IPO to finance Nok's move for regional expansion

Economy May 13, 2013 00:00

By Bamrung Amnatcharoenrit

5,222 Viewed

Nok Airlines Plc (NOK), owner of national low-cost carrier Nok Air, will float its initial public offering of 187.5 million ordinary shares next month. It expects to raise Bt5 billion.

The funds raised will be spent on buying new aircraft to expand its fleet and also invest as working capital to secure its long-term business, according to Vitai Ratanakorn, the company’s chief financial officer.

It will be the first airline to list on the Stock Exchange of Thailand (SET) this year. Bangkok Airways, another low-cost airline, is expected to follow its move. It is projected that NOK will be traded on the SET by the end of next month. Siam Commercial Bank Plc (SCB) is its financial adviser with SCB Securities Co as the sole lead underwriter.

It submitted its filing to the Securities and Exchange Commission (SEC) on March 6.

Out of 187.5 million IPO shares, 62.5 million are existing shares, while the remaining 125 million are newly issued. Its paid-up capital will be raised to Bt625 million from Bt500 million at present. Its par value is one baht.

Today, Thai Airways International Plc, the national carrier, holds a 49-per-cent stake in the company. After the IPO, its share will be reduced to 39.2 per cent. The remaining shareholders are Aviation Investment International, holding 10 per cent; CPB Equity with 4.8 per cent; Patee Sarasin, who is NOK CEO; SCB; King Power; and the Asvinvichit family – each holding four per cent.

Despite THAI’s majority stake in NOK, the company’s board remains independent. The company said the IPO would not effect its current shareholders, who would continue to receive the same benefits they have received since operations began.

Founded in 2004, the firm has enjoyed steady growth. Last year, its net profit was recorded at Bt504.7 million over total sales of Bt8.21 billion. In the first quarter of this year, its net profit was at Bt425.3 million over total sales of Bt2.81 billion, thanks to its strategic network expansion.

It is anticipated that 2013 will see the highest profit earnings for the company since its operations commenced. Its new energy-saving Boeing 737-800 aircraft are also expected to boost company earnings this year.

From 2010-2012, Nok’s sales revenue grew more than 40 per cent annually, as it maintained a cabin factor of 80 per cent.

This year, the company said its cabin factor – number of passengers per flight – regularly reached 90 per cent.

In addition, the airline projects it will carry 6 million passengers in total this year, up from 4 million last year. The domestic market is its core business with 23 routes. The company also boasts the highest flight frequency with 483 per week. Rival AirAsia currently has 13 routes with a flight frequency of 333 per week.

The airline has 41 per cent of the domestic market in the low-cost segment and projects that this will increase steadily over the next few years. In Thailand, the firm believes that there is more room for growth, especially flying from city to city, without flying via Bangkok.

Regionally this year, the firm will launch flights from Mae Sot to two cities in Myanmar – Mawlamyine in September and Yangon in October – using smaller aircraft. In November, it will also launch flights to Yangon from Bangkok's Don Mueang International Airport. Myanmar is a key focus for the airline this year, as it plans to consolidate its existing network and look for new investment opportunities as the country opens its doors to foreign investment.

The airline is also considering flights from Chiang Mai to other cities in Myanmar, including Mandalay and Bagan.

The opening of the Asean Economic Community (AEC) in 2015 will provide more opportunities for low-cost carriers. Geographically, Thailand is considered a regional hub, with flying time to regional destinations averaging four-and-a-half hours.

Vitai said regional expansion of its network would be step by step, due mainly to the limited number of aircraft at its disposal. The launch of any new routes would depend solely on whether they were guaranteed to be profitable, he said. In the past, the airline has been forced to cancel services to Bangalore, India, and Hanoi, due to rising fuel costs and the weakening baht.

Nok Air currently has 16 aircraft in its fleet, with plans to increase that number to 23 next year and 30 in 2015 – an increase in seat capacity of 37 per cent annually until 2015. Its aircraft include the ATR and Boeing 737-800, with an average age of 7 to 8 years.