Rayong Refinery's IPO highlights investor interest and caution

Despite almost three weeks of virtually uninterrupted equity market declines, bankers say they still see interest in primary market issues - although investors are now typically opting for smaller sizes than they would have a month ago. They are also becoming more careful with regard to valuations, and this is especially noticeable because of a higher proportion of price limit orders.

A case in point is Thailand-based Rayong Refinery Co. (RRC) which yesterday (May 25) priced its initial public offering at the bottom end of the indicated range for a total deal size of Bt25.2 billion ($657 million). The spin-off from government-controlled energy company PTT fixed the price at Bt18 per share, after marketing the offer to investors in a range between Bt18 and Bt23.

Even at the smaller size, the deal is the largest IPO in Thailand since fellow refiner Thai Oil raised Bt32.5 billion ($788 million) in October 2004 and the third biggest overall. It is also the largest energy offering out of Southeast Asia this year and the second Thai company to complete an IPO this week after Thai Beverage (which is listing in Singapore) closed a $866 million offering on Wednesday.

RRC’s offer includes a greenshoe of 15%, which according to the practice on Thai IPOs has been overallocated exclusively to domestic institutions. If fully exercised it will boost total proceeds to Bt29 billion ($753 million)