Joint bookrunners JPMorgan and Merrill Lynch started roadshows for Thai Airways' share offer on Monday. Pricing will take place on November 19.
The sale, which is expected to raise Bt15 billion, will comprise an offer of 285 million new shares and a disposal of 100 million shares held by the Ministry of Finance. This week will be spent courting investors in Thailand's major cities before the marketing drive hits the international circuit next week with stops in Singapore, Hong Kong, New York and London.
Up to 70% of the shares will go to international investors and the the rest will be plced domestically by Asset Plus, Bua Lung Securities, JPMorgan, Merrill Lynch Phatra and SCB. There is also a greenshoe of 57.75 million shares. Given a vast improvement in the liquidity of the Thai stock market, the company will certainly hope to exercise it.
The airline announced Monday a guaranteed dividend of Bt1 a share, driving its stock price up 18% by the end of the day. On the back of the stock market's heady performance in the past year - it is up 85% in 2003 - the airline is trading at around 11-times last year's earnings.
Elsewhere in Asia Singapore Airlines trades at a P/E of 12, Cathay Pacific at 13 and Qantas at 10. Given that Thai Airways will remain in government hands even after the share sale the offer remains off the radar screens of some institutional investors.
But a banker on the deal claims that the airline's growth prospects suggest that a P/E of around five is a more realistic valuation going forward. "That's very cheap in relation to comparables around the region," he says. "And the management team has the potential to run the airline like a private company." With Thailand's government now predicting sustained growth of up to 7% for the next five years Thai Airways is a cheap way to buy into a strong story, according to the banker. "If you want to buy into Thailand this is the way to do it."
The deal hasn't had a smooth take-off. It was postponed a number of times thanks to volatility in the airline industry created by the Iraq war and Sars, and the offer certainly wasn't helped when the prime minister, Thaksin Shinawatra, described the airline as "lousy". (He had good grounds for complaint: one of its Boeing-737s exploded on the tarmac as he was waiting to board with his son - terrorists were intially suspected but the problem turned out to be an overheating aircon unit.)