Indicative terms for the deal have been settled at the lower end of the government's original ambitions, with a Bt31 to Bt35 price range announced yesterday (Monday). At this level, the company is set to raise Bt24.8 billion to Bt28 billion pre-greenshoe ($553.2 million to $624.58 million) from an 800 million share deal.
This, in turn, has been split between an offer of 750 million primary shares and 50 million secondary shares. In addition, the 15% greenshoe will also comprise secondary shares. Pre-greenshoe, this represents 28.5% of the company's equity and 31.5% post greenshoe.
Although the indicative price range is beneath the government's initial valuation of Bt37.5 to Bt65 per share, it is slightly higher than the very bottom of the equity valuation assigned to the company at the beginning of pre-marketing - Bt60 billion to Bt100 billion. In order to entice a retail investor base driven by absolute price considerations rather than valuation, the government has opted for a low share price. In order to meet its overall revenue targets, however, it has balanced this by keeping the number of shares on offer at the higher end of the company's filing for 500 million to 850 million.
Roadshows began yesterday in Bangkok and will continue again today in the Thai capital city, before moving around the country for the rest of the week. International roadshows will begin next week ahead of final pricing on November 16 and listing on December 3.
Led by Credit Suisse First Boston, Lehman Brothers, Merrill Lynch, SCB Securities and Tisco Securities, the deal will have a 60%/40% institutional/retail split, meaning that the international portion of the deal should amount to $235.55 million at the mid-point of the range.
In an effort to remove the market risk that Thai IPO's always expose institutional investors to, the leads have also changed the method by which they will syndicate the deal. Instead of conducting the institutional offer as a book-build, which then closes as the domestic IPO opens, the two will be run concurrently. As such, the retail IPO will follow the Hong Kong method and open four days before the end of roadshows. Retail investors will be offered shares at the top end of the indicative range and receive a refund if the deal is eventually priced lower. Both books will be allocated at the same time.
In terms of P/E ratios and EV/EBITDA ratios, the deal is being pitched at a discount to the Thai energy sector and regional comps.
Where p/e ratios are concerned, the company is being marketed at 4.1 to 4.6 times 2002 earnings, against a current trading level of roughly seven times for 61% owned subsidiary PTTE&P (PTT Exploration & Production) and six times for global emerging market oil and gas companies.
Where EV/EBITDA ratios are concerned, it is being pitched on a range of 4 to 4.2 times 2002 earnings against a global emerging markets average of 4.5 times.
Bankers believe that the story has enough defensive qualities to attract international and domestic accounts. "Funds have a lot of cash and are looking for a defensive story with a decent yield and limited downside," one comments. "PTT has all three and it will also be one of the most liquid stocks on the Thai stock exchange."
They are also keen to emphasise that the Thai government is prepared to do whatever it takes to make the deal a success. "The Thai government is very focused on making this deal work," says one. "This is the deal which has to re-open the Thai equity market. It is the lynchpin of the Thaksin government's economic programme."
