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Compared to regional peers, Thailand is a relatively mature economy, leading companies to try to outpace competitors by venturing into other countries or equipping themselves with better digital offerings. (Source photos by AP and Getty Images) 
Market Spotlight

Thailand leads Southeast Asia IPO resurgence, but has challengers

Listing of tech unicorn Bukalapak boosts funds raised in Indonesia above $2bn

MASAYUKI YUDA, Nikkei staff writer | Southeast Asia

BANGKOK -- Southeast Asian companies have raised more than $10 billion from initial public offerings this year for the first time since 2017 as executives sought capital for expansion and stock exchanges worked hard to woo new listings.

According to data compiled by accounting firm Deloitte, Thailand continued to lead the region by a large margin, with 35 companies and real estate investment trusts raising $4.2 billion as of Nov. 15, while the Philippines and Indonesia leapfrogged Singapore to take second and third place, respectively. The amount raised through IPOs in the Philippine market more than tripled, while in Indonesia it almost sextupled.

The COVID-19 pandemic prompted companies to raise funding to invest in diversifying revenue sources and adjusting to a rapid shift to digital. "All eyes are on the region now, with abundant liquidity evident in the numerous blockbuster listings in Southeast Asia," said Tay Hwee Ling, disruptive events advisory leader at Deloitte Southeast Asia and Singapore.

For Thailand, the year 2021 kicked off with a giant IPO: The state oil conglomerate's retail arm, PTT Oil and Retail Business (PTTOR), raised 54 billion baht ($1.6 billion) in a February listing. Microfinance firm Ngern Tid Lor raised 38 billion baht in May, while entertainment media content producer and distributor The One Enterprise raised 4.2 billion baht in November.

Compared to regional peers, Thailand is a relatively mature economy, leading companies to try to outpace competitors by venturing into other countries or equipping themselves with better digital offerings.

PTTOR allocated 13.3 billion baht from the IPO to grow its network of gas stations, 9.8 billion baht for its retail network, 8.5 billion baht for oil storage and distribution centers, and 5 billion to 9.5 billion baht for foreign businesses. Apart from paying its debt, Ngern Tid Lor will use its funding to improve its IT and digital services. The One Enterprise will invest in ramping up production and its IT capability.

"These companies are [pursuing] new strategic directions that require higher investment and may appear [too] risky for the banking sector's appetite -- for example, international or regional expansion, or online retail and services," Pavida Pananond, professor of international business at Thammasat University, told Nikkei Asia.

"Banks may be more familiar with traditional collateral-based business models, while the capital market offers more room for risks."

Southeast Asian companies have found receptive investors, not least because returns available on alternatives such as bonds and deposits look so meager, with interest rates being held low to deal with the economic effects of COVID-19.

"IPOs provide investors more choices to make a gain at a time that the interest rates are unlikely to rise," said an analyst at KGI Securities in Thailand.

The Thai government gave a push as well. On May 20, the Thailand Board of Investment, a government agency, granted newly listed companies a 100% exemption on corporate income tax for certain investments, on top of other tax incentives.

Although Thailand led the region, it may have not lived up to its potential. Stock Exchange of Thailand President Pakorn Peetathawatchai told Nikkei Asia earlier this year, "We would like to have 30 to 50 IPOs at the SET each year, with them raising roughly 250 billion baht ($7.4 billion) per year." The bourse secured more than that number of IPOs, but the target for funds raised was missed.

Thailand represented 43% of total funds raised in the region as of mid-November. This is lower than the 63% share it achieved in 2020, as the Philippines and Indonesia recorded strong growth this year.

The robust IPO record of the Philippines was supported by real estate investment trusts (REITs). The Philippines Stock Exchange welcomed the listing of an REIT for the first time in 2020, and this year four large REITs raised $1.8 billion in total. Additionally, food and beverage giant Monde Nissin's $1 billion IPO helped the market to supply more funds in 2021 than in the last four years combined.

Meanwhile, as many as 43 companies have made their market debuts on the Indonesia Stock Exchange so far this year, raising a total of 51.16 trillion rupiah ($3.57 billion) -- the biggest annual IPO fundraise in the Jakarta bourse's history. These include the record-breaking IPO of e-commerce unicorn Bukalapak, which raised 21.9 trillion rupiah in August.

Imelda Orbito, disruptive events advisory leader at Deloitte Indonesia, said tech shares especially appeal to millennial and younger Indonesians, who make up about 80% of retail investors at the Indonesia Stock Exchange.

Deloitte's report includes data up to Nov. 15, when $9.77 billion had been raised by 121 companies on Southeast Asian bourses, but the flow of IPOs has kept up since. Daiwa House Logistics Trust, which comprises 14 warehouses in Japan, raised 575.7 million Singaporean dollars ($422 million) through listing on the Singapore Exchange.

Indonesia's telecommunications infrastructure company Dayamitra Telekomunikasi, or Mitratel, went public on Nov. 22, raking in 18.34 trillion rupiah from its IPO. Four companies including Widodo Makmur Perkasa, which runs poultry and cattle farms and meat-processing facilities, and dairy producer Cisarua Mountain Dairy are expected to make their public debuts in Indonesia on Monday, targeting fundraisings of 707 billion rupiah and 3.66 trillion rupiah, respectively.

Southeast Asia's IPO market is expected to have an active start to 2022 as well, with some companies already in the pipeline to list their stocks. The successful debut of Mitratel, a subsidiary of state-owned Telekomunikasi Indonesia, is expected to boost the government's confidence to proceed with its IPO plans for at least 13 other state-owned enterprises or their subsidiaries over the next few years.

And Indonesia's largest tech company, GoTo, is reportedly scheduling an IPO in the first half of the year, awaiting upcoming rule changes that will make it easier for high-growth but not-yet-profitable startups to join the Indonesia Stock Exchange. The boursewill also allow the flotation of companies that have a dual-class share structure, under which company founders have greater voting rights than new investors.

After trailing behind Thailand for the third consecutive year, Singapore has introduced a new regulatory framework that enables special purpose acquisition companies (SPACs) -- cash shells that raise funds and then acquire a company -- to list on the Singapore Exchange. SPAC listings helped the U.S. to enjoy an IPO boom. The Singaporean bourse aims to copy that success in 2022.

To compete with regional peers, the Stock Exchange of Thailand earlier this year amended its listing requirements to make it easier for companies in target industries -- such as next-generation automotive, robotics, aviation and logistics; medical and wellness tourism; biotechnology and nanotechnology -- to list.

The bourse is also in talks with Thailand's Security and Exchange Commission to review listing rules that are often more stringent for foreign issuers than for Thai companies. For example, many foreign companies are required to maintain a free float of no less than 20%. The threshold is 15% for Thai companies. In September, the commission shortened the required period for foreign companies to employ a financial adviser to oversee their activities from three years to a year, matching what is asked of Thai companies. 

"We should see more digital and tech companies going public in Thailand, a departure from the usual traditional companies," said Wilasinee Krishnamra, disruptive events advisory leader from Deloitte Thailand.

Additional reporting by Erwida Maulia in Jakarta.

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