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Thai IPO market to end another year of success with Kerry Express

Kingdom tops Singapore and Philippines by wide margin in funds raised

The IPO of Thai retailer Central Retail, left, was the biggest in Southeast Asia in 2020. Now, parcel transporter Kerry Express Thailand, right, is set to conclude another robust year for Thailand's IPO market. (Photos by Akira Kodaka and courtesy of Kerry Express)

BANGKOK -- Parcel transporter Kerry Express Thailand is set to wrap up yet another year of success for the kingdom's capital market as funds raised through initial public offerings in 2020 at the Stock Exchange of Thailand topped regional peers despite intermittent pro-democracy demonstrations in the second half of the year weighing on the country's stock market as a whole.

The local subsidiary of Hong Kong-listed Kerry Logistics Network had a strong debut on the Stock Exchange of Thailand on Thursday. Investors' appetite lifted the share price to 73 baht in morning trade, 2.7 times the offer price finalized on Dec. 15.

That offer price already reflected strong demand, as it was set at the upper end of the 25 to 28 baht range proposed earlier. The final price allowed the delivery service to raise 8.4 billion baht through the sale of 300 million shares, or 17.2% of all issued shares after the IPO.

According to its prospectus, Kerry intends to spend 4.3 billion baht between 2021 and 2023 on expanding its parcel delivery network, investing in its own transportation system, operational efficiency and information technology development, while 800 million baht will be used to repay debt. The rest of the funds will be reserved for working capital in its business operations.

The listing boom took total funds raised in Thai IPO market since the beginning of the year to 135 billion baht ($4.5 billion) including Kerry's, a 48% increase from the previous year and the largest since 2013. That accounts for over 60% of IPOs launched in Southeast Asia during 2020.

"Thailand's IPO market continues to show its growth potential as one of the stronger IPO markets in Southeast Asia," said Wilasinee Krishnamra, disruptive events advisory leader at Deloitte Thailand. "Largely driven by homegrown companies and fueled by increasing investor interests in companies focused on consumer businesses, it continues to appeal strongly to investors and fund managers," she added.

According to a report by Deloitte, Singapore Exchange raised a total of $895 million in IPO proceeds, second in the region though far behind Thailand. The market shrank 60% compared to the previous year, but in a notable change a tech company became the biggest IPO of the year in the city-state where listings of real estate investment trusts tend to dominate.

That was Nanofilm Technologies International, a nanotechnology solution provider for smartphones and other electronics, which went public in October and brought in over 470 million Singapore dollars ($340 million).

The Philippine Stock Exchange became the third-largest IPO market in the region with the landmark listing of AREIT, the real estate investment trust created by Ayala Land, Philippine conglomerate Ayala's property arm. The first REIT listing in the country contributed to 31% of total funds raised in the Philippines this year.

Investors' hunger for IPO shares is what boosted the Thai market over its regional peers. They are pinning their hopes for big gain on IPO shares as the pandemic makes betting on sharp rises in indexes less profitable, an analyst from a Thai broker said. A spate of youth-led pro-democracy protests has been a source of market uncertainty.

By funds raised, Kerry will become Thailand's fourth-largest IPO this year. Thai retail giant Central Retail was the biggest IPO of the year in Southeast Asia.

Parcel delivery services have been on an upward trend in Thailand, as consumers shift from brick-and-mortar stores to online shopping. The COVID-19 pandemic and work-from-home preference only added fuel to the tendency. In the prospectus, however, Kerry cited fierce competition as the foremost risk in the industry, where it held a 39% market share behind state-owned Thailand Post's 41%.

Large post-COVID IPOs in Thailand have mostly been those companies that responded well to changes in demand. Medical glove maker Sri Trang Gloves kicked off the trend, riding high on strong hygiene demand. Packing material manufacturer SCG Packaging benefited from to-go food containers and cardboard shipping boxes.

"Kerry Express is expected to remain a key player in the Thai private express delivery industry, being an early entrant and having large and established operations in the country," said U. S-based consultancy Frost & Sullivan. "Late entrants in the market would require significant investments to challenge the dominant position that Kerry Express has established over the years."

"The COVID-19 has made companies reevaluate their business and growth forecast, and companies are looking into windows of opportunity to raise funds from stock markets to support their growth and stay resilient in this challenging climate," said Tay Hwee Ling, disruptive events advisory leader at Deloitte Southeast Asia and Singapore.

"Although we are not out of the woods yet, the listing markets in Southeast Asia are still dynamic and attractive to investors," she said of the outlook for 2021.

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