IPO launches on hold amid crisis

IPO launches on hold amid crisis

Recent SET listings have underwhelmed

Bull and bear mascots sit at the Stock Exchange of Thailand museum on Ratchadaphisek Road. The coronavirus pandemic has put off the prospects of IPOs and other public offerings.  (Photo by Tawatchai Kemgumnerd)
Bull and bear mascots sit at the Stock Exchange of Thailand museum on Ratchadaphisek Road. The coronavirus pandemic has put off the prospects of IPOs and other public offerings.  (Photo by Tawatchai Kemgumnerd)

IPO launches in Thailand's stock market have effectively been put on hold as fundraising prospects are caught in the crossfire of deteriorating confidence and falling revenue amid the pandemic, with no sign that any new listings will surface in the first half of 2020.

The only IPO launched this year was on Feb 20 by Central Retail Corporation Plc (CRC), a holding company that invests in multi-format and multi-category retailing in Thailand and overseas.

A throng of flush smiles at the launch date turned to grimaces as CRC's share price plummeted to 31.50 baht as of April 16, a far cry from the IPO price of 42 baht.

The price had been down more than 50% at 21 baht in late March as the stock market experienced a series of heavy sell-offs prompted by the coronavirus outbreak.

Other large-cap stocks that were seen as rising stars during last year's IPO launches suffered a similar fate.

The share price of Asset World Corp Plc (AWC), the property arm of billionaire Charoen Sirivadhanabhakdi's TCC Group, fell to 4.64 baht per share as of April 16 from the IPO price of 6 baht. AWC announced a temporary closure of its hotels in Bangkok, shutting the doors of five premises from March 26 to April 30, to reduce the risk of spreading the virus.

For state-owned Bangkok Commercial Asset Management Plc, the country's biggest distressed assets manager, the share price has seen a wide swing while still outperforming other large-cap stocks. The price stood at 21.30 baht as of April 16, higher than the IPO price of 17.50 baht.

Manpong Senanarong, senior executive vice-president and head of the issuer and listing division at the Stock Exchange of Thailand (SET), said there is still no sign of any new company signalling its confirmation to list on the bourse this quarter.

The stock market remains highly volatile from the impact of the pandemic, effectively putting off prospects of IPOs and other public offerings until the viral outbreak can be controlled.

A foreign company intending to list on the SET as its first foreign IPO is also waiting for the market situation to return to normal, Mr Manpong said.

The SET approached owners of hotels, office buildings, shopping malls and other properties in Laos, Cambodia and Myanmar to tap its capital market for long-term funds, Bloomberg reported in December.

Spinning off assets, such as real estate investment trusts, would be faster and easier than doing IPOs of entire companies, as accounting standards and internal corporate controls can consume a lot of time for entity-listing IPOs.

"Listed firms are now very busy with the annual general shareholders' meeting (AGM) season that always comes between April to June," Mr Manpong said. "But the Covid-19 outbreak and measures to mitigate the local epidemic, such as social distancing, have impeded AGM events."

At present, 10% of total SET-listed firms have already set up their AGM events, with only a handful of investors participating in the meetings. The other 90% have postponed the meetings until the government withdraws virus control measures.

Companies have also opted to raise funds via bank loans or debenture issuance, as the timing for IPO launch is not desirable.

But all hope is not lost for the IPO market. If the outbreak can be controlled in the coming period, stock market sentiment will recover at a fast pace, providing a platform for IPO launches afterward, Mr Manpong said.

LOW VALUATION

Among the companies that have submitted their IPO filings are PTT Oil and Retail Business Plc (PTTOR), SCG Packaging Plc, Siamrajathanee Plc, Samart Aviation Solutions Plc and Sri Trang Gloves Thailand Plc.

PTTOR's main assets include subsidiaries in oil retail and non-oil units in Thailand and abroad, oil pipelines and jet fuel services, cooking gas, lubricant oil and some cooking gas depots.

It will offer up to 2.7 billion newly issued ordinary shares, excluding any additional shares that could be offered for an over-allotment option.

PTTOR will also allocate up to 300 million newly issued ordinary shares exclusively to existing shareholders of PTT. Newly issued ordinary shares of PTTOR will dilute PTT's ownership to no less than 75%.

The long-delayed IPO has been in development since 2018, but the process of approval for asset separation from parent firm PTT Plc was complicated and took a long time.

Although it's expected to be this year's largest new listing on the SET, the timing of PTTOR's IPO launch remains up in the air.

While the stock market remains highly volatile, it is difficult to set an appropriate IPO price, and companies will not opt to raise funds when the price-to-earnings ratio is at a low level, said Therdsak Thaveeteeratham, executive vice-president for research at Asia Plus Securities.

The valuation of the share price will also be at a cheap threshold, while investors still have no confidence to invest amid recurring volatility, Mr Therdsak said.

"It is a very simple situation," he said. "Everyone has to focus on how to survive the Covid-19 impact and how to save their businesses and employees."

As countries across the globe also have been reeling from the pandemic, some upcoming large IPOs, such as PTTOR, will have difficulty allocating shares to foreign investors, Mr Therdsak said.

But if the pandemic ends soon, stock market sentiment could recover at a fast pace, with the possibility of IPO launches re-emerging in the second half, he said.

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