Tanayong stock jumped 38 per cent in its first day of resumed trading yesterday, but stock analysts have recommended it be regarded only as a speculative stock - as its price has shot up well beyond its fundamentals, with business risks in its future.

The stock closed at Bt1.38 yesterday, a rise of 38 per cent from the closing price of Bt1 five years ago. It rose to a peak of Bt2.60 during the day, exceeding its fundamental price level. After reaching this high point, it was later influenced by a drop in the Stock Exchange of Thailand index.

The SET fell 7 points, or 1.1 per cent, due to foreign net selling as well as the negative factor of political uncertainty, following rumours that ousted former prime minister Thaksin Shinawatra would return to Thailand. The SET Index closed at 680.36 points.

Tanayong used to be a leading property developer, running several large projects including Thana City, Regent Condominium, and Bangkok Transit System, the Skytrain operator. However, the company struck trouble after the 1997 financial crisis and has been under rehabilitation, with its stock suspended, since September 2001.

According to its rehabilitation plan, Tanayong has recently succeeded in increasing its capital via new foreign investors and the Central Bankruptcy Court last month approved its graduation from the rehabilitation plan. The Stock Exchange of Thailand approved the company's resumption of trading yesterday.

Kim Eng Securities (Thailand) said a suitable price for Tanayong is 90 satang per share. Its main revenues come from the Thana City project and the Bt8.4-billion Baan Ua Athorn project. The company currently has property assets for sale worth about Bt1.94 billion.

However, it still has business risks because its projects are all old businesses that may be hard to sell, while its ability to control the costs of the Ua Athorn project remains to be proven.

In the 2006 accounting year, ending March 2007, Tanayong is expected to post a net profit, without any special items, of Bt48 million - as well as expected profits of Bt26.94 billion, most of which will come from debt restructuring and special items.

Next year, the company's income is likely to jump to Bt6.35 billion with normalised profits, without special items of Bt606 million.

Analysts from Siam City Securities said Tanayong's revenue is expected to increase, and its earnings to turn positive at 11 satang per share. They estimate a suitable price for the stock at between 77 satang and Bt1.10.

They said that while Tanayong's income is expected to jump by 465 per cent in 2007 because of income from the Ua Athorn project, there remains a high risk involved with that income because the project is owned by the government.

KGI Securities (Thailand) said incomes from Tanayong's business would remain uncertain until 2009 because the company will have to invest hugely in its business.

"Tanayong stock is not interesting for investment. The consensus price is between 60 satang and Bt1.20 per share. We don't recommend it for long-term investment because of the uncertain long-term income, but it can be a speculative stock," KGI said.

Seamico Securities said that although the company would make a profit, its income would come from projects affected by political uncertainty. Therefore, Seamico recommends Tanayong stock as a trading buy with a target price of 56 satang.

Siriporn Chanjindamanee

The Nation