BERJAYA CORP BHD (BCorp), via its wholly-owned unit Berjaya Group Bhd (BGroup), placed out RM230 million worth of Berjaya Auto Bhd (BAuto) shares in May as the latter’s stock more than doubled from its initial public offer (IPO) price of 70 sen just six months after its November 2013 listing.

However, little did BCorp know that BAuto shares would continue to surge post placement, to close at RM3.29 on Dec 17, with a market capitalisation of RM2.55 billion. While BCorp made a tidy profit from the placement, those who took up the shares have made handsome gains.

At RM2 per share, the placement on May 20 involved a total of 115 million ordinary shares of 50 sen each, equivalent to about a 14.25% stake in BAuto. BCorp had calculated the realised profit from the placement to be some RM188 million, based on the carrying value of the placement shares of about RM42 million as at Jan 31, 2014.

Although the exercise trimmed BCorp’s shareholding in BAuto to some 427.88 million shares or a 53% stake, it nevertheless improved the liquidity of BAuto shares and enhanced the valuation of the stock, which benefits BCorp.

According to RHB Investment Bank Bhd (RHB IB), the placement increased BAuto’s public shareholding by 14% to approximately 40% post-transaction, which enhanced its liquidity, leading to a better trading price and efficiencies. RHB IB is one of the joint placement agents for the deal, while the second book runner for the deal was CIMB Investment Bank Bhd.

“The strong demand led to the placement being upsized by 10 million shares to register a final deal size of 115 million shares. Anchor investors were allocated approximately three-quarters of the book,” RHB IB says.

The book-building was also tightly allocated, with domestic and international long-only investors making up 86% of the allocation. Domestic to international take up was split at a 74:26 ratio.

The placement has allowed BCorp to unlock a significant portion of its holdings within half-a-year of

BAuto’s IPO, following its debut on the Main Market of Bursa Malaysia on Nov 18, 2013, at an offer price of 70 sen per share.

At the time of the placement, BAuto had already shown sturdy growth, with market capitalisation at some RM1.6 billion, nearly triple its market capitalisation of RM561.9 million upon IPO.

The company is the official distributor of Mazda vehicles in Malaysia and the Philippines. So far, the Mazda franchise looks promising with brisk sales and significant market share. “Sales of Mazda [cars] in Malaysia are set to enjoy exponential growth (2013: 45.2% y-o-y) over the next several years, backed by a strong new product pipeline and local assembly of more models,” says RHB IB.

This article first appeared in The Edge Malaysia Weekly, on 22 - 28 December 2014.

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