Thai billionaire family plans to take Central Retail Corp public

By Chayut Setboonsarng

 

FILE PHOTO: Tos Chirathivat, the Chief Executive Officer of the Central Group gestures during a news conference at a hotel in Bangkok, Thailand, March 2, 2016. REUTERS/Athit Perawongmetha

 

BANGKOK (Reuters) - Top Thai retailer Central Group, owned by the billionaire Chirathivat family, said on Wednesday it would list its unit Central Retail Corp, combining retail businesses in Thailand, Vietnam and Italy.

 

Taking the business public would allow Central to better engage with international partners, attract talent and take advantage of capital markets, Central Group President Yol Phokasub told reporters.

 

The company intends to file for the listing by the year-end, he said, but declined to give any further details. Refinitiv IFR has pegged the IPO size at between $1 billion and $2 billion.

 

Central Group, the family conglomerate with a seven-decade history, was among the first to introduce shopping malls to Bangkok.

 

Central Retail's listing comes amid intense competition among retailers and online shopping. Last year, rival Siam Piwat opened a billion-dollar luxury shopping mall, while the Mall Group also plans a new $300 million entertainment and retail complex.

 

Central is betting that its multiple formats, segments and platforms will win over customers.

 

"We are integrating online and offline," Yol said, adding that its platforms were especially focused on personalisation, based on data from its 27 million customers worldwide.

 

Central Retail booked 53.6 billion baht ($1.74 billion) in revenue in the three months ended March, up 6% from a year earlier. The Thai market accounted for 76% of revenue, while 16% came from Vietnam and the remainder from Italy.

 

The company has 2,000 stores in Thailand, 134 in Vietnam, and nine in Italy under the Rinascente brand.

 

Sales are under pressure as e-commerce gains popularity in Southeast Asia's second-largest economy, with Alibaba's Lazada <BABA.N> and Tencent-backed Sea Ltd's Shopee <0700.HK> <SE.N> battling for market share.

 

Central's online strategy has been patchy with the acquisition of Zalora Thailand, a $500 million joint venture with China's JD.com <JD.O> and a $200 investment in the Thai unit of Singapore-based ride-hailing firm Grab.

 

As part of the share sale, Central will delist another retail subsidiary, Robinson Pcl <ROBINS.BK>, where it holds a majority stake, with a tender offer for the newly issued shares with no cash alternative.

 

Central Group's other subsidiaries include commercial property developer Central Patana Pcl <CPN.BK> and hospitality arm Central Plaza Hotel Pcl <CENTEL.BK>.

 

($1 = 30.7700 baht)

 

(Reporting by Chayut Setboonsarng; Editing by Subhranshu Sahu)

 

 

-- © Copyright Reuters 2019-07-31

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Jumping ship? Are the days of over-pricing over? For those who don't know how retailing in Thailand works: suppliers provide a shop-in-shop shell, the staff, the uniform and the merchandise in consignment, presented to the department store (Central is not alone in this game) against an official tax invoice without a due date. So, in essence, they provide suppliers with air-conditioned retail space.

End of the month, the department store claims back the 7% (input) VAT from the revenue department which had to be paid by the suppliers (as output VAT). Result is, that the department store has access to interest-free money in the bank.

Once the merchandise gets physically sold, the initial VAT invoice is reversed with a credit note and an actual, new VAT invoice is issued with the same date. The suppliers then can collect the payment 45 days after the month's end in which the sale got transacted. My company sold merchandise through both big department store chains against a margin of 30% (Central) and 18% (Mall Group); apart from that we were "invited" to participate in Central's (poor) marketing efforts and promotion "strategies". Depending on product you have no other choice due to the monopolization of the business nature through the "Alien Business Law" stipulating clearly, which business is reserved exclusively for certain oligarch-elitarian groups in the Land. 

Imagine that the entire stock in Central creates 7% VAT and stays with Central as free loan - provided for by all the suppliers who have to report their output VAT.

That explains some of the high pricing as well as the full war chest of the retail operators owners. 

As this modus operandi cannot last forever, I consider it a very very smart move (again) by this department store owners to go public. Apart from sitting still on a substantial part of the shares the IPO will create billions in cash. 

A tip to the hat, Tos Chirathivat; he understands the game, plays it professionally and perfectly well. The war chest will get yet another very healthy cash injection with which they will carry on shopping for other department store opportunities, like Rinascente. And yes, over time, internet shopping will eat painfully more and more into the previously thick slice of department store business. 

7 minutes ago, Sydebolle said:

yes, over time, internet shopping will eat painfully more and more into the previously thick slice of department store business. 

Looks like they see the writing on the wall also! 

22 minutes ago, Sydebolle said:

Jumping ship? Are the days of over-pricing over? For those who don't know how retailing in Thailand works: suppliers provide a shop-in-shop shell, the staff, the uniform and the merchandise in consignment, presented to the department store (Central is not alone in this game) against an official tax invoice without a due date. So, in essence, they provide suppliers with air-conditioned retail space.

End of the month, the department store claims back the 7% (input) VAT from the revenue department which had to be paid by the suppliers (as output VAT). Result is, that the department store has access to interest-free money in the bank.

Once the merchandise gets physically sold, the initial VAT invoice is reversed with a credit note and an actual, new VAT invoice is issued with the same date. The suppliers then can collect the payment 45 days after the month's end in which the sale got transacted. My company sold merchandise through both big department store chains against a margin of 30% (Central) and 18% (Mall Group); apart from that we were "invited" to participate in Central's (poor) marketing efforts and promotion "strategies". Depending on product you have no other choice due to the monopolization of the business nature through the "Alien Business Law" stipulating clearly, which business is reserved exclusively for certain oligarch-elitarian groups in the Land. 

Imagine that the entire stock in Central creates 7% VAT and stays with Central as free loan - provided for by all the suppliers who have to report their output VAT.

That explains some of the high pricing as well as the full war chest of the retail operators owners. 

As this modus operandi cannot last forever, I consider it a very very smart move (again) by this department store owners to go public. Apart from sitting still on a substantial part of the shares the IPO will create billions in cash. 

A tip to the hat, Tos Chirathivat; he understands the game, plays it professionally and perfectly well. The war chest will get yet another very healthy cash injection with which they will carry on shopping for other department store opportunities, like Rinascente. And yes, over time, internet shopping will eat painfully more and more into the previously thick slice of department store business. 

Very accurate description of the system - thanks for that .... and yes, the days of this typical whole sale are numbered for good. I did not bother to join this exploitative system and sell our products via Facebook to make Mark richer.