Friday, September 20, 2019

Asset World Corp’s upcoming IPO is not so exciting: foreign analyst

Sep 13. 2019
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By The Nation

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Investments in global infrastructure will yield higher returns than investment in Thailand’s property stocks, Paul Gambles, director and chief investment officer at MBMG Investment Advisory, told The Nation. 

Asset World Corporation (AWC), Thailand’s leading integrated lifestyle real-estate group, plans to launch an initial public offering of 8 billion shares. The upcoming IPO of AWC made the headlines in local business newspapers, partly because one of its largest shareholders is Charoen Sirivadhanabhakdi, a Thai billionaire whose net wealth is estimated to be Bt505 billion.

AWC’s IPO is priced at Bt6 per share and will be made available to the public between September 25 and 27. The shares will be traded in the stock market early next month. 

The company’s market capitalisation through the IPO is expected to be worth Bt192 billion – the largest in the history of the Stock Exchange of Thailand (SET), exceeding PTT’s market capitalisation of Bt97 billion when it debuted IPOs 18 years ago. 

AWC’s price-to-earnings ratio (P/E) is extremely high at 277.6 times, with some analysts saying the P/E is not appropriate enough to justify valuation in this case. 

Gambles agreed with other analysts, saying the P/E may not be the right tool to gauge the valuation. He said the yields in this case should be compared with the yield of fixed asset bonds. If you look at yield stocks like REITs (real-estate investment trusts) or infrastructure, then they may have more in common with fixed interest rather than with growth stocks, he noted. 

He also added that in general, yields in Thailand are currently at an all-time low. “So, if you look at the P/E of AWC, then maybe you can explain part of the reason why the price seems to be so high,” he said. “Should we look AWC in terms of a yield play like a bond? Property trusts tend to behave more like bonds because they pay out most of their earnings. 

“I haven’t followed AWC, but I know that I can get a 3.4 per cent yield in US dollar on global infrastructure, so that seems a better deal to me,” Gambles said. 

AWC plans to use Bt48 billion of funds raised for future acquisition, reinvesting in existing assets, enriching working capital and paying debt as its debt-to-equity ratio is high at 2.5 times.

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