Investors seeking steady and predictable returns over years and yields far above those offered by high-street banks may be tempted by infrastructure funds.
The skytrain may be getting more crowded, but that will soon mean money in the pocket of investors. PAWAT LAOPAISARNTAKSIN
An investment in infrastructure assets provides benefits of diversification from traditional equity and fixed-income investments.
It can also reduce risks due to its monopolistic nature, so it has high barriers for new players to enter and low competition.
It may also be a hedge against inflation, as transport concession holders have the right to raise prices or fares based on inflation.
Infrastructure funds typically mobilise money from the public and plough it into big public service projects such as railways, roads, ports, airports, power plants, water supply, alternative energy, water management, information technology and natural disaster protection systems.
The BTS Rail Mass Transit Growth Infrastructure Fund (BTSGIF), Thailand's first infrastructure fund, is raising up to 62.5 billion baht by allocating 5.79 billion units in the primary market. It is the country's largest initial public offering (IPO).
An indicative price for each unit has been set in the range of 10.40 to 10.80 baht, and the final price, based on book building, will be announced on Friday.
The units are backed by net fare box revenue to be generated from the extension of the 23.5-kilometre skytrain route (the Sukhumvit line connecting Mor Chit to On Nut and the Silom line running from Saphan Taksin to National Stadium) for the remaining 17 years of the concession.
Of the IPO units, 3.2 billion baht including 1.93 billion that will be subscribed by BTS Group Holdings Plc will be earmarked for local investors, while the remaining 2.47 billion will be allocated to foreign investors from April 9-11.
Retail investors can subscribe to the IPO unit trusts at branches of Bangkok Bank, Krungthai Bank, Kasikornbank, Bank of Ayudhya and CIMB Thai Bank across the country from now until midday this Thursday. The minimum subscription is 2,000 units with increments of 100.
Sudhipongse Phuaphanprasert, deputy managing director of the property fund business at BBL Asset Management, said the fund could be an investment alternative for those seeking a steady stream of dividends while diversifying their portfolios.
The fund is expected to offer a yield of 5.8% to 6% to unit trust holders within the first year.
BBL Asset Management is the fund manager for BTSGIF.
Mr Sudhipongse said use of the skytrain for the main 23.5-km route tended to increase following completion of the extensions.
The main route had 176 million passengers in the fiscal year ended March 31, 2012, and it generated fare income of 4.3 billion baht, up from 3.5 billion a year earlier.
The fund estimates the main route will have 195 million passengers and 4.84 billion baht in fare income in the fiscal year that ended yesterday.
For the nine months ended last Dec 31, the main route contributed fare revenue of 3.63 billion baht.
Wutthakat and Bang Wa stations, which are of the Wong Wian Yai-Bang Wa extension, will start commercial operations later this year.
The skytrain now consists of 32 stations with a combined track length of 32.7 km.
Mr Sudhipongse said the fund has the first rights to buy additional routes operated by BTS.
BTS is interested in investing in the Green Line extension from Mor Chit to Saphan Mai and from Bearing to Samut Prakan, the Pink Line from Khae Rai to Min Buri and the Light Rail Transit Line from Bang Na to Suvarnabhumi airport.
BTS will prioritise lines that have a direct connection to the core 23.5-km lines.
Mr Sudhipongse said the fund has upside potential from increases in fares. Skytrain operator Bangkok Mass Transit System Plc, 97.5% owned by BTS, plans to increase fares every two years.
The current fares for the skytrain are set at 15-40 baht. less than the maximum range of 18.79 to 56.36 baht that the concession provider allows the skytrain operator to charge.
The fund will list on the Stock Exchange of Thailand on April 19.
Even though the fund carries a low risk, it is not absolutely risk-free, with returns dependent on ridership of the skytrain, Mr Sudhipongse said.
Last but not least, the unit trusts are subject to 10% withholding tax on dividends waived for 10 years.
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Writer: Oranan Paweewun