It was a busy night in the equity capital markets in Asia with at least three deals of size. The largest was a block trade in Thai hospital operator Bangkok Dusit Medical Services, which raised Bt22.18 billion ($723 million).
Also in the market on a day when European and US markets came under pressure following a lowering by the IMF of its global growth forecasts was Taiwan-listed Chailease Holding, which raised $206 million from its debut sale of global depositary receipts (GDRs), and a sell-down in Korea Electric Power Corp (Kepco) by Korea Deposit Insurance Corp. The latter was aiming to raise up to $235 million, but also came with an unspecified upsize option. However, as of early this morning, the Kepco deal hadn’t yet been priced and allocated.
At $723 million, the Bangkok Dusit transaction is the biggest equity deal in Thailand this year and the largest overnight trade since Siam Cement raised $1.1 billion from the sale of a 16% stake in PTT Chemical in December 2010. It was also a chunky trade relative to the size of the company and the daily turnover, accounting for 13.7% of the outstanding share capital and about 80 days of trading.
However, the terms didn’t appear to account for a deal that size, with the shares being offered at a discount of just 2.3% to 5% versus yesterday’s close. Indeed, a significantly smaller $135 million block trade in Bangkok Dusit in July this year was priced at a 5.9% discount.
The reason for the tight pricing soon became clear, though, as it emerged that an undisclosed domestic strategic investor was buying a big portion of the deal. Exactly how big wasn’t made public, but in order to be confident to launch at that price, it must have been pretty significant. It also seems that the demand from other investors was greater than the remaining portion of the deal, as the bookrunner was able to lift the price above the bottom of the range. That said, the deal was said to have been “well covered”, rather than massively oversubscribed, which is no real surprise for a deal of this size.
Credit Suisse, which acted as the sole bookrunner, knows the sector well and would have been well aware of who was a potential buyer, after being involved both in the IPO of Malaysian hospital operator IHH Healthcare and in a separate block trade in Bangkok Chain Hospital in July this year. Domestic firm Bualuang Securities participated as a joint global coordinator, but was not a bookrunner.
About 40 accounts participated in the transaction and some 85% of the demand came from domestic investors, including the strategic player, one source said. Surprisingly, the international demand was slightly biased towards hedge funds, although overall the shares were primarily placed with long-only funds or investors who know the sector well and are believed to be long-term holders, the source said. There was also a bit of demand from high-net-worth retail investors.
The deal comprised approximately 212.2 million shares that were offered at a price between Bt104 and Bt107. The price was fixed at Bt104.50 for a discount of 4.6% versus yesterday’s close of Bt109.50.
The sellers were a group of shareholders, including two representatives of one of the four families that founded the company. According to the term sheet Satit Viddayakorn, who owned 9.95% before this deal, and Pongsak Viddayakorn, a director on the Bangkok Dusit board who owned 0.88%, both sold their entire stakes in the company. The remaining shares came from other minority shareholders who were also exiting.
Although Satit Viddayakorn was the second largest shareholder of the company (according to end of March data on the Thai stock exchange website), an observer noted that the exit wouldn’t necessarily be seen as a negative as it would make the ownership of the company a bit more focused. The sale should also have a positive impact on the free-float, even though a large portion of the shares were taken up by the strategic investor.
And it is not hard to understand why the shareholders are tempted to monetise their holdings. The stock has been edging steadily upwards for the past three years and, on Monday, it closed at a new record high of Bt111.50. And even after falling 1.8% yesterday, the share price is up 36.4% so far this year, compared with a 26% gain in the benchmark Thai index, and it has added 338% since the beginning of 2010.
Part of the reason for the share price gains is that the company, which is the largest hospital operator in Thailand in terms of patient service revenues and market cap, has continued to expand its footprint both through acquisitions and greenfield projects. As of the end of June it had 4,140 available beds and in the first six months this year, revenues from its hospital operations increased by 35% year-on-year to Bt21.1 billion ($687 million) mainly due to a growing number of patients and the consolidation of revenues from two additional hospitals. Its net profit (excluding non-recurring items) improved by 56% to Bt2.7 billion.
