YTL completes Malaysia's first placement of treasury shares

The construction and infrastructure play raises $101 million amid improving sentiment for Malaysian stocks. Deal rounds off busy week for UBS.
Malaysian construction and infrastructure development company YTL Corp has raised $101 million from the countryÆs first ever overnight sale of treasury shares in a move to strengthen its finances so that it will have the flexibility to participate in the governmentÆs development programme as opportunities arise.

The sale, which took place after the market closed on Friday (January 19), comprised 50 million treasury shares which were sold at M$7.10 apiece. The price represented a 5.3% discount to FridayÆs closing price of M$7.50 û a post-financial crisis record - but was on par with the five-day volume-weighted average price. The share price has rallied 14.5% since the beginning of the year, including a jump in the final half hour of trading on Friday.

According to a source, the improving sentiment for the Malaysian stock market and a good macro environment contributed to a solid interest for the stock. The buyers were said to have been predominantly long-only funds, which isnÆt that strange when considering the sale was conducted on a Friday night û a time when most hedge fund managers tend to have already finished the weekÆs trading.

Perhaps for the same reason, there was good interest from European investors. The book was only kept open long enough to cover the trade and include a sufficient number of quality investors.

ôMalaysia is very much back on the agenda as the macro environment gets better. The market has been a laggard in the past few years but started to catch up towards the end of 2006 and the outcome of this deal is a testament to that positive market sentiment,ö the source says.

The benchmark index added 21.8% in 2006 and has risen 4.7% year to date. YTL Corp gained 22% last year.

In a recent research piece, Merrill Lynch ranked Malaysia among its top three favourite countries in the Asia-Pacific region and upgraded it to overweight, citing positive policy changes and pending company restructuring.

Malaysia ôhas the regionÆs second-best consumer story after China, with real private consumption growing almost 9% per annum over the last three years. Next year looks good, with an expansionary budget, inflation peaking, and a large current account surplus allowing interest rates to stay low at just 3.5%,ö the economics team said.

ôOn 15.9 times 2007 earnings for 11.8% EPS growth, Malaysia is not cheap, but itÆs cheaper than its average over the past 10 years which is 17.1 times for 0.3% EPS growth. And arguable the Malaysian story has not been this good in 10 years,ö it added.

According to people close to the placement, YTL had sought and received a waiver from a Malaysian regulation stating that treasury shares cannot be sold through overnight placements, but rather have to be divested in the market.

Being granted the waiver meant the company didnÆt have to run the risk of pushing down the share price by offering a large block of stock in the market, but instead was able to achieve the best possible price by using a bookbuilding process. It was also able to raise fresh cash without any dilution for existing shareholders, since the treasury shares were already in issuance û only held on the companyÆs own books.

The sale accounted for 3.5% of the outstanding share capital of the company and 28-days worth of trading volume.

The placement rounded off a busy week for UBS, which seems determined to retain a top spot in the ECM league tables in the first quarter after ending 2006 as the runner-up after Goldman Sachs.

Aside from arranging this placement for YTL, last week saw UBS complete a $204 million follow-on share sale for Philippine real estate developer Filinvest; lead a $141 million placement for Hong Kong-listed TPV Technology; arrange a $56 million placement for Zhejiang Expressway, act as joint bookrunner for a $53 million placement for Philippine power producer First Gen; and being one of three bookrunners (with DBS and Deutsche Bank) for Mapletree Logistics TrustÆs $208 million follow-on unit sale in Singapore.

On Wednesday UBS and Credit Suisse also kicked off the institutional roadshow for Wuyi PharmaceuticalÆs Hong Kong IPO of up to $103 million.
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