What's new in business news: April 4, 2014

IPO for Green-tea billionaire Tan, new free online selling website & Japan Credit Rating Agency downgrades Thailand.

Small-time retail investors line up at the Stock Exchange of Thailand (SET) for a chance to buy Ichitan initial public offering (IPO) stock shares in the latest sales gimmick dreamed up by the company's billionaire founder.

STOCK MARKET 

IPO for green-tea billionaire Tan

Green-tea billionaire Tan Passakornnatee, who created his Ichitan brand image around his chubby face in a captain’s hat and by his entertaining sales promotions, again used marketing gimmicks to stoke demand in his company's initial public offering (IPO), selling shares in a bid to make the stock into a blockbuster hit.

Ichitan Group (ICHI) offered the first 250 investors who queued up at the Stock Exchange of Thailand (SET) today and showed the company's bottlecaps, boxes or packaging the opportunity to subscribe to up to 5,000 IPO shares. The 250 investors allowed to invest in the IPO must join the company’s road show starting from 1pm today. Asia Plus Securities, which acts as financial adviser and lead underwriter for the IPO, and the Securities and Exchange Commission (SEC) insist the Ichitan gimmick does not break any Thai listing regulations.

Several IPO stocks this year have made a successful trading debut.  Golden Lime Plc's (SUTHA) sizzling debut yesterday, soaring 67.57% above its IPO price to 6.20 baht, also helped work up investors' appetite in ICHI's shares. ICHI plans to raise 3.9 billion baht from selling 300 million shares to the public at a price of 13 baht each. Of the total, 27% of the IPO shares will be allocated to institutional investors, 23% to general investors and the remaining 50% to the company's patrons.  The subscription period has been set for April 8 to 11. Proceeds from the share allocation will be used to repay the company's 1.5-billion-baht debt to financial institutions and one of the directors, expand the company's plant in a second phase worth 800 million baht, and also used as reserve working capital. ICHI delayed its fundraising plan from late last year because of political tensions hurting the bourse's sentiment.

Last year the company had sales revenue of 6.48 billion baht, up significantly from 3.9 billion in 2012 and 1.06 billion baht in 2011. Its net profit last year amounted to 883.7 million baht, jumping from 306.4 million in 2012 and a net loss of 198 million in 2011 when the company's plant was submerged by floods. According to a Securities and Exchange Commission (SEC) filing, the company's price-to-earnings ratio (PE) in 2013 stood at 19.2 times, a 36% discount from the industry average.

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ECOMMERCE 

New free online selling website  

OLX.co.th, formerly known as Dealfish.co.th, owned by the South African-based multinational media company Naspers, provides a marketplace for people to sell their second-hand things on the website free of charge. The country's sluggish economy has created a windfall opportunity for an online marketplace selling used items as people are unloading their unnecessary stuff for extra cash, according to the company. There are up to 800,000 items selling on the company's website. The company allows products to sell on its website for 45 days. Most users are people over 35-years old. The best-selling products are clothes, amulets, mobile phones and accessories and even homes.

OLX plans to launch its mobile application for Android- and Apple-based mobile devices soon. Currently, 51% of OLX customers use mobile phones to access its website, compared with 18% last year and the figure to expected to jump to 70% this year.

The company is aiming for a 400% surge in its user base this year, up from 9 million currently. The company enjoyed a 400% increase in the number of users last year. Despite the fact that OLX has earned no money from the service so far, the company expects to earn advertising revenue in the near future when its user base grows significantly. Online classified site operators normally break even within 4-6 years after investment.

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ECONOMY

Japan Credit Rating Agency downgrades Thailand

The Japan Credit Rating Agency (JCR) has become the first ratings agency to downgrade Thailand's credit outlook to "negative" from "stable". The JCR warned the political turmoil could cripple the economic recovery, while a protracted crisis amid the present current account deficit could weaken the country's foreign currency liquidity position. Thailand has run a small current account deficit since 2012, with foreign reserves at US$168 million as of March 21. The JCR said Thailand's current account deficit this year is likely to decline in line with an export pickup, given the global economic recovery, particularly in developed countries. It has also become more likely that implementation of economic measures including infrastructure development needed for economic growth will be delayed.

The JCR is not the first organisation to sound an alarm about Thailand's current account deficit. The Asian Development Bank (ADB) recently said twin deficits in the current account and fiscal budget warranted monitoring, as the country's "external factors" would deteriorate if the deficits continued for several years despite high foreign reserves. Moody's also recently said the Constitutional Court's ruling to void the Feb 2 general election was a credit negative, as the political uncertainty could drag on. Approval for foreign direct investment (FDI) has also declined drastically due to an absence of a new board at the Board of Investment (BoI), but the Election Commission (EC) recently approved the appointment of the BoI's new board.

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Writer: Jon Fernquest
Position: Online Writer