Although Rayong Refinery is the world's third-biggest oil- refining facility, it could face an uphill task impressing investors when it starts trading today on the local bourse. Its debut stands a good chance of misfiring due to prevailing unfavourable factors, brokers said last week.

"RRC is a sound fundamental stock, and investors can pile up on it. The market's sluggish sentiment will be the main reason if it turns in a disappointing performance on the first day of trading. Thai shares have slipped off the radar screens of foreign investors despite the very low prices now," a trader at a foreign brokerage said.

RRC emerged as the local market's third largest initial public offering, following Thai Oil Plc (TOP) and PTT Plc. The oil-refiner decided to price its IPO at the bottom of the indicative range of Bt18-Bt23, fearing hostile market conditions.

In the case of Thai Beverage Plc, the cut-price IPO strategy failed to guarantee a good showing of its stock's launch on the Singapore Exchange. The brewer and distiller set its IPO price at near the low end of the indicative range, 0.28 of a Singapore dollar (Bt6.8), and on the May 30th first day of trading it closed under that.

All four stocks that commenced trading on the Thai bourse this year have succumbed to the glum market sentiment, and their prices have failed to stay above the IPO price on debut. The dismal IPO track record has discouraged many companies from seeking a listing this year.

The Stock Exchange of Thailand has high hopes that more firms will be attracted into going public, but the reality is that the market environment is not conducive, especially with political jitters, soaring oil prices and higher interest rates all contributing to softer consumption and slower economic growth.

If the Bank of Thailand raises the repurchase rate on Wednesday, this will certainly make the market mood even blacker.

Due to the absence of good news, the stock market has lost nearly 9 per cent in the past few weeks. Foreign investors have continued their sell-off around the world on anxiety over a possible US interest-rate hike. The SET Index briefly dipped below the 700 psychological barrier during trading last Wednesday.

The trader said that although RRC has set its IPO price at the low end, Bt18 appears high compared with TOP's price.

"The price-to-earnings ratio of both stocks are on par, but TOP's earnings are more than double RRC's," he said.

The local stock market's direction now correlates with the movements of Wall Street and Asian stock markets, he said.

Foreign investors have disposed of a net Bt38.52 million of shares in the past 15 trading days. Excluding the Bt73-billion Shin Corp deal, they have actually been net sellers so far this year, pulling out over Bt10 billion.

Kim Eng Securities (Thailand) recommends a "buy" for RRC, saying the IPO price has a 50-per-cent upside potential, given the broker's fair-value estimate of Bt27.

It predicted that RRC's average refining margin would stand at US$7 (Bt267) per barrel this year, close to what it was in the past two years.

RRC is expected to earn a net Bt7.51 billion this year.

Capital Nomura Securities estimates a fair value for RRC stock at Bt26, close to Kim Eng Securities' calculation.

The Bt26 assumes that the refinery will run at full capacity of 145,000 tonnes per year and its refining margin will average $4 per barrel.

An analyst at a local brokerage said the stock market here would follow other stock markets due to the dearth of fresh positive external factors.

The stock market will get back on track if the political situation clears up and corporate earnings are higher than expected, the analyst said.

Siriporn Chanjindamanee

The Nation