CRC prices IPO with eye on uncertainty
Central Retail Corporation Plc (CRC), Thailand's biggest retailer and the retail arm of Central Group, will debut its first trading equity for Thailand's largest-ever market capitalisation today in the hope that foreign cornerstone investors will help cushion against tepid market sentiment.
CRC is a holding company investing in multi-format and multi-category retail platforms in Thailand, Italy and Vietnam.
CRC is reportedly raising funds worth 78.1 billion baht after setting the IPO price at 42 baht per share for no more than 1.69 billion IPO shares and an over-allotment option of 169 million shares.
The massive market cap will enthrone CRC as Thailand's largest IPO.
Some 562.28 million shares, or 52.2% of total IPO shares, were offered to domestic investors, while 514.1 million were offered to foreign investors. This excludes 783.7 million shares offered to ROBINS shareholders and the over-allotment option shares.
The majority of the 48% shares held by foreign investors are identified as cornerstone investors who hold equities for a long-term investment period, said Anuwat Ruamsuke, managing director of Phatra Securities, one of CRC's main underwriters.
"We have designed the investor proportion to reduce effects of retail businesses being affected by several risk factors," Mr Anuwat said. "The IPO pricing can also help absorb future uncertainties, which we have already factored in.
"The price-to-earnings ratio of 28 times is not considered expensive, since there is a huge business growth potential and CRC is a leading multi-market player."
A greenshoe option of 169 million shares, representing 10% of total IPO shares, can be exercised when the IPO price trades below 42 baht per share and must only be exercised within 30 days, Mr Anuwat said.
After the IPO and business restructuring based on an assumption that the over-allotment option is not exercised, CRC shares owned by Harng Central Department Store Co Ltd will be diluted to 35.1% of total shareholding, with the Chirathivat family owning 30.4%.
Under the same scenario, Hawthorn Resources Ltd, a wholly owned subsidiary of OAL Holding Ltd -- in which 78 members of the Chirathivat family are identified as beneficiary owners -- will own 4.2% of total shares.
Members of the public will own either 17.4% or 15% of total CRC shares based on whether the over-allotment option is fully exercised or not.
As of Sept 30, 2019, CRC operated 1,922 stores under key retail banners across multiple formats in Thailand, 133 stores across multiple formats in Vietnam, and nine department stores in Italy.
The company reported third-quarter revenue of 53.4 billion baht, up 6.2% year-on-year, with a net profit of 1.66 billion baht, up 30% year-on-year.
Revenues generated from the fashion, hardline retail and food segments accounted for 33.35%, 24.15% and 41.87% of total revenue.
Notable business risks include engaging in a highly competitive business in an open market and the company's financial performance depending on retail market and economic conditions.
Suneeporn Teewasuwet, senior vice-president of Finansia Syrus Securities, said the retail industry's outlook is not bright in the first half amid the coronavirus outbreak and ebbing consumer confidence.
"Retail businesses will feel the pinch no matter how strong they are," Ms Suneeporn said.