Singapore government divests Sunway stake

GIC offers investors attractive discount after short sellers push stock below its daily volume weighted average price shortly before the close.

Singapore's GIC raised M$482 million ($144.7 million) after divesting its remaining 8.7% stake in Malaysian construction and property group Sunway Berhad on Tuesday. The Singapore government-controlled group offloaded 150.66 million shares after placing out both a 125 million share base deal and a 25.66 million share upsize option.

Under the lead of CIMB and JP Morgan, the accelerated block trade was priced at M$3.20, according to a termsheet seen by FinanceAsia. This represented the bottom end of a M$3.20 to M$3.30 range and equated to a 4.5% discount to the stock's M$3.35 close and a 6.7% discount to its volume weighted average price.

The base deal is said to have been covered at launch after the leads spoke to a handful of anchor investors in the 24 hours preceding the deal. Indeed, it seems that news of the trade seeped out into the pubic domain after the stock suddenly slipped 3.2% in the final hour of trading.

This encouraged GIC to offer more generous pricing to the 28 accounts that participated. Unsurprisingly, there was a very heavy concentration of domestic institutions, with only a handful of buyers from Singapore and Hong Kong.

The top five investors took 75% between them, which should help to ensure a stable aftermarket.

Foreign investors have been showing signs of a tentative return to the Malaysian equities market after turning net sellers throughout the whole of September and most of October. However, bankers said the sell-off was selective and largely driven by portfolio positioning and a desire to lock in strong gains ahead of the year-end. 

Most of Sunway's order book comprised existing investors who were keen to top up their holdings ahead of the group's proposed spin-off of its construction arm during 2015. The group has said it plans to return some of the proceeds to existing investors via a cash dividend.

Sunway is up 23.16% year-to-date and currently trading at about 10.4 times 2015 earnings, below the Kuala Lumpur stock market average of about 15.5 times. During previous infrastructure upcycles, Malaysian construction stocks have traded between 16 and 30 times forward earnings.

In its recent budget, the government re-affirmed a commitment to using infrastructure as an economic driver, announcing seven large scale projects totalling M$48 billion. These include lines two and three of the Klang Valley MRT and a M$27 billion pan Borneo highway. 

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