ComfortDelgro Corp., the biggest operator of taxis and buses in Singapore, plunged the most in more than a decade on the city’s stock exchange after its former largest shareholder sold part of its stake.
The stock fell 12 percent, the most since April 2003, to close at S$1.925 in Singapore. The drop trimmed ComfortDelgro’s gain this year to 8.1 percent, compared with a 7.1 percent advance for the benchmark Straits Times Index.
Singapore Labour Foundation raised S$329.8 million ($261 million), selling 170 million shares at S$1.94 each, 11 percent lower than yesterday’s closing price, according to terms for the deal obtained by Bloomberg. ComfortDelgro was formed in March 2003 after the merger between Comfort Group Ltd. and Delgro Corp. to help the companies expand overseas and cut costs. It now gets almost half its operating profit from overseas operations.
“It’s very surprising as to why it has decided to cash out right now,” said Siyi Lim, an analyst at OCBC Investment Research in Singapore with a hold rating on the stock. “Most of the street views Singapore Labour Foundation as a very long-term investor that has been with Comfort since before the merger.”
UBS AG was the sole bookrunner for the placement.
Singapore Labour Foundation was ComfortDelgro’s biggest shareholder before it sold about 67 percent of shares it owned in the taxi fleet operator. The investor last sold 124 million shares in February 2006.
ComfortDelgro has been expanding its overseas business in China, U.K. and Australia through acquisitions. The company earlier this week said it agreed to pay A$22 million ($21 million) for Australia’s Driver Group Pty Ltd., which operates bus routes in Melbourne.
The stake sale doesn’t change the fundamentals of the company, which has a strong balance sheet and potential growth from acquisitions, said Chan Wen Jie, a Singapore-based analyst at Nomura Holdings Inc. who recommends buying the stock.
“We suggest that investors focus on the facts and judge the company by its fundamentals and not the noise generated by this transaction,” Chan said.
ComfortDelgro reported first-quarter net income of S$57.7 million, 7.9 percent more than a year earlier, helped by its taxi operations. Sales increased 1.8 percent to S$870.8 million. The company had cash and near-cash of S$757.9 million at the end of March.