Jasmine prices IPO at bottom of the range

One of Thailand's largest IPOs is fixed at the bottom of its price range, offering a big yield pick-up for investors.

Jasmine Broadband Internet Infrastructure Fund (Jasif) has priced its Thai initial public offering at the bottom of its indicative range, offering a big pick up to comparables and Thai sovereign bonds.

The 3.66 billion share deal was priced at Wednesday's open at Bt10, raising proceeds of Bt36.67 billion ($1.1 billion). Allocations for the Morgan Stanley- and Bualuang-led offering were also being completed on Wednesday, with a likely 50/50 split between domestic and international investors.

About 70% of the international tranche will go to the top 10 investors, with a strong focus on global long-only income funds.  “This isn’t a deal that appealed to momentum and hedge fund investors,” one observer commented. “It was a specialist product with volume and price tension. But it was good to see rotation from US funds out of their home market and into Asia.

“The issuer has been very sensible with pricing,” he added. “There was price sensitivity towards the bottom end of the range and they decided to ensure the deal trades well in the aftermarket by giving a little extra on pricing."

Listing is scheduled for February 16.

In the wider Thai equity market, retail investors continue to remain net buyers as they have for most of the year. As such, they appear to have shrugged off the country's first violent incident since the military coup last May.

On Sunday, two pipe bombs exploded in the central shopping district but caused little damage. Subsequent finger pointing suggested the bombs were either planted by the military to justify an extension of martial law, or by supporters of ousted Prime Minister Yingluck Shinawatra, who was impeached at the end of last month.

However, the incident may have helped turn foreign investors into net sellers again, a position they have also held for most of the year with the exception of last week.

At Bt10 per share, Jasif's IPO has been priced with a forward yield of 9%. This equates to 607bp over Thai government bonds.

Sovereign yields have been little changed over the past week following the Bank of Thailand's decision to hold rates at 2%. However, the prevailing tone remains downwards after an additional member voted for a rate cut. Figures also show that the country's manufacturing index registered its 21st consecutive contraction in December.

Jasif is forecast to provide distribution growth of 8% over the next two years. It has also indicated that it will pay out 100% of its forecast Bt4.5 billion 2015 net profit.

Under Thai law, infrastructure funds are required to pay out at least 90% of adjusted net profit as dividends. These are free of withholding taxes for the first 10 years.

Post IPO, the fund's sponsor, Jasmine International, will own 33.3%. It is subject to a three-year lock up after which there is a second three-year lock-up limiting the group from selling down below 19%.

Proceeds from the IPO are being used to fund the parent's Bt6 billion capex plan in 2015. Jasmine hopes to secure two million broadband customers by the end of 2015, up from 1.547 million in June 2014.

The parent's stock price has responded positively to the spin-off of its fibre optic network. Year-to-date it is up 11.1% to Tuesday's close, outperforming the benchmark SET Index, which is up 8% over the same time period.

Jasif's nearest comparable, infrastructure fund TRUE GIF, has also performed well after announcing a new asset injection. It is up 10.2% to Tuesday's close and trading on a yield of 7.9%.

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