Already listed in Singapore, this could make ThailandÆs leading producer of beer and spirits the second Thai company to have a dual listing after mobile phone operator Total Access Communication, which is also listed in Bangkok and Singapore.
The company, which is controlled by Charoen Sirivadhanabhaki, opted to list in Singapore in May 2006 after repeated protests by a strong religious lobby made it abandon its original plans for a Bangkok listing. The lobby had forced it to cancel a domestic IPO in late 2005 on the grounds that it would encourage drinking. However, Thai Beverage hadnÆt given up its vision to allow ordinary Thais a chance to get a share of the company and with the passing of the 2008 Alcoholic Beverage Control Act, that target now appears to be within reach.
Among other things, the new act bans the sale and consumption of alcohol in various places, such as temples, educational institutions and gas stations, and no longer allows the sale of alcohol to those under 20 years old, thus addressing some of the concerns of the religious lobby.
In a press release issued late Wednesday, Thai Beverage says it has applied to list its common shares on the Stock Exchange of Thailand and if the application is approved it will offer 80 million existing shares to retail investors in Thailand. The shares in question will be sold by Siriwana Co, which is 50% owned by Charoen Sirivadhanabhakdi and has an 8.75% stake in the company. This means no new money will be raised as a result of the dual listing.
While the basic premise of a listing in its home market clearly makes sense, one may question why the company is choosing to do this now, at a time when global equity markets are in turmoil and investor appetite for equity issues is at absolute rock bottom. Over the past couple of months, the Thai stock market has also come under additional pressure due to ongoing political protests, which have already forced one prime minister to step down.
Having held up well in the first four months of the year û when it was one of the few Asian markets in positive territory û the Thai stock market has been on a steady decline since mid-May and has lost 45% of its value year-to-date. Performance-wise, this puts it on par with Taiwan, Korea and Japan and slightly ahead of Hong Kong and Singapore û although it is hard to argue that this slight outperformance puts it in any better light.
However, the poor performance by the Thai market û much of which has been caused by an outflow of international money û may actually be the reason why the dual-listing proposal comes at this time. In the press release Thai Beverage says the listing application has been made at the invitation of the Thai stock exchange, so it may well be that the local bourse sees the addition of one of ThailandÆs top companies to its board as a way to improve the attraction of the market. As part of its bid to increase the market value and attract more foreign investors, the Thai government is offering lower taxes to companies that list on the domestic exchange.
With a current market capitalisation of $3.8 billion, Thai Beverage should be in the top 10 companies in the Thai market, according to the press release, and the company says it believes the dual listing will also ôhelp to strengthen ThailandÆs capital marketö.
In addition, Thai Beverage is characterised as a ôdefensiveö stock since its revenues are typically not sensitive to economic swings û exactly the kind of stock that one would want to own in an economic downturn. It also has a dominant position in its home market, a strong cashflow and an above-average dividend yield, paying out 50% of its net profits in dividends every year. As a direct result of this, the stock is not so volatile and it has held up significantly better than the Singapore market as a whole this year, falling only 11.8%. SingaporeÆs Strait Times index has lost 49.6%.
However, having traded in a narrow range between S$0.24 and S$0.30 ever since it listed, the stock has in the past few months broken out on the downside and on Wednesday closed at S$0.225 (Thailand was closed yesterday for a public holiday). Its May 2006 IPO was priced at S$0.28 per share.
The company is certainly not one for shying away from difficult markets though, with the environment during its initial public offering also quite challenging. During the bookbuilding period the SingaporeÆs Straits Times Index dropped 7.4% and the SET index declined 8.8%. However, its defensive qualities helped it pull through and complete the S$1.37 billion ($866 million) offering, which at the time was the largest Singapore IPO since 1993 and also the largest IPO by a private sector company based in Thailand.
At that time, it had the support of large international funds with long-term liabilities that were keen on the dividend yield. It remains to be seen whether the local retail investors will offer similar support in the current environment. The deal is open to domestic institutions as well, but according to Ueychai Tantha-Obhas, a senior vice-president and director of the company, the focus will be on retail investors.
However, the offering will be tiny at only 0.3% of the outstanding share capital. Based on the current price in Singapore this would result in a deal size of only S$18 million ($12 million). Still, it is the dual listing that is the interesting issue here, not the size of the offering. According to a draft prospectus, the shares that are to be listed in Bangkok will be fungible with those listed in Singapore, which means it is possible that more of the daily turnover in the stock would eventually migrate to the Thai bourse. However, the company points out that there is no online system trading securities across the SET and the Singapore exchange, which means Thai Beverage shareholders will not be able to promptly trade shares listed in Bangkok on the Singapore exchange and vice versa. A transfer of shares between the exchanges currently takes about 10-12 business days during which the investor is exposed to fluctuations in the share prices as well as the exchange rate.
The regulatory review of the companyÆs listing application is expected to take at least one month, which means that the share offer could be launched at the beginning of December at the earliest. One source says the intention is to complete the sale by the end of this year.
The deal will be arranged by SCB Securities and Phatra Securities, which also acted as joint global coordinators for the Singapore IPO together with Deutsche Bank, J.P. Morgan and Merrill Lynch.
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