Merrill Lynch completed the first accelerated block trade out of Thailand after Wednesday's close (December 1), raising Bt2.7 billion ($70 million) for True Corp, formerly known as TelecomAsia. The 398 million new share deal was marketed at Bt6.3 to Bt6.8 and priced at Bt6.8, which represents a 7.5% discount to the stock's close of Bt7.35.
The transaction faced a number of challenges, but managed to attract demand of $275 million, with participation by 54 accounts. However, the true deal size was just $38 million as the controlling shareholder - Charoen Pokphand - subscribed to 174 million shares to maintain its stake at 43.69%. Existing shareholders will be diluted by 10.8% and the freefloat will expand from 45.2% to 54.5%.
The biggest execution hurdle was the long settlement period for a stock, which trades at a high volatility level of 82%. The new shares will not begin trading until December 15.
The stock has also spiked quite significantly since early August when it hit a year-to-date low of Bt3.64. The upswing has been generated by a resolution of debt restructurings at two of its subsidiaries - 100% owned Asia Wireless (AWC) and TA Orange. Proceeds from the placement, for example, are being used to buy-back debt from AWC.
Analysts believe the group's re-organization should allow it to re-focus on its core operations and become free cash flow positive by 2005. True Corp is a fully integrated telecom operator - one of only two fixed line operators in Bangkok, with a PHS wireless service through AWC, a mobile service through a 44% stake in TA Orange, a broadband service and a stake in UBC, Thailand's only cable TV operator.
A second catalyst for stock price performance may be the removal of access fees following the recent establishment of the National Telecommunications Commission.
The company is currently trading on an EV/EBITDA ratio of6.5 times 2005 earnings versus 6.5 times for Total Access and 6 times for AIS.