Chow Steel expects high trading price on IPO launch
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Chow Steel Industries expects its shares on their first trading day today to be traded higher than the IPO price.
The billet producer is launching the initial public offering of 200 million shares in the Market for Alternative Investment (MAI) at Bt3 per share.
Chow chief executive officer Anavin Jiratomsiri said he expected the IPO would earn an enthusiastic welcome and trade higher than the subscription price, thanks to the company’s substantial revenue growth. It also has market capital of Bt2.4 billion, the fifth-largest in the MAI.
Anavin said the company was eager to raise funds in the capital market. It decided to list on the MAI as there are many large steel companies in the main Stock Exchange of Thailand. If it listed in the SET, its shares might be less attractive. But there is no steel business listed on the MAI.
He said Chow could move to the SET later if it wanted, given that its registered capital of Bt600 million exceeds the Bt400-million minimum required by the main exchange.
The company will spend the proceeds from the IPO on business expansion and debt repayment. It currently has an interest burden of Bt120 million per year.
Anavin said the price of steel in the global market next year was likely to increase by about 10 per cent.
Currently the steel price in the local market is estimated at Bt20 per kilogram, up from Bt18 early in the year.
The local steel business next year is expected to expand by 10-14 per cent because of the anticipated boom of mega-projects. The need to restore homes and infrastructure after the flood will also boost steel demand.
Chow targets revenue growth of 20 per cent in 2012 from estimated revenue of about Bt5 billion this year. The company made revenue of more than Bt4.254 billion during the first nine months, compared with full-year revenue in 2010 of Bt3.893 billion.
The growth forecast is based on the company’s planned expansion of annual production capacity to 730,000 tonnes next year from the present 450,000 tonnes.
More than 90 per cent of its production serves the local market, while the rest is for export to Vietnam. It also plans to export to Sri Lanka, Bangladesh and the Middle East.
