2 times covered, which is ôa very good outcome for a Philippine dealö, says one observer.
The management met with about 85 international investors during the three-week roadshow and achieved a conversion ratio of about 70%. Unusually for a Philippine equity offering, onshore US investors were given a chance to participate in the 144A-registered deal and this proved to be a good move as about 44% of the shares were taken up by these investors.
Another 41% of the shares were bought by Asian accounts, while the remaining 15% ended up in Europe. About 65% went to long-only funds with hedge funds taking up the balance.
As is common for Philippine follow-on offerings, sources said the book was built primarily at the 10% discount level, which is the maximum allowed by local regulations. But as the orders started to fill up two to three days before last FridayÆs close, the bookrunners were able to revise some of the price limit orders and narrow the discount to 7.7%.
This process was made easier by the fact that thinly traded Robinsons Land didnÆt move much during the offering period. In fact, the stock hovered in a range between Ps12.75 and Ps13.25 throughout the roadshow and FridayÆs closing price of Ps13.00 was also equal to the 10-day volume-weighted average price (VWAP).
One observer notes that the final price should be viewed in the context of a 128% gain in RLCÆs share price already this year, which has seen it outperform key comparables Ayala Land and MegaWorld by about 70%. It is also well ahead of the Philippine Stock Exchange benchmark index which is up 20.8% in the same period. RLC hit a record high of Ps13.50 in the week before the roadshow started.
The final price values RLC at a 31% discount to its projected post-offer 2006 net asset value compared with a sector average of 28% - an improvement from about 37% as estimated by JPMorgan a week before the deal. However, due to the difficulty in assessing the forward NAV accurately in this market, many market participants prefer to look at Philippine developers on an enterprise value to EBITDA basis.
Using this metric, RLC was priced at an 8.1 times multiple, compared with 8.7 times for similarly sized SM Prime and MegaWorld.
The total deal comprised 811.1 million shares, of which 450 million were new. This allowed the company to raise $107 million which will be partly used to fund the opening of nine new malls by 2008, adding to its current portfolio of 18 malls.
RLC is the second largest developer of malls in the Philippines after SM Prime.
In addition, Universal Robina sold its entire 17.8% stake in the company, which made up the bulk of the 361.1 million secondary shares on offer. There is also a greenshoe of an additional 121.7 million secondary shares that could boost the total deal size to $223 million.
As much as 95% of the deal was sold offshore, while 5% will be offered to local investors through a five-day domestic placement led by ATR Kim Eng Capital Partners which opened yesterday.
The new shares are due to start trading on October 5.
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