November 30, 2014

SMPH reportedly raised US$400m in placement of treasury shares

In a disclosure to the Exchange, SM Prime Holdings (SMPH) said it sold 1.06b in treasury shares to raise P18.02b or roughly US$400m. Based on a report from FinanceAsia’s website, the deal was reportedly upsized from US$300m originally.
However, it was priced at P17/sh which is at the lower end of the P17-17.88/sh original price range and represented a 4.93% discount to yesterday’s closing price. FinanceAsia reported that about 50 investors participated in the share placement but about 80% of the deal was allocated to the top 10 long-only investors.

Our take: Unlike the Ayala Corp (AC) share placement last week, the SMPH transaction did not come as a surprise as the company has repeatedly flagged the possible sale of its treasury shares to finance potentially large investments that included the group’s investments in a stake in the Ortigas holding company, defend its Bonifacio South proposal from a Swiss challenge, and two potentially large land reclamation projects that will entail about P108b in investments over five years. Last week, SM Prime also announced that it will look into possible debt or other financing options to fund its investments in the Ortigas transaction.

The recent transaction will expand SMPH’s outstanding shares by around 4% and can dilute its EPS growth which was tracking around just 12% in 9M14. It also represented just about a fifth of the 5.34b in existing treasury shares which the company plans to issue to finance its potentially huge investments.

When issued, the 5.39b treasury shares will expand SMPH’s outstanding shares by 19%. Unless the planned investments can create an immediate earnings boost, we believe that the staggered placement of such shares will continue to weigh on the near-term share performance of SMPH. – WealthSec