Published on January 18, 2006
SEC again ducks giving clear pointer on Thai Beverage listing
Although Thai Beverage has confirmed it wants to list on the Thai stock market after doing so in Singapore, those involved in the capital market were disappointed when the Securities and Exchange Commission’s board on Monday failed to give a clear picture as to whether it would allow alcohol producers to list locally.
Thai Beverage submitted a letter to the SEC stating that it was willing to go ahead if the watchdog’s board would allow it to list after Parliament passes an act governing alcohol. The company’s board recently agreed that the firm, owned by liquor magnate Charoen Siriwadhanabhaki, could list next month on the Singapore Exchange – the Thai stock market’s arch-rival. The Singapore Exchange has a market capitalisation of Bt45 trillion, compared with the local market’s Bt5 trillion. The Thai bourse will soon lose at least Bt100 billion in market capitalisation when Thai Beverage lists on the Singapore Exchange. Thai Beverage’s market cap likely exceeds the combined capitalisation of 36 companies listed on the Thai stock market last year. According to the company’s filing with the SEC, Thai Beverage would earmark seven billion shares at Bt1 par value to the public through an initial public offering. Listing Thai Beverage on the Singapore Exchange will allow foreign investors to reap hefty profits from business in Thailand while Thais do not gain anything. Thai Beverage’s sales last year amounted to Bt100 billion, with a net profit of Bt10 billion and cash in hand of Bt18 billion.Although Thai Beverage, in the best-case scenario, will seek a dual listing on the Thai stock market in the future, the local bourse at that time would become only the secondary market for Thai Beverage’s stock. Besides, local investors will have to buy expensive stocks of Thai Beverage as its shares listed in Singapore would have a higher value, given the fact that the Singapore Exchange has a far greater price to equity (P/E) ratio than the local stock market. The Singapore Exchange’s P/E stands at about 17 times, while the Thai stock market is at about 10 times. If Thai Beverage’s planned listing on the Thai stock market after Singapore becomes a reality, Thai investors would have to buy shares at an expensive price according to arbitrage rules. Losing Thai Beverage to the Singapore Exchange would cause the Thai stock market to lose its attraction to foreign investors who have a strong influence over the market, as Thailand hardly has any non-listed multi-billion corporations. It would also have a domino effect on the local brokerage industry. Stock Exchange of Thailand president Kittiratt Na Ranong earlier estimated that brokerages would lose Bt500 million in commission fees if Thai Beverage lists on the Singapore Exchange. If the impact from losing Thai Beverage upon the overall economic picture is considered, capital inflow to the equity market may not increase – or could even decline. Such capital inflows are essential while Thailand’s current account is running a deficit due mainly to the government’s mega-infrastructure projects. What Thais will get from this situation is likely only a few drops of alcohol. Oranan Paweewun The Nation
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