Tesco’s Thai property fund is aiming to raise up to Bt7.5 billion ($240 million) to invest in five Tesco Lotus-anchored shopping malls. The deal will comprise the issuance up to 650 million new units to existing shareholders.
The five malls are located in Phuket, Salaya, Nakornsrithammarat, Rangsit Nakornnayok and Bangpoo. The acquisitions will bring Tesco Lotus Retail Growth Freehold and Leasehold Property Fund’s total number of assets to 22, it said in a statement on Monday.
At the time of the initial public offering in March, which raised $450 million, the property fund comprised 17 malls anchored by Tesco Lotus stores. This will be the fund’s first asset acquisition and follow-on offering since the IPO.
The fund’s investment committee has already approved the proposed offering and it is now subject to approval at a shareholders meeting scheduled for October 5.
“These new assets are well performing, with proven track records and will start generating income for [the fund] from the first day, resulting in no dilution to investors,” it said in the statement.
The fund’s stock ended yesterday’s trade up 2.9% at Bt14.4, up more than 38% from its IPO price of Bt10.40. Southeast Asian stock markets are generally performing strongly this year, with the benchmark SET Index gaining about 20% during 2012.
The new properties are expected to enhance the fund’s dividend payouts and to diversify the its sources of income, Krung Thai Asset Management Public Company, which manages the fund, said in a separate statement on Monday.
In its IPO, the fund priced the deal at the top of the indicative range at Bt10.40 a share, which gave an implied yield of 6.5% for the fiscal year to February 2013, and it was expected to pay almost all of its distributable income as dividends.
The exact number of new investment units offered will be determined before the start of the offering, but the fund said it expects that it may not be necessary to issue the maximum number of new units to meet the capital-raising target.
Once approved, existing unitholders may subscribe to the new units according to their entitlement, more or less than their entitlement or not subscribe for units at all, according to the statement.
The offering price of the new investment units will be determined by the investment committee and the management company based on a book-building process, it noted. It will take into account factors such as the prevailing market price of the fund’s issued units during the period in which the new investment units are offered for sale, the appraised value of the new properties, general market conditions and market response.
Operating locally as Tesco Lotus, the company has bought and developed more than 1,000 stores across Thailand, giving it a market share of 13%, according to the Tesco group’s website.
Tesco Lotus provides a stable offering of essential goods, including a variety of fresh food, groceries, electronics, leisure and entertainment and household products, as well as value-for-money apparel.
Ek-Chai Distribution System is the property manager of the fund and owns 25%.
Bank of America Merrill Lynch, Citi, HSBC and Phatra Securities are joint bookrunners for the deal, according to a source.
