Sansiri president Srettha Thavisin will soon become the residential developer's major shareholder - replacing Natural Park - in a bid to restore investor confidence.

Srettha or his associates will subscribe to 725.9 million of the company's capital-increase shares, representing a stake of 24.9 per cent, at a price of Bt4.28.

He expects to spend Bt2 billion to Bt3 billion for the new share subscription.

Sansiri stock closed down 4.43 per cent yesterday at Bt3.88.

The 725.9 million newly issued shares are part of the 2.95 billion shares that Sansiri plans to float.

The remaining shares will be sold to specific investors through private placement with Ayudhya Securities and UBS AG Group as the arrangers.

The company will allocate 1.47 billion warrants to its existing shareholders at a ratio of one warrant for every two shares held. Each warrant can be converted into a common share at the exercise price of Bt4.28.

The share offering will raise the developer's registered capital from Bt12.61 billion to Bt19.24 billion and cut Natural Park's stake in half to 12 per cent.

The recapitalisation is subject to approval from Sansiri's shareholders at their meeting on January 18.

Srettha said yesterday the capital increase plan was partly an attempt to reduce Natural Park's role in Sansiri as it could not support Sansiri's business and some Natural Park executives and shareholders have been slapped with legal actions.

"Sansiri's stock price is now undervalued. We found that our shareholders are not strong enough in the investors' view," he said.

Sansiri's executives would today discuss with Natural Park's executives to convince them to endorse the company's capital-increase plan.

"I believe that Natural Park will vote to support the plan as it will benefit the company and its shareholders. Besides, existing shareholders will get warrants to offset the dilution effect," he said. The hefty capital increase will strengthen the company's financial condition and create a big change in the property market here, he added.

Sansiri's leverage will be reduced from 1.37 to 0.88 times.

The improved financial position will catch both local and foreign investors' eyes, he said.

The company's Bt15-billion backlog will be realised over three to five years, said Srettha. Sansiri expects to book sales of Bt14 billion to Bt15 billion next year, up from Bt12 billion this year, he said.

By 2009, Sansiri's capital and sales in will be in the same league as Land and Houses, now the country's largest residential developer.

Porntat Amatavivadhana, managing director of Ayudhya Securities, said Sansiri would conduct a road show in March to Hong Kong, Singapore and Europe for the private placement.

Seamico Securities has downgraded its recommendation on Sansiri's to sell with a new fair value before warrant issuance of Bt3.90 and after the issuance of Bt3.60.

The broker said Sansiri would use the proceeds from the share allocation to develop its new projects to boost sales over the next five years and to repay some of its debts.

Sansiri plans to launch 25 projects next year and has increased its budget for land purchases from Bt2 billion-Bt3 billion to Bt8 billion. Its pre-sales estimate for next year will be raised from Bt10 billion to Bt17 billion and the company will still concentrate on selling homes with price tags below Bt5 million.

Although the massive capital increase will strengthen its financial position and willbe a boon in the long run, it cannot offset the huge dilution effect next year, Seamico said. To reflect Sansiri's recapitalisation, the broker has increased its net profit forecasts for Sansiri by 48 per cent to Bt811 million in 2007 and by 40 per cent to Bt1.13 billion in 2008. 

Siriporn Chanjindamanee

The Nation