Corporate Finance : Thai Ipos Spring To Life As China Offerings Dry Up



China was the world’s biggest market for initial public offerings last year, but its IPO market has shriveled following a sharp drop in stock prices since last October, while the long-dormant market in Thailand is coming back to life.

The Esso (Thailand) unit of Exxon Mobil raised $269 million in an initial public offering in April, which was Thailand’s first IPO in 10 months. Meanwhile, at least a dozen other Thai companies have filed applications or had IPOs approved for listing on the Stock Exchange of Thailand.

The small rush by Thai companies to tap the local equity market comes at a time when the local economy is looking up. The World Bank in April said real gross domestic product in Thailand is projected to grow 5% in 2008—not as fast as China, but up from an earlier forecast of 4.6%. The World Bank said growth in Thailand’s economy would be driven by a recovery in domestic demand and higher confidence of both consumers and investors following the return of democracy and the election of a new government late in 2007.

The retail portion of Esso (Thailand)’s IPO was three times oversubscribed, according to its lead underwriter, Phatra Securities. The company’s shares rose 5% in their May 6 debut on the Stock Exchange of Thailand.

Esso (Thailand) operates a complex oil refinery able to handle heavy crude with a capacity of 177,000 barrels per day, and a paraxylene plant with annual capacity of 500,000 metric tons of the chemical used in the manufacture of plastic bottles, polyester film and resins. Morgan Stanley was the lead underwriter for the portion of the IPO sold in foreign markets.

Meanwhile, Thai Tap Water Supply, the country’s largest private water supply distributor, and Asiasoft, which makes online gaming software, were preparing to come to market as Global Finance went to press. Lombard Asia III, a US-based private equity fund focusing on Southeast Asia, planned to buy 10% of Asiasoft. The fund planned to purchase half of that stake in the IPO and the rest from shareholders at the IPO price.

Other Thailand-based companies planning IPOs include Siam Gas and Petrochemical, Premier Marketing, Bangkok Life Assurance, lingerie-producer Sabina, and Triple T Broadband.

Meanwhile, many equity issues in China were postponed or withdrawn last month. Ping An Insurance, China’s second-largest insurer, said it would not pursue a plan to issue shares on the Shanghai Stock Exchange for at least six months due to volatile market conditions. In January the company announced plans for big stock and bond issues to pay for acquisitions.

The total value of IPOs in China declined to $7.85 billion in the first quarter of 2008 from $9.06 billion in the same period a year earlier, according to state media reports. The $3.65 billion offering by China Coal Energy was the largest IPO in the first quarter of this year. The company’s shares soared 40% in their February 1 debut but as of early May were trading below their issue price.

The China Securities Regulatory Commission announced last month that it would strengthen its supervision of IPOs to reduce speculative trading, which contributed to the stock market’s slump. The regulator will focus on how issues are priced and how they are divided between institutional and retail investors.

The next big test for China’s new-issues market could come this month, when China South Locomotive and Rolling Stock plans to raise at least $1.4 billion in a dual Shanghai and Hong Kong IPO. The company is scheduled to float about 25% of its shares in Shanghai and another 15% in Hong Kong.

Shares in China-based department store operator Maoye fell 2% in their May 5 debut in Hong Kong. The company raised $343 million in an IPO that was scaled back from an earlier planned offering of more than $900 million. Goldman Sachs, UBS and HSBC handled the offering.



Gordon Platt