Best Share Placement: Khazanah sells RM1.2 billion TNB block at record high prices

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This article first appeared in The Edge Malaysia Weekly, on December 19-25, 2016.


CIMB Investment Bank Bhd bagged best placement for a second year in a row, once again for placing out Tenaga Nasional Bhd shares for Khazanah Nasional Bhd.

This year, Khazanah disposed of 82 million TNB shares at RM14.30 apiece, or RM1.17 billion in total. This block makes up a 1.5% stake of TNB’s share capital.

This makes it the largest equity capital market transaction in Malaysia for the year, and one of the largest in Southeast Asia.

What is impressive about the deal is that the TNB shares were placed out at a mere 4% discount to its 52-week high of RM14.90. Compared to the closing price on the launch date, the placement was priced at a discount of only 1.8%.

In fact, the day the shares crossed, TNB was trading at RM14.44, a slight 1% premium to the placement price.

This is impressive given the sheer size of the placement. Also, bear in mind that TNB had been on a strong 12-month rally. Late last year, the share price had been over fears that the power utility would have to acquire 1Malaysia Development Bhd’s energy assets as part of a bailout.

From that low base, TNB’s share price has risen almost 40%. And Khazanah struck while the iron was hot, launching the placement exercise at peak valuations.

To be fair, TNB shares are still in high demand as a defensive stock with solid fundamentals. After all, not only is it the largest utility in Malaysia, it is one of the largest in Southeast Asia. TNB is also the stock with the heaviest weighting on the FBM KLCI index.

In other words, CIMB had the advantage of placing a relatively attractive asset to begin with.

This is also Khazanah’s fourth placement of TNB shares in four years, all successfully led by CIMB. Last year, CIMB placed out a block of 112 million shares worth RM1.6 billion.

Khazanah retains a 28.26% stake in TNB, while the second largest shareholder is the Employees Provident Fund with 14.92%.

On the other side of the equation, Khazanah had a relatively small window to complete the exercise — before the few public holidays in Malaysia and market volatility from the upcoming September FOMC meeting.

As the joint book runner for the deal, along with Macquarie group, CIMB takes credit for generating 64% of the total demand and 66% of total allocations. This gave CIMB strong demand visibility with strong momentum from pre-launch indications.

The placement was conducted via an accelerated book-building exercise that was fully covered in only 30 minutes. By the time the book building closed, the placement was covered by 1.5 times.

It is interesting to note that the placement was concluded at the lowest possible price in the book building, which was set between RM14.30 and RM14.56.

Considering the size of the block and the tight deadline for the placement however, the pricing is still commendable.

Similar to previous placements of TNB shares, the exercise attracted plenty of interest from long-only funds, which took up 72% of the placement, with 28% taken up by multi-strategy funds.

The placement also garnered relatively strong foreign interest of 33%. Overall, the top six investors made up 70% of the allocations.

It is, however, important to note that TNB’s share price performance, post listing, has been relatively lacklustre. While it managed to stay above the RM14.30 mark, it has since slid to RM14 as at Dec 14, 2.1% lower than the placement price.

There is no lockup period for the buyers. Only the vendor, Khazanah, has a 90-day lockup period.

The share price weakness further underscores the timeliness of Khazanah’s placement, taking advantage of a bullish market.