Sansiri's second-largest shareholder Elite Fund, managed by PYN Fund Management, will not throw its support behind the property developer's Bt12.61-billion capital-increase plan.

"The timing for a huge dilution is wrong, otherwise the plans are OK. The company's management has proposed, along with its financial advisers, a huge capital increase by 200 per cent at the wrong time," said PYN Fund Management's chairman Petri Deryng.

 "In the next 12 months, the demand and conditions for the housing market in Thailand look positive. We can expect more than 20-per-cent sales growth and remarkable profit growth for most developers, including Sansiri. Very likely, the shares of all property developers will move upwards.

"It doesn't make any sense to dilute the shareholding in this situation by 200 per cent when Sansiri's stock is trading 0.68 times to book value."

Elite Fund now holds 146.5 million shares in Sansiri, accounting for 9.9 per cent through non-voting depository receipts (NVDRs).

Deryng said the company had planned to convert its NVDRs into Sansiri's common shares ahead of the company's shareholders' meeting on January 18 next year, during which the hefty recapitalisation will be at the top of the agenda. The capital increase needs the backing of 75 per cent of shareholders.

Natural Park is Sansiri's largest shareholder with a 24.6-per-cent stake, while another major shareholder, Viriyah Insurance, owns 6.5 per cent.

Sansiri last week announced that it would raise its capital from Bt6.63 billion to Bt19.24 billion by issuing 2.95 billion new shares at a par value of Bt4.28. Of the total shares, 752.9 million will be earmarked for Sansiri president Srettha Thavisin and his associates, 1.47 billion will be reserved for warrant conversion and the remainder will be sold to specific investors through private placement.

The company will also issue 1.47 billion units of warrants for free to its existing shareholders at a ratio of one unit of warrant to every two shares held.

"Though we requested a meeting, we haven't been able to meet with Khun Srettha yet, but we did meet with other Sansiri executives and expressed our concerns about the massive shareholder dilution with the current proposed plan. We also told them that we will propose another plan to them," Deryng said.

"We don't know what other shareholders think or how they will vote at the shareholders' meeting, but we can only assume they are not happy with the current plan and would also be more pleased with our proposal, which is a much more gradual and reasonable expansion for Sansiri that would leave plenty of upside potential for current and new shareholders."

PYN Fund Management's plan proposes to divide the company's recapitalisation into two phases - first, Sansiri would issue 450 million shares to Srettha and associates at Bt4.28 each and later, the company would issue another batch of shares and warrants.

Deryng said the number of newly issued shares and warrants would depend on market conditions.

With the issuance of 450 million shares to Srettha and associates, Sansiri will obtain almost Bt2 billion and Srettha and associates will become the company's largest shareholders with a 23.4-per-cent stake.

Shareholdings of Natural Park, Elite Fund and Viriyah Insurance will be diluted to 18.3 per cent, 7.4 per cent and 4.8 per cent respectively.

Deryng said that Sansiri should be able to reach a 35-per-cent gross margin level first.

The current industry's average gross margin is 34 per cent and Sansiri is operating at 28 per cent.

Asked what he would do if the plan is refused by Sansiri, Deryng said there were several other options but he would like to see first if Srettha is interested in the plan.

"We hope to find a solution with Khun Srettha with our alternative plan. It would make the company's future look good and would almost guarantee that the share price would appreciate, which will benefit Khun Srettha and its current shareholders," he said.

Oranan Paweewun

The Nation