With CLSA as lead manager a 60 million share placement was completed late on Thursday at HK$6.275 - a 4.9% discount to the stock's close earlier that lunchtime when it was suspended.
Representing 24 days trading, the deal accounted for 10.34% of the company's existing share capital, or 8% of its expanded share capital. Just over 50 accounts participated in the transaction, adding welcome liquidity to a company, which while well tracked by institutional accounts relative to its size, only has a market capitalization of $500 million. Pre-issue, the company had a freefloat of 66%, with chairman Horst Pudwill owning a further 22.5% and managing director Roy Chung a further 11.5%.
Having returned 261.33% over the past year, Techtronic Industries been one of the best performers on the Hong Kong stock exchange and since the beginning of the year has risen 111.2% to close at an all time high of HK$6.60 as the placement was launched on Thursday.
The stock's outperformance has co-incided with its move from a pure China-based manufacturer to a brand name owner (Ryobi power tools). The company has also said that sales of its power tools to the US (its major market) should double this year following the completion of a 10-year agreement with the Home Depot chain. Proceeds from the share placement are being used to construct a new plant in Mexico to build engines for garden tools in association with Japan's Komatsu Zenoah.
Supporters argue that since the company is only trading on a p/e ratio of 13 times forward earnings, the stock still has upside potential. According to CLSA, Techtronic recorded 30% EPS growth during 2001 and the bank is forecasting an 18% multiple during 2002 and 25% during 2003.
For the 2001 Financial Year, the company reported a 32% increase in net profit to HK$238.8 million ($30 million).