‘Empathetic’ Provident Fund!

Instead of 'Employees', one could call it the ‘Empathetic’ Provident Fund (EPF) considering its unprecedented move of sharing the mega sale of 8.4% stake or 71 million shares in premier blue chip JKH for Rs. 13.77 billion (Rs. 194 per share) on Friday to Malaysia’s sovereign wealth fund Khazanah Nasional Berhad.

Whilst the buying broker was John Keells Stock Brokers (JKSB), the seller EPF took what analysts described as the populist route sharing the sale with 25 brokers. In an industry comprising 28 brokers dealing with equity and debt, the trio left out was DNH Financial, Assetline Securities Ltd., and Calridge Securities.
Analysts confirmed the choice of 25 brokers to share the sale was “unprecedented” but linked it to possible mindset of EPF wanting to give opportunity to all to make merry from the mega deal, the single largest after the privatisation sale of Sri Lanka Telecom in early 1990s.
“The move could also be to reflect greater transparency in addition feeding the entire market giving all the opportunity to participate in this recent times historic deal,” analysts opined. “EPF is the single largest local investor in the market hence it was symbolically important for almost all brokers wanting a share,” they added.
For the buyer and its broker it meant dealing with 25 different parties for one seller. Some linked the sharing of the sale since Merrill Lynch had originally approached EPF directly on behalf of the buyer.  
Nevertheless, the 25 brokers did enjoy a piece of the big pie with some feasting a bigger share.
It couldn’t be confirmed on which basis EPF allocated the specific blocks of shares on a four tiered structure. Some linked it to the degree of relationship with EPF and their service. For example Nation Lanka Equities was unique as being the sole broker handling 6.5 million-shares-block worth Rs. 1.26 billion. Eight others handled 5.75 million-shares-blocks each worth Rs. 1.115 billion.
A further seven brokers did two million-shares blocks each worth Rs. 388 million and the rest of the nine got the crumbs amounting to 0.5 million-shares blocks each worth Rs. 97 million.

Whilst Khazanah via its fund Broga Hill Investments Ltd., and EPF dominated spotlight on Friday the JKH centre of market play did see heavy activity from the outside as well. Overall JKH saw 76.819 million shares in total traded via 489 transactions for Rs. 14.9 billion. Khazanah bought 8.85% stake amounting to 74.6 million shares for Rs. 14.5 billion.
Analysts said slew of institutional investors both foreign and local, and a large number of local high networth individuals were active on JKH.
As at 31 December 2011, EPF held 8.3% stake of 69.94 million shares. Its sale of 8.4% stake confirms more shares had been collected since then.
Interestingly, Captains, the largest shareholder in JKH, didn’t figure in the selling side to Khazana on Friday but was busy collecting quantities. They had bought Rs. 185 million worth of shares in JKH on Friday whilst as at end 2011, Captains controlled around 18.4% stake in JKH. But Captains also takes trading positions on JKH regularly.
On the buying side of JKH were also Harry J’s Melstacorp (on top of its 3.2% stake) and several more foreign funds.
Those who cashed in midst the mega deal were Ravi Thambiayah controlled companies selling around Rs. 200 million worth of shares, Ashok Pathirage and a host of other individuals whilst on the institutional side Asian Alliance, Confifi Group and connected parties as well as Ceybank, MAS Capital figured according to analysts.
There was speculation that Khazanah could be having appetite for more of JKH but couldn’t be confirmed.
In that event some potential sellers could be SLIC which holds 1.7% stake or 14.2 million shares. The second largest shareholder in JKH is US fund Janus with a 10% stake.
Confirmation of the fact that apart from Khazanah there were other foreign buyers was foreign holding of JKH by Friday grew to 49.4% or 416.3 million shares, up from 40.2% or 339 million shares the previous wee