TPI Polene refuels Thai IPO market

Southeast Asia's largest waste-to-energy company opens one of Thailand's largest flotations in recent years.

Thailand's third largest cement company, TPI Polene, has formally launched a Bt15 billion to Bt 17.5 billion ($429 million to $500 million) initial public offering in its waste-to-energy unit, TPI Polene Public Power Company (TPIPP).

If the 2.5 billion-share deal prices at the top end of its Bt6 to Bt7 indicative range, it will represent the eighth largest flotation from Thailand over the past decade and the largest since EGAT's North Bangkok Power Plant raised $617 million in July 2015. 

Bankers expect the deal to go well given the valuation attached to a company, which has a strong domestic market position in a sector that has been prioritised by the Thai government. 

The transaction, which represents 29.8% of the company's enlarged share capital, is being pitched on a forecast 2018 price-to-earnings multiple of 8.8 to 10.3 times according to bankers.

At this level, it is coming at a roughly 23% discount to one of its nearest regional peers, China Everbright International. The Hong Kong-listed group is currently trading around 13 times forecast 2018 earnings. 

Perhaps more importantly, TPIPP it is also coming at a roughly 28% discount to Thailand’s market average forward price-to-earnings ratio of roughly 14.3 times.

Analysts are starting to describe the overall Thai market as expensive, given it has averaged 14 times since the global financial crisis. 

However, in a recent research report Credit Suisse noted the energy sector remained a favourite among foreign investors and had been receiving positive earnings revisions from financial analysts.

Local liquidity also remains strong and TPIPP’s parent company has been on a tear since early February. It has risen 15% since February 3 to close at Bt2.70 on Friday compared to a 1.4% drop in the SET Index over the same period. 

TPIPP is Southeast Asia's largest waste-to-energy (WTE) company by installed capacity and is growing fast. Net income, for example, is forecast to grow from Bt1.02 billion in 2015 to Bt5.7 billion in 2018.

By the end of 2017, TPIPP estimates it will have installed capacity of 440MW including a new coal-fired power station. When the company initially filed for its IPO in 2016, it had four major assets and installed capacity of 150MW. 

These assets comprised two refuse derived fuel (RDF) fired power plants amounting to 60MW and 20WM, plus two waste heat recovery (WHR) power plants accounting for a further 30MW and 40MW. RDF is fuel produced from various types of wastes such as municipal sold wastes and industrial wastes.

The two WHR plants power TPI's cement operations in Saraburi, while the two RDF-fired plants sell power to EGAT under long-term power purchase agreements. A delay getting an agreement signed with EGAT is the main reason why the IPO was held over from 2016 when TPIPP originally hoped to list.

The company's most recent assets include a 70MW RDF-fired plant, which will also sell electricity to EGAT, plus a forthcoming 150MW coal-fired plant and a 70MW combined coal and RDF fired plant, which will both sell electricity to the parent. 

In addition, the company also has eight oil service stations, one NGV gas station and three oil and gas stations. 

Proceeds are being used for expansion. The group is not only hoping to diversify out of Thailand into neighbouring Myanmar and Laos, but also into other renewable sectors including solar and wind. 

IPO structure.

The leads have lined up a core group of cornerstones for the deal, but unlike in the case of Chinese companies going to IPO in Hong Kong they will not overwhelm it. A group of seven investors will take up 473.3 million shares equating to 18.9% of the deal and 5.6% of the enlarged share capital.

They encompass Affin Hwang Asset Management, CIMB Principal Asset Management, Asset Plus Fund Management, CIMB Principal Asset Management (Thailand), FWD Life Insurance, Phillip Securities and Tisco Asset Management.

The offered tranche comprises 2.375 billion shares, or 28.3% of the enlarged share capital. There is also a pre-emptive rights offering covering 125 million shares, or 1.5% of the enlarged.

Upon listing, the company will have a market cap of Bt50.4 billion to Bt58.8 billion ($1.4 billion to $1.7 billion).

The institutional order book is open until March 23, with the retail offering running from March 24 to March 29. Listing is scheduled for April 5.

Post IPO, TPI Polene will be under a one-year lock up for 55% of TPIPP’s enlarged share capital, of which 25% of this portion may be sold after six months.

Joint global co-ordinators are CIMB, Maybank and Tisco.

¬ Haymarket Media Limited. All rights reserved.
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