IPOs have generally done well on the SET, pandemic or not

As the 3rd wave of Covid-19 takes Thailand closer to a crisis stage and despite the doom and gloom caused by the quasi lockdowns, border closures, lack of vaccines, the rising demand for medical supplies, one thing can has continued to perform well – initial public offerings (IPO).

The performance of newly listed companies on the Stock Exchange of Thailand (SET) has continued to perform well irrespective of valuation or whether they are priced at the top of the range.  

This comes despite historical evidence that the share prices of companies with large offerings (offering a lot of shares) generally performing poorly from the first day of trading up to a month after.

There are many reasons for a successful IPO such as sector of new listing, size of offering, level of interest from foreign investors, and retail hype, as well as valuation and market timing, etc.  

There is no single factor that will guarantee the success of the first day of trading as it’s possible for investor sentiment to change between the pricing of a listing and its initial listing date.  

Oversubscription of an IPO is often seen as indicator of success, but it is extremely difficult to judge if investors who could not get IPO allocation will still want to buy them on the day of listing. And even if they do, most are simply participating in the momentum.

Only a Handful Underwater 

Data shows that since January 2019, of the 32 IPOs undertaken in Thailand, just 9 are trading below IPO price.  

Three of these poor performers have a market cap of more than $1.2 billion, 8 of these companies could be victims of Covid pandemic – they are in the property development, REITS, and hotels sector.  

Among the IPOs undertaken since January 2019 only Absolute Clean Energy Plc (ACE), is trading 17 per cent below its IPO price. ACE is an odd one as its business of Biomass Power is not affected by the pandemic.

Helped by Pandemic

Sri Trang Gloves (Thailand) Plc (STGT) is one example which has benefited from the pandemic and has become a mega performer due to significant rise in demand for medical gloves.

Covid-19 has benefitted may other companies such as retailers of IT products Com7 Plc (COM7), IT parts makers Delta Electronics (Thailand) Plc (DELTA) and KCE Electronics Plc (KCE), and insurance brokers TQM Corporation Plc (TQM) and TQR Plc (TQR).  

Some of these names do not feature in the list below as our discussion is focused on newly listed companies.

Tw0 New Themes for successful IPO

Perceived increased demand for micro finance loans, businesses related to extraction, distribution, and production of medical marijuana laced products. Retail investors have just gone crazy to speculate on anything related with medical marijuana.

The fact that companies say that they are going to be doing marijuana has pushed up share prices of companies such as R&B Food Supply Plc (RBF), Yggdrazil Group Plc (YGG), Inter Pharma Plc (IP), NR Instant Produce Plc (NRF), Rojukiss International Plc (KISS), all have announced to sell or distribute cannabis related products. 

As for those in the micro finance camp, the companies that have benefitted are the likes of Next Capital Plc (NCAP) – one of the most successful IPO, up almost 6x from IPO price, Saksiam Leasing Plc (SAK), and Bangkok Asset Management Plc (BAM).

Micro finance and leasing companies are in great demand on hopes that economic shutdown and the absence of tourists will force many individuals and SMEs to borrow more to cover the next 12-18 months of expenses/growth/living, until Covid-19 impact softens.

Low interest rates and minimal regulations of the micro finance and secured loans against the vehicles have raised investor hopes from leasing/micro finance business to an almost bubble level.

Take for example Krungthai Card Plc (KTC) is trading on PER of 31x, and its current market capitalization of 190 billion baht, which is larger than that of Home Product Center Plc (HMPRO) which has a market capitalization of 182 billon baht, and Krung Thai Bank Plc (KTB) – which is KTC’s parent company as KTB owns just over 49 per cent in KTC, has a market capitalization of 158 billion baht. Not to forget Thai Oil Plc (TOP) a company that is just over 45 per cent owned by PTT Plc which has a market capitalization of just over 121 billion baht. To put in context KTC has a market capitalization that is more than Thailand’s 6th largest bank – TMB Bank Plc which has a market capitalization of a mere 111 billion baht.

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