Thailand IPO

PTT Oil and Retail’s (PTTOR) IPO Extends ECM Deals In Thailand Amid Bangkok Lockdown

While billion-dollar ECM deals are on the decline globally, domestic Thai corporates are stoking demand with spin-offs of well-known, profitable subsidiaries.

PTT Oil and Retail (PTTOR), the conglomerate’s retail arm which sells and distributes petroleum products but better known as the operator for PTT’s Café Amazon coffee chain, filed for IPO last week with expectations that the deal would raise between $1 billion and $2 billion for the parent company.

While plans to go public were discussed back in 2018, the business entity is expected to fetch a market capitalization between Bt 190 billion to Bt 250 billion ($6 billion to $8 billion), which would be eligible for the SET50 index.

PTTOR’s IPO becomes Thailand’s second billion dollar deal this year, following Central Retail’s $2.3 billion listing in February. As bankers, lawyers, and investment managers are finding themselves working from home, niche deals across Asia suggest selective thematic investments are still galvanizing interest.

WiMi Holdings, the augmented reality (AR) holographic service provider, listed at the start of April. Tycoon Group, a health-care focused product distributor, goes public this week. SBI Card, India’s second-largest credit card issuer, was the last Asian ECM deal to raise more than a billion dollars year to date, raising $1.4 billion in March.

Corporate Recognition

Even as virtual meetings and social distancing become more commonplace amid the pandemic, Thai corporates are better positioned, as many are already well known by domestic investors and unlikely require any introduction. Among other Thai deals planning to raise secondary money, Siam Cement Group, Thailand’s oldest building material company, is slated to raise a $1 billion spinning of its packaging business. Thai Beverage, the country’s largest beverage company, is expected to raise $2 billion to $3 billion when they list their Vietnam beer business.

Equity investors who own shares in the parent company already had indirect exposure to these subsidiaries.

While Thai ECM deals face similar challenges as other Asian markets amid the COVID-19 pandemic, the reluctance to postpone deals likely reflects pent up demand from when the ‘Land of Smiles’ was under military rule between 2014 and 2019.

“For investors, it is not important which political party forms the new government, as long as it can offer stability and there is no political turmoil,” according to Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Market Organisation, speaking at “Thai Stock Insight, Impact of the Election” in March 2019.

During the military coup that ran between May 2014 and General Election in March 2019, Thailand raised $15 billion across 174 deals. Since then, only 30 deals have raised $6 billion.

Besides its corporate recognition, PTTOR is hoping that the domestic economy proves to be more resilient and support petroleum demand. Macro sentiment remains anemic, after the Bank of Thailand revised the country’s 2020 GDP outlook to -5.3% last month due to a drop in export demand and tourism activity.

Although Thailand’s economy is a beneficiary of falling crude oil prices given its position as a net importer, the domestic SET index is heavily weighted towards crude linked industries, particularly subsidiaries of PTT, which affect corporate earnings.

Oil retail wholesale accounted for 80% of PTTOR net profit last year.

Café Amazon, the coffee chain which runs almost 3,000 stores domestically and nearly 200 stores overseas in markets including China, Japan, across Southeast Asia, accounts for most of the remaining 20% non-oil business. Café Amazon served 225 million cups of coffee and related drinks in 2018.

Ambitions to rival Starbucks in Thailand may provoke bitter comparison to China Luckin Coffee, which recently admitted to fabricating sales figures over the final three quarters in 2019.

“[Luckin Coffee] probably doesn’t materially impact the group, given the segment is profitable” according to an investment insider. “However, it probably doesn’t help either.” 

Not Always A Great Reception

Listing PTTOR helps inject much-needed cash into the parent company without significant diluting control of the entity. PTT is expected to maintain 75% control post offering.

Despite the deal size, IPO stocks have received a lukewarm response from shareholders. Since the start of 2019, only Bangkok Commercial Asset Management (BCAM), Thailand’s largest bad debt management firm, is among $500 million-plus deals which is trading above its IPO price. Along with Central Retail, Asset World Corporation, which raised $1.3 billion in its debut in October 2019, is down 20%.

Financial Advisor for the deal includes Bualuang Securities Public Company Limited, Finansa Securities Limited, Kasikorn Securities Public Company Limited, Phatra Securities Public Company Limited, TISCO Securities Company Limited.


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