Satya Capital, which had been a long-term shareholder in the Singapore refining company, chose to sell out after a 14% gain in the share price over the past month which had brought the stock to 52-week high territory. Yesterday it closed unchanged at S$5.35, which was only 5 Singapore cents away from the high of S$5.40 on May 22.
The seller offered 45.65 million shares, which represented its entire 8.8% stake, at a price between S$5 and S$5.30 and after a few hours of bookbuilding set the price at S$5.10 for a 4.7% discount to the close. According to sources, there was good demand for the stock at that level with the book approaching four times covered. However, investors were also clear they didnÆt want to pay more than S$5.10.
The strong rally in the share price likely played a role here as, even with a dip in late April, the stock is up 32% from the low on January 12. Having been a shareholder for a few years, Satya Capital is sitting on a much bigger return than that, however, and supposedly saw this as a good time to realise those gains.
ôThis is an opportunistic fund raising and the key aim was to get it all done in one go,ö says a source close to the transaction.
This should also be good for other shareholders as it will leave no overhang on the stock, he says, noting that Singapore Petroleum itself doesnÆt need money which suggests there is unlikely to be any imminent sale of primary shares either. The sale will also increase the freefloat to 53%, which will benefit existing shareholders.
And while this is a big chunk of shares coming from one of the largest investors in the company, Satya Capital didnÆt have a seat on the board. That circumstance should help mitigate any concerns by other shareholders about the exit.
The 50-odd investors who bought into the deal had a good geographical mix with about 40% of the demand coming from Asia and 30% each from Europe and offshore US accounts.
Some investors were likely attracted by the fact that placements by blue-chip Singapore names have been a rarity this year. Also, the stock isnÆt that liquid, trading only $5 million worth of shares per day, which meant this deal offered a decent opportunity to buy Singapore Petroleum stock in bulk.
Fundamentally, analysts still have a mixed view on refiners, but the company did report a 65% increase in first quarter net profit to $74 million thanks to rising fuel prices and an inventory build-up among its customers, making it an interesting investment for those who believe there is still more upside in the cycle. Singapore Petroleum also offers a decent dividend yield of about 3.7%, meaning the stock could be worth holding even if the next leg of equity upside turns out to be some time away.