BTS insists IPO on track despite poor performance

Bangkok Mass Transit System says its IPO remains on target to get away in the second half of this year despite weaker-than-expected take-up since its December launch.

Bangkok Mass Transit System (BTS) plans to proceed with an initial public offering (IPO) of 200-400 million new shares in the second half of 2000. It aims to raise as much as Bt9.6 billion ($247 million). The company denies it may delay the fundraising exercise after a slower-than-expected take-up for its elevated commuter train service, Skytrain, which commenced operations above Bangkok's congested streets in December 1999.

"The listing should be this year, the third or fourth quarter," says Chief Financial Officer Vichet Bunthuwong. At the moment, the company and its adviser, Salomon Smith Barney, are awaiting regulatory approvals, which should be granted in mid-July.

Of the proceeds, a minimum 10% - possibly 20% depending upon how much is raised - will go towards repaying some of BTS' $1.2 billion borrowings. The remainder will be used to bolster the company's working capital and finance the expansion of its rail network.

SG Securities analyst Visit Onpipattanakul says BTS is unlikely to get its shares away at the desired price of Bt20-Bt24 without a debt restructuring. Loan repayments need to be pushed back five to six years, he says, and creditors will have to be talked into a debt-for-equity swap. He envisages that this would reduce BTS controlling shareholder Tanayong's stake to around 20% from 55%. "The breakeven for BTS is around 500,000 to 600,000 passengers a day. Right now it is 75% below this level," says Onpipattanakul. "It will not make a profit for a long time."

Bunthuwong admits the growth in passenger numbers has been disappointing. He says BTS now carries 150,000-180,000 passengers a day, far behind schedule if it is to achieve its original target of 600,000 after one year of operation. Some critics argue BTS' fares at around Bt25 a journey are beyond the reach of most Thais, especially when compared against bus fares, which for similar length journeys are typically in the region of Bt5. Bunthuwong disagrees, saying attitudes are to blame. "Thai people like the door-to-door red carpet treatment," he says.

An April campaign to boost passenger numbers failed to have much impact, he adds, though another one targeted at students is in the pipeline.

The CFO says stockmarket conditions will be the main factor influencing the timing of BTS' IPO. Given the fairly modest size of the issue, Bunthuwong says he is not overly concerned about clashing with other rail operator's IPOs around the region.

The other Asian rail operators planning to list by year-end include Hong Kong's MTR Corp and Singapore MRT, which are expected to raise HK$30 billion ($3.8 billion) and S$400 million ($232 million) respectively. In addition, Kuala Lumpur People Mover Rapid Transit System is expected to raise up to M$230 million ($61 million) to help finance the completion of a 16km monorail system.