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Don’t call a revival yet for Thailand’s IPO market

By Jonathan Breen
23 Oct 2018

The recent resurgence in Thai IPOs is reassuring amid the volatility roiling many emerging markets. But the success of the listings from Thailand Future Fund and Osotspa is far from a reflection of a booming ECM market in the country.

Thailand’s listing market received a jolt recently. State-owned Thailand Future Fund (TFF) stormed across the finish line on October 19 with its Bt44.7bn ($1.37bn) IPO, seeing an impressive amount of orders after a week on the road. The deal had been in the works for well over two years and investors were chomping at the bit when it finally came to the market. Naturally, it was a big success.

It also came just a couple of weeks after Osotspa, a Thai conglomerate, bagged a healthy Bt15.1bn from its flotation on October 5.

Their triumph is certainly positive, especially given the turbulence in emerging markets globally. But bankers calling a revival in the southeast Asian country’s IPO market should take a beat — TFF’s and Osotspa’s listings were special cases and do not signal a thriving Thai market.

TFF, for starters, is one of a handful of infrastructure trusts that the state has privatised in the past six years. Each was welcomed with open arms by local investors. The extent of domestic demand for TFF was clear, given the entire available float ended up in the hands of retail and other non-institutional Thai accounts.

The fact the government has retained a stake in TFF through the Ministry of Finance was an added bonus for the buy side. The fund is collecting returns on two existing expressways and has an accord to build more, all while offering a projected first year yield of up to 5.3%. A sure recipe for a safe, reliable and attractive investment opportunity.

The fund’s units are scheduled for listing on October 31. But despite being a huge flotation, it doesn’t follow a year of grand activity in the country’s IPO market, which is expecting very little else in terms of significant deals anytime soon.

Lacklustre market

Osotspa’s transaction, the largest of 2018 until last week, is the only other to come near TFF in size and popularity.

But Osotspa also offered a one-off unique story to the market. Not only was the firm able to take advantage of a quiet issuance period, but it is also familiar to retail investors. Its brands, including numerous energy drinks such as Shark and M-150 as well as healthcare and pharmaceutical products, are well known to consumers throughout the country, meaning their support for the transaction was all but guaranteed.

Sure, Thailand does have plenty going for it when compared with its emerging market peers. Its currency is strong, it has maintained fiscal discipline over the years and shown macroeconomic stability consistently. Economic growth is robust, with plans also in place for a fillip to investment in the country.

Its IPO market, though, hasn’t dazzled. A total of $2.3bn has been raised through 15 IPOs so far in 2018, the largest two of which were from TFF and Osotspa. Apart from them, the only others to top $100m were a pair of real estate investment trusts in January and February, according to Dealogic data.

By this time last year, 24 companies had listed for a combined $2.18bn, with seven raising between $100m and $505m.

Osotspa and TFF’s IPOs are certainly worth writing home about, but they capped the pipeline of chunky deals for the year. Anyone searching for more opportunities in the country imminently may be left empty-handed.

By Jonathan Breen
23 Oct 2018