This article first appeared in The Edge Malaysia Weekly, on December 21 - 27, 2015.    

THE RM1.6 billion placement by CIMB Investment Bank Bhd and Credit Suisse of Khazanah Nasional Bhd’s shares in Tenaga Nasional Bhd at RM14.50 apiece gets the nod for the best placement exercise this year. The placement does have its merits, among them the sheer size of the offering. At RM1.6 billion, it was the fourth largest in the history of the local capital markets.

Also as at Dec 10 this year, TNB — with a market capitalisation of RM75.4 billion — was the largest company on Bursa Malaysia and the largest utility company in Southeast Asia, which added to the appeal of the whole deal.

The block of 112 million shares was the third that Khazanah had disposed of in a span of two years. It is noteworthy that since the last placement in June 2013, TNB’s shares have gained circa 77%, auguring well for Khazanah. With the sale, the state-controlled investment arm has pared down its shareholding in TNB to 30.4% from 32.4%.

Adding to the positives for Khazanah is the timing at which the placement was executed.

The placement was launched four days after TNB released its first-quarter financials for the year ended August 2015. Due to the sterling results — the utility giant registered a net profit of RM2.35 billion on the back of RM11.03 billion in revenue, a gain of 34.29% and 15.25% respectively from the previous corresponding period — its shares traded at RM14.77 apiece despite fears of a weakening ringgit and amid rumours of an electricity tariff reduction, which weighed down the stock. In the run-up to the results, the counter gained RM1.27 or close to 9.5%, maximising Khazanah’s gain from the placement.

Khazanah’s block in TNB saw strong momentum on the back of positive prelaunch indications, resulting in a narrow price range of RM14.40 to RM14.60, or a discount of 1.35% to 2.7% on the launch date closing price of RM14.80.

CIMB IB managed to bring in a mix of quality domestic institutional investors, international long-only investors and hedge funds from Asia and Europe to take up the placement. A large portion of the shares — circa 86% of the block — was allocated to high-quality domestic and long-only funds, and about 84% of the book was allocated to the top 10 investors.

The placement, priced at RM14.50, was a 2% discount on the launch date closing price of RM14.80, representing the tightest discount ever achieved for a Malaysian block trade larger than US$400 million.

The allocation strategy employed by CIMB IB resulted in a steady and stable aftermarket performance, with trading volumes in line with historical averages, and investors who participated in the placement buying in the aftermarket as well.

TNB closed at RM14.56 the day after the placement. During the day, it hit an intraday high of RM14.70 and low RM14.52, on volume of 11.6 million shares.

Since the conclusion of the block trade, the stock has closed at a high of RM14.88, which is a 2.6% premium over the placement price.

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