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SCMP Reporter

Singapore Telecommunications has raised S$684 million (about HK$3.05 billion) by spinning off its postal services business in the fourth largest global share offer of the year.

Much of the initial public offering (IPO) was carried out with potential investors through teleconferencing as Sars restricted travel to and from Singapore.

SingTel, Singapore's dominant phone company, sold 1.14 billion shares, or a 60 per cent stake, in Singapore Post (SingPost), which controls more than 90 per cent of the Singapore postal market.

The shares were priced at 60 Singapore cents each, at the top end of the 50 cent to 60 cent initial price range, as the offer met fierce demand despite the outbreak of Sars, which has slowed the flow of deals to a trickle in recent weeks.

'It was covered within three days and was about nine times covered by the end,' said Colin West, head of equity capital markets for Asia at UBS Warburg, which managed the IPO with DBS, sharing 2 per cent in fees.

The fact that the Singapore post office ranked as the fourth biggest deal this year highlights the deflated state of global equity markets which are reeling from war in Iraq and the Sars outbreak.

It trailed Japan's US$634 million IPO for Taiyo Life, South Africa's US$491 million Telekom SA share offer and China's HK$3.4 billion Sinotrans IPO.

SingPost's deal may swell to S$787 million if the company opts to issue an additional 171 million shares allowed under the 'greenshoe' option.

By midway through last year, the four largest IPOs raised US$11.54 billion, nearly six times the level so far this year, according to data from Thomson Financial.

Despite some trepidation, Mr West said video conferencing proved a very effective way to reach 125 investors during a two-week roadshow, particularly because SingPost management was willing to make calls in the middle of the night Singapore time when necessary.

'We were even a little surprised by just how well it worked,' he said.

'In Singapore, investors had a choice of either seeing the company face to face or having a video conference. Outside Singapore, it was clear that even if individual fund managers wanted to see the company, company policies prevented them from meeting investors face to face.'

The virtual roadshow's success indicates that investors are adapting to a climate where handshakes are avoided and travel has all but ground to a halt.

'The SingPost deal [yesterday] was fairly well received even though it was done on a virtual roadshow basis, which shows people are adapting pretty well,' said an investment banker at a rival firm. 'I take my hat off to UBS Warburg on that one.'

For their part investors were lured by SingPost's promise to pay S$80 million in first-year dividends, or 4.2 cents a share, offering a 7 per cent net dividend yield, and a solid cash-flow business that means the dividends will keep coming.

'It was valued attractively and it fits into what investors are looking for right now - a very conservative, strong cash-flow, high dividend yield stock. It's a dividend play as opposed to a growth stock. SingPost hit the market just right,' the investment banker said.

Institutional investors were allocated 1.06 billion shares, while individual investors purchased 80 million shares. However, retail investors actually took 18 per cent of the offer because some purchased shares through the institutional tranche.

Even though SingPost management never stepped on a plane to sell the shares, United States investors took up 20 per cent of the deal, 30 per cent went to European investors and 50 per cent to investors in Asia, which includes Asian-based US and European fund managers.

Following the IPO, SingTel will own 40 per cent of SingPost, though its stake could fall to 31 per cent if the entire greenshoe is exercised.

The shares will begin trading on Tuesday.

Graphic: ipo08gbz



SingTel raises $3b in postal IPO