Temasek picking lead manager for PSA Corp privatisation

The Singapore government''s investment arm is close to picking a lead manager for the $2 billion privatisation of PSA Corp - the holding company of Port of Singapore Authority.

The Singapore government's investment arm, Temasek Holdings, hasábeen hearing sales pitches from seven investment banks bidding for the lead manager role in the planned privatisation of PSA Corp, the holding company for Port of Singapore Authority. The privatisation is the biggest in the pipeline in Singapore, with reports suggesting around $2 billion will be raised.

Could be a top 5 company

Anáhistorical price/earnings ratio of 15 times -ádescribed as conservative in a recent Straits Times report - would value PSA at almost $7 billion and makeáitáthe fifth biggest company ináSingapore (by market capitalisation) after Singapore Telecom, DBS Group, Chartered Semiconductor and Singapore Airlines.

The seven investment banks pitching for the PSA Corp privatisation are Credit Suisse First Boston, Goldman Sachs, Merrill Lynch, Morgan Stanley Dean Witter, Nomura, Salomon Smith Barney and UBS Warburg.

Morgan Stanley Dean Witter was appointed towards the end of last year by PSA Corp to advise it on how to better manage its balance sheet and the port operator has since announced it intends to issue up to S$3 billion ($1.74 billion) in bonds - Morgan Stanley Dean Witter and JP Morgan have been appointed to handle the sale which is expected to take place in June or July.

PSA Corp listing seen Q4 after SMRT float

The sale of shares in PSA Corp is likely to take place before the end of this year, most likely after the privatisation of Singapore MRT (SMRT), the city-state's rail operator, which already has in-principle approval from Singapore Exchange for a listing. The sale of shares in SMRT is expected to proceed in the third quarter of this year and is likely to raise around $150 million. The timing is likely to be fixed so as not to clash with the Hong Kong government's privatisation of MTR Corp,áoperator one of Hong Kong's two rail networks, which is also expected to list in the second half of this year.

Neitheráthe SMRT nor theáPSA Corp share sales are expected to proceed until investor sentiment in Singapore recovers from current levels.

"It is alot to throw down the throats of Singapore investors at once ... the liquidity environment is about as bad as it has been since the crisis," says Marc Julienne, head trader for SG Securities in Singapore.

On a more positive note, however, both SMRT and PSA Corp can boast steady earnings growth, which should make them attractive, particularly to investors who have taken a hammering in the recent downturn in the volatile technology sector.

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