Tesco Lotus Retail Growth Freehold & Leasehold Property Fund THB18.41 billion (US$601.6 million) IPO
Bookrunners: Bank of America-Merrill Lynch, Nomura, Phatra Securities, Royal Bank of Scotland
Alongside Malaysia, Thailand was one of the few countries to enjoy good equity market conditions during much of 2012, which enabled it to conduct some notable stock offerings. The largest was the IPO of Tesco Lotus Retail Growth Freehold & Leasehold Property Fund in March.
The Tesco Lotus fund is the country’s largest real estate fund, and comprises 17 retail properties across Thailand, each of which is anchored by a Tesco Lotus supermarket. While its size and connection to a leading UK company were distinct selling points, the timing of the IPO appeared a little odd. The country had after all suffered widespread devastation from sustained flooding during the latter months of 2011.
Despite this Thailand’s economy is enjoying renewed momentum, and as a result its expanding middle class is seeking better accommodation and consumer options. Added to this, companies such as Tesco Lotus are taking advantage of the country’s positive economic trajectory to raise funds to refurbish damaged buildings and build new facilities.
The deal was a standout due to its size alone, being the biggest equity listing in the country for six years. Yet despite its size it gained demand from the country’s investor base, with the IPO ending up 15 times covered by institutional investor orders. That ensured that Tesco Lotus could price its shares at the top end of the marketed THB9.65-THB10.4 price range.
The deal also gained a cornerstone investor in the form of Capital Research & Management, which took up 110 million shares. Tesco Lotus’s stock performed well immediately on the break too, rising to THB11.4 a day after pricing and continuing to improve to THB15.2 at the end of 2012.
The strength of demand for Tesco Lotus’s deal led Asia Aviation, the local subsidiary of AirAsia, to follow with a successful THB7.1 billion listing in May, marking the largest non-property IPO in Thailand since 2009, while Ananda Development conducted its own THB5.6 billion IPO in early December too.
Another transaction we considered was oil and gas major PTT’s US$1.5 billion bond issue, which marked the largest ever international bond from a Thai corporate. The deal was split into 10-year and 30-year bonds, with the tranches designed to respectively raise money for PTT’s subsidiaries PTT Chemical and PTT EP.
While an impressive transaction in its own right we felt that the ability of Tesco Lotus to demonstrate the renewed appeal of Thailand’s equity market was a particularly noteworthy feat.