PTTOR prepares to file mammoth IPO

As PTT prepares to spin-off its oil and retail arm, Thai IPOs are shaping up to raise more money in 2019 than in 2017 and 2018 combined.
The fuel of PTT's profit growth
The fuel of PTT's profit growth

PTT is expected to file for the initial public offering of its oil and retail arm (PTTOR) at the very beginning of January, setting in motion what should be a record-breaking year for the Stock Exchange of Thailand (SET).

PTTOR is one of the country’s most hotly anticipated IPOs of all time, and expectations are high for a deal that could raise up to $3 billion based on the syndicate’s Bt200 billion ($6.1 billion) working valuation for the entire company.

If the group’s valuation expectations are met, then its IPO will end up being almost double the size of the country’s previous record-holder - BTS GIF - which raised Bt62.5 billion in 2013.

Alongside PTTOR, bankers also expect a circa $1.5 billion IPO from Asset World Corp (AWC), the property development arm of the TCC Group and, if it is able to complete its restructuring work in time, a $1 billion spin-off of the Central Group’s retail assets. 

Just these three deals alone would bring the IPO tally to over $5 billion. They would also go a long way to wiping away the memory of 2018, which has not been a good year for the Thai equity market.

Dealogic figures show that Thai companies have raised a total of $2.4 billion during 2018. There has been just one $1 billion-plus deal (Thai Future Fund or TFFIF) and three others above $100 million (Osotspa, Bhiraj Office Leasehold and Bualuang Office Leasehold).


Foreign portfolio investors have also been heavy net sellers. They have offloaded $8.9 billion over the course of the year according to Kotak Institutional Equities data.

This selling pressure has helped push the SET Index down 5.91% to December 7, which puts Thailand in the middle of the Asian pack in terms of performance. 

The currency, however, has been much stronger, down just -0.89% against the dollar to December 8. And domestic equity investors have remained net buyers.

In a recent research report, CIMB argued that record foreign selling has not been justified by Thailand's economic performance and it forecasts that the country will be a major beneficiary of any turnaround in sentiment towards emerging markets. It noted that most Hong Kong-based investors it had spoken to were either neutral or underweight Thailand compared to Singapore-based investors’ neutral to overweight positions.

CIMB also believes there will be a rotation out of defensive stocks into laggard sectors such as tourism, property and consumer-oriented stocks once sentiment turns.

And during the first week of December, there have been signs that this may be happening, as foreign investors turn net buyers again.

“Foreign investors are starting to take note of how strong the fundamentals of the Thai economy still are,” said one Bangkok-based ECM head. “Listed companies also have low debt levels and ambitious expansion plans outside of Thailand, which augurs well for 2019.”

Yet valuations, which average 15 times forward earnings, are still not cheap compared to comparable Asean countries which trade around 12 to 13 times. Many investors also seem likely to take a wait-and-see approach ahead of elections, which have been confirmed for late February and have historically not passed off without violence.

But the more optimistic view is echoed by DBS, whose Thai research team recently conducted a US roadshow. In a note to clients, it reported that discussion takeaways covered the “positive outlook for consumer confidence (at a four-year high) and spending, improvement in GDP growth and the ongoing smooth transition to the forthcoming general election.”


Some local bankers had been expecting the elections to be pushed back until late April or early May because of the coronation of the new king.

But either way, this is unlikely to have much effect on PTTOR given Thailand’s lengthy IPO registration and approval process. This means the deal is expected to come in the third quarter under the lead management of Bualuang, Finansa, KasikornPhatra and TISCO on the domestic side, plus Bank of America Merrill LynchJP Morgan and Morgan Stanley on the international side. 

Assets include 1,662 petrol stations in Thailand, plus a further 232 across Indochina (Myanmar, Cambodia and Laos), which offer future growth opportunities.

But the really fast-growing part of the group is PTTOR’s retail arm.

It has nearly 2,500 Café Amazon coffee shops in Thailand, which puts it in the number one spot (way above Starbucks) with a further 168 strung across the rest of Asia. It has plans to expand the number to 4,000 by 2023.

It is also expanding its 7-Eleven chain and forecasts that the non-oil retail business will account for about 30% of overall profits within the next five years; up from 20% in 2017.

Analysts and bankers agree that it is the retail arm, which will boost the IPO valuation and also uplift PTT by unlocking value. The Bt200 billion IPO valuation has a 50/50 split between oil and non-oil retail and the parent is expected to offload slightly over 50% to take it into private ownership.

State-controlled PTT currently trades around 10.1 times 2019 earnings, but hopes to price PTTOR around 25 to 30 times in line with other domestic retail plays. As such, it will be hoping that investors do not focus on regional comparables like Caltex Australia, which currently trades at a far lower valuation of nearly 14 times forward earnings.


The second of the three jumbo IPOs is expected to be AWC. Thailand’s richest tycoon, Charoen Sirivadhanabhakdi, is in the final stages of carving the domestic property development arm out of his sprawling conglomerate.

Assets include retail, office and hospitality developments including the Hilton in Bangkok and Le Méridien in Chiang Mai. The group recorded EBITDA of Bt6.4 billion.

International banks have recently been pitching for the IPO, joining a Thai syndicate which comprises Kasikorn, Phatra and SCB.

Slightly further down the line should be the IPO for Central Retail, which is being overseen by Bualuang, Phatra and Morgan Stanley, although other banks may be appointed later.

“There’s still a lot of restructuring work that needs to be done,” said one local banker away from the deal. “So Central Retail may not quite make it for next year.”

Investors are also watching to see if the Thai government boosts TFFIF, which raised Bt44.7 billion from Thailand’s largest IPO during 2018.

The cabinet has already approved the injection of two new highways into the vehicle, but bankers say the group is unlikely to raise new equity to fund it since it has plenty of leeway to increase debt.

“This should be extremely yield accretive,” said one market specialist, who added that future injections could comprise other toll roads, plus assets owned by the Port Authority of Thailand and Thai Railways.

A second banker noted that there has been some discussion about injecting airport assets. However, a third added that since the Airport Authority of Thailand is already listed it would make far more sense for it to set up a separate vehicle.

“There's some internal debate about whether to use TFFIF for all government assets, or to replicate the structure for different asset classes so it makes it easier for investors to value them,” one banker remarked.


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