Ironically though, observers say the company, which is ThailandÆs leading producer of beer and spirits, was actually quite well suited for this environment given its dominant position in its home market, its strong cashflows and above average dividend yield.
ôItÆs a high quality blue-chip name with defensive characteristics and with an extremely strong franchise in the consumer space which is a key theme for investors at the moment,ö says one observer. This explained the momentum that enabled the newcomer to price the offering at a premium to the average valuations in both Thailand and Singapore, and to pull off the largest IPO by a food and beverage company globally this year, he argues.
However, a 7.4% drop in SingaporeÆs Straits Times Index and an 8.8% decline in ThailandÆs benchmark SET index during the bookbuilding period did weigh on investor interest and resulted in many of the orders being placed in the lower half of the price range.
According to sources the institutional tranche was no more than two times covered, with fairly even demand from Asia, Europe and the US. The Singapore retail offer, which accounted for 5% of the total, was believed to have had a subscription ratio slightly below that.
The company is listing in Singapore after protests by a strong religious lobby forced it to cancel an IPO aimed for the Bangkok stock exchange in the fourth quarter last year and eventually abandon a domestic listing altogether.
Deutsche Bank, JPMorgan, Merrill Lynch and Thai investment banks, Phatra Securities and SBC Securities are joint global coordinators for the sale, which is the largest Singapore IPO since SingTelÆs $1.5 billion listing in 1993. It is also the largest IPO by a private sector company based in Thailand. DBS arranged the domestic retail offer.
The total offer comprised 4.89 billion shares, or 20% of the issued share capital, which were priced at S$0.28 apiece versus an indicated range of S$0.26 to S$0.36. There is a 15% greenshoe that could boost the total deal size to S$1.57 billion ($993 million).
Half of the shares were new, while the other half was sold by Risen Mark Enterprise, which is an investment holding company indirectly owned in equal parts by Charoen Sirivadhanabhaki and his wife. RisenÆs stake in the company will fall to 12.65% at the time of listing from 25.2%.
The final price values the company at about 14.5 times the consensus 2006 earnings, which marks a premium of about 10% over the Singapore market and about 35% over the Thai market, sources say.
It is also at a slight premium to KoreaÆs Hite Brewery, which trades at a forward PE multiple of 14 times, according to Bloomberg data. Other Asian comparables trade at slightly higher valuations, the data show, with SingaporeÆs Asia Pacific Breweries in Singapore (the producer of Tiger and Anchor beers) quoted at 16.4 times, Carlsberg Brewery Malaysia at 17.4 times and San Miguel of the Philippines, which is relatively illiquid, at 21.6 times,
Because of the stable consumer base and high market share, a key challenge for the Thai brewery will be to grow its revenues and improve margins and many analysts simply view it as a value stock that will generate a stable yield for investors.
The price will give a dividend yield between 3.5% and 4% based on the companyÆs intention to pay out 50% of its net profit - which is a premium to its global comparables which yield about 3%. The range is quite wide though with Hite paying a yield of 1%, while Asia Pacific Brewery pays 3.4%.
The company, which is owned by ThailandÆs richest man, Charoen Sirivadhanabhaki, dominates the countryÆs alcoholic beverage industry with a 60% share of the beer market and a 75% share of spirits sales. Sales volumes in the spirits market are growing at about 2% per year, while beer sales have been expanding at a compound annual growth rate of 10% since 1998, according to industry data.
Some growth in anticipated, however as a result of increased beer making capacity and the introduction of new products. This year, revenues are expected to edge up 6.5% to Bt98 billion ($2.24 billion), while net profit should improve by 10.5% to about Bt10.5 billion ($255.5 million), according to syndicate research.
The shares are due to start trading in Singapore on May 30.
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