Thailand had the strongest initial public offering (IPO) market in the region in 2015. Not only was a significant amount of new equity sold, but the issuers represented a good cross-section of the economy. In terms of deal flow and demand, 2016 is looking good as well. Despite the weak benchmark index in the face of political uncertainty and international headwinds, the new offering market has outperformed expectations, further strengthening Thailand’s reputation as a major market of the ASEAN region.
In terms of IPOs, the country raised a total of about BT297bn ($8.9bn) in 2015. The stock exchange had set a target of BT250bn ($7.5bn). That compares with a total of BT65.65bn ($2bn) in 2014. For 2016, the Stock Exchange of Thailand (SET) has set a target of BT270bn ($8.1bn) for the full year. The performance in 2015 was exceptional. Malaysia only raised around $1bn in 2015 and Singapore just $240m.
Optimism & Stimulus
The market was strong for new issues for a number of reasons. The political situation stabilised following the 2014 coup, and this led to some optimism, while the economy was beginning to recover. Although the rebound was modest, with overall performance numbers still relatively low and the benchmark index range bound, the sense was that the country had come through in good shape.
The anticipation of public investment, especially in infrastructure, and the hope for stimulus, helped to boost optimism and create demand for new offerings. Regional issuers have been selling baht-denominated bonds in Thailand, while the authorities have been discussing the listing of foreign shares on the SET. This internationalisation of the market had a positive impact on sentiment, as the possibility of the country developing into a capital markets nexus for the region became more apparent.
On the back of optimism and good fundamentals, companies started to race to market early in 2015. In the first quarter, 45 issuers had submitted applications to the Securities and Exchange Commission (SEC) for IPOs. The momentum continues; volumes on the market are consistently above those on other regional exchanges, and the liquidity in and of itself is generating considerable interest.
The largest issue of the year was Jasmine International’s IPO of its Jasmine Broadband Internet Infrastructure Fund. In the transaction, BT36.7bn ($1.1bn) was raised in February 2015. It was a significant offering, the largest stock sale in the country since True floated its infrastructure assets, as True Telecommunications Growth Infrastructure Fund, in a BT58.08bn ($1.7bn) sale in 2013. It is also the third-largest IPO in the history of Thai financial markets (the largest was the sale of BTS Rail Mass Transit Growth Infrastructure Fund earlier in 2013 when $2.1bn was raised). The Jasmine fund owns 980,000 km of fibre-optic cables, and much of the network will be leased back by the parent company.
The deal was, however, a difficult transaction and highlighted the delicate state of the IPO market and its vulnerability to sudden shifts in sentiment. Jasmine’s infrastructure sale had been in the works since 2013, and was originally scheduled for 2014. But it was delayed due to the weak market and the threat of rising rates in the US. When it finally came out, the offering sold at the low end of the range. But it was nevertheless seen as particularly attractive due to the yield it was generating — 9% at the time of the offering versus the SET’s overall yield of 2.73%.
In June 2015 the Electricity Generating Authority of Thailand (EGAT) listed the rights to availability payments of its North Bangkok Power Plant Block 1 for a period of 20 years. The transaction raised BT20.86bn ($627.9m), and the funds will be used for expansion and new business. It was the first infrastructure fund by a state enterprise in Thailand.
According to Chavinda Hanratanakool, the CEO of Krungthai Asset Management, alternative investment vehicles are currently gaining in popularity. “The EGAT infrastructure fund launched in July 2015 stemmed from the government’s desire to encourage alternative funding for large-scale projects,” Chavinda said. “The infrastructure fund was oversubscribed in 2015, especially among institutional investors, and maintained its price throughout the year.”
The rest of the IPOs in 2015 come from a wide range of sectors and included Plan B media, an out-of-home media provider; SCN, a natural gas company; and S11, a motorcycle hire-purchase company established in 2011, all of which went to market in February. They were followed by mall operator Platinum Group, in March; Salle Printing, a packaging company that will use the funds raised for a new warehouse and to increase capacity, in April; AMTAR real estate investment trust (REIT) and Home Pottery in June; Bangkok Ranch, a duck meat producer, and WICE Logistics, in July; COM7, which owns the Banana IT electronics retail chain, in August; JWD Infologistics in September; Origin Property, a condominium developer, SCI Electric, a producer and distributor of electric switch boards, and Thai Foods, in October; JAS Assets, WHABT REIT and TLHPF property, in November. The year rounded out with Taokaenoi Food and Marketing, maker of Taokaenoi seaweed snacks, Star Petroleum Refining, LHHOTEL and MIT, the first Thai REIT to invest overseas, in December.
A number of investment vehicles are available, and this diversity is seen attracting issuers to the market. Infrastructure funds were introduced in the country as a separate investment vehicle in 2012. They are closed-ended funds with registered capital of not less than BT2bn ($60.2m) and minimum infrastructure investments of BT1.5bn ($45.2m). Each investment must be at least BT1bn ($30.1m), or BT500m ($15.1m) in the case of small power producers. Infrastructure funds must also be determined to benefit the domestic society.
REITs were introduced in 2013. The rules require that minimum capital be BT500m ($15.1m) and that the REIT manager be licensed by the SEC and be free of conflicts with the REIT itself. The vehicles can invest it real property, on both a freehold or leasehold basis, or in another REIT. A minimum of 75% of the value of the REIT must be made in income-producing properties. Investments in incomplete properties cannot exceed 10% of the value of the REIT portfolio.
In 2014 a new vehicle was introduced: the infrastructure trust, which combines feature of REITs and infrastructure funds. The main advantage is that a trust allows for outbound investment in approved infrastructure. The trust structure is also freed from the restriction of having to build that which is beneficial to Thai society. It is thus more flexible than an infrastructure fund and might be more attractive.
The authorities are working to make listing in Thailand easier and more attractive. In early 2016 the SET along with the SEC announced the introduction of a digital IPO service. All securities will be able to use the service. The programme will allow listing candidates to submit documents, including listing and public offering applications, in digital format.
The exchange believes that this will reduce administrative burdens and improve service. The digital service was introduced in 2012 for derivative warrants, and reduced the time it took to register a listing from 10 days to two days. New shares and stock warrants were added in 2014. The latest move now allows for all products on the exchange to be covered. The authorities are also working on crowdfunding regulations, which could further boost the IPO market.
Bankers are optimistic about the prospects for 2016. As many as 17 listings are reported to be in the works, including REITs, infrastructure funds and IPOs. There is also optimism surrounding the possibility of foreign firms listing on the exchange. The SET has said that a number of companies and funds from the region are preparing the paperwork to list.
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