This article first appeared in The Edge Malaysia Weekly on December 31, 2018 - January 6, 2019
STRUCTURING a share placement that fetches a good price at a time financial markets are under a heavy cloud of heightened global economic uncertainties is no easy task.
It is to Khazanah Nasional Bhd’s credit, then, that it managed to successfully place out CIMB Group Holdings Bhd shares in December, pricing them at a level that served the interests of both buyer and seller.
On Dec 3, the sovereign wealth fund disposed of 62.99 million CIMB Group shares — a 0.66% stake — at RM5.78 per share, or RM364 million in total. CIMB Investment Bank Bhd and Credit Suisse were the joint bookrunners for the deal.
What is impressive about the transaction is that CIMB Group’s shares were placed out at a mere 2% discount to its last closing price — the tightest discount achieved for a Southeast Asian block in 2018.
The block trade also marks the continued trend of Khazanah’s successful divestments of part of its CIMB Group shares at a 2% or tighter discount.
CIMB Group, with an asset size of RM522.85 billion, is the fifth largest banking group in Asean. In Malaysia, its home base, it is the second largest banking group.
Since Pakatan Harapan took over Putrajaya in May, it was widely anticipated that Khazanah would sell some assets to raise cash for the government, given the country’s debt burden of over RM1 trillion.
Indeed, in November, Khazanah divested a 16% stake in IHH Healthcare Bhd to Mitsui & Co Ltd for RM8.42 billion as part of a restructuring of its portfolio.
It is worth noting that it launched the CIMB Group block trade just two days after the banking group reported strong financial results for the nine months ended Sept 30 (9MFY2018). Net profit grew 30.8% year on year to a record high of RM4.5 billion, bolstered in part by a gain from the sale of stakes in its asset management businesses. Revenue was also higher at RM13.31 billion, compared with RM13.11 billion a year ago.
CIMB Group CEO Tengku Datuk Seri Zafrul Aziz said the good 9MFY2018 performance was underpinned by lower provisions and costs, continued improvement from consumer and commercial banking as well as a recovery in wholesale banking revenue.
The transaction was also timed to perfection as it was launched post-G20 summit, with all Asian markets trading up on the day of the launch. The benchmark FBM KLCI was up 1.4% and CIMB’s share price was up 2.4% on the day.
The transaction marks Khazanah’s fourth accelerated bookbuilding block trade of CIMB shares since 2010. This block trade also marks the second largest and second financial institution group-related block trade in Malaysia in 2018.
That more than 65% of the demand for the placement came from foreign investors in Asia and Europe is a testament to the continued support from international investors for the Malaysian equity capital markets post-general election.
The final book was well oversubscribed with strong demand from existing investors, both domestic and international, long-only accounts as well as multi-strategy funds.
About 20 investors participated in the bookbuilding and the top five received more than 75% of the allocation.
Geographically, international investors received about two-thirds of the allocation while local investors received the remaining one-third. As for investor categories, multi-strategy funds received 60% of the allocation and long-only investors the remaining 40%.
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