Country Group prepares Bt13 billion M&A war chest

“We expect a return of investment of more than 15 per cent a year for all of our merger and acquisition deals,” he said in an interview yesterday.
 CGH is a holding company with major stakes in four companies: Country Group Securities Plc (CGS), Country Group Development Plc (CGD), MFC Asset Management Plc and Padaeng Industry Plc.
Under the Bt13 billion investment budget, Bt10 billion will be allocated to businesses in the hospitality, real estate and food sectors.
In hospitality, target investments will be in Thailand and overseas, particularly in Asia and Europe, with a focus on hotel chains. The remaining Bt3 billion will be invested by Padaeng Industry Plc in alternative energy, such as solar farms and in wind power and hydropower projects, Tommy said.
The investment funds will be drawn from cash holdings, with Bt5 billion from CGH and Bt3 billion from Padaeng Industry, and borrowings from domestic and overseas banks, he said.
 “We now have lower debt and that has given us enough room to borrow from the banks for our M&A deals for the rest of this year,” Tommy said.

Long-term holdings 
He said the main business of CGH is investments that are broken down into long-term holdings of between five and 10 years and short-term plays in the stock and bond markets, with the use of financial tools in the market accounting for the rest.
The Bt13 billion earmarked is for long-term investments for M&A opportunities, Tommy said, as the company has a budget of Bt1 billion for short-term investments, also for this year, Tommy said.
The company’s short-term investment portfolio is worth Bt5.9 billion, with holdings of up to 25 per cent in US financial markets. Some 25 per cent is held in the mainland Chinese and Hong Kong financial markets, with 10 per cent in the Thai markets, Tommy said.
He said the company’s investments over the short term had suffered from volatility in the US financial markets. Its first-half net profit dropped 50.49 per cent to Bt50 million from the same period last year.
In response, he said the company had reduced the US share of its investment portfolio from 30 per cent in the first half to 25 per cent for the rest of this year. 
The allocations to the mainland Chinese and Hong Kong markets had risen, in the belief that the returns for the rest of this year will be better than in the first half.
For 2016, the company reported revenue of Bt1.35 billion and net profit of Bt391.33 million. In addition to the first-half slide in net profit to Bt50 million, revenue for the period came in at Bt198.36 million.
The company aims to qualify for membership of the SET 50 Index in 2020, under its business target to boost net profit to more than Bt1 billion. That would increase its market capitalisation to more than Bt20 billion, from Bt6.37 billion on May 22, Tommy said.
 “We believe that when we have expanded our investments to achieve our target for M&As, this will drive our business growth every year and, in turn, that expansion will drive our financial results to show strong growth,” said Tommy said, adding this would enable the company to achieve its goal of SET 50 membership in 2020.