Thai Stock Market: Growth Path for Family Business

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Embedding different values, family businesses across the globe pursue a common goal: growth. For that, many have turned to stock exchanges in search of new funds.

 

That is also the case in Thailand. Out of 791 companies listed on the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (mai) polled at the end of 2022, 451 companies or 57 percent identified as family businesses. They have been in existence for an average of 34 years, and one business is 146 years old.

 

Based on SET Note Vol. 14/2023, a listed family business is defined as a company in which a family holds more than 20 percent of listed shares and has management control or a family-controlled company where a family owns more than one-fourth of listed shares. 

 

Out of the 331 family businesses listed on the main board, most are in the Food & Beverage, Commerce, Healthcare Services, Construction Materials, and Personal Products & Pharmaceuticals sectors, operating the original businesses established by their first generations. Approximately three-fourths of companies in these sectors are family businesses. Most of the rest listed on mai (second board) are in the Services, Property & Construction, and Industry groups.

 

These businesses have achieved the objectives of their listing. At the end of 2022, they constituted 43.2 percent or US$258.58 billion (THB9.07 trillion) of total market capitalization. Their market cap had grown 6.7 percent on a yearly average from 2016 – 2022, driven mainly by an increase in share prices, new initial public offerings (IPO), and their profit profiles. 

 

Notably, their combined market caps dropped 11.1 percent from that level to US$237.36 billion (THB8.06 trillion) at the end of June 2023, when the SET Index fell 11.0 percent. However, the market cap had not taken into account newly listed family companies in the first half of 2023.

 

 

During 2017 – 2022, listed family businesses saw an average annual growth rate of 14 percent in total assets, reaching US$699.17 billion (THB22.8 trillion). Compared with all listed companies, their total assets accounted for 47.3 percent as of the end of 2022. Listed family businesses performed reasonably well with an average annual revenue growth of 9.2 percent between 2017 – 2022, including a combined revenue of US$209.44 billion (THB6.83 trillion) or 36.8 percent that of all listed companies in 2022. Net profit growth averaged 5.1 percent per annum. Notably, their six-year net profits accounted for 46.1 percent that of all listed companies. In 2022 alone, listed family businesses’ net profits reached US$12.31 billion (THB431.59 billion) or 44.3 percent that of all listed companies. 

 

To achieve growth and enduring prosperity, 149 family businesses entered the bourses from 2016 through 2022, and their IPOs were valued at US$9.32 billion (THB308.3 billion) or 58 percent of the total amounts raised by 212 newly-listed companies during the period. On their first trading days, their combined market cap was as high as US$45.34 billion (THB1.5 trillion) or 60 percent of all IPOs. During those years, 45 family business companies raised another US$305.02 million (THB10.09 billion) in fresh funds through secondary offerings.

 

In an age where sustainability has become an important issue to society and consumer behaviors, many of the listed family businesses are also pursuing sustainable growth. 

 

Eighty-six businesses are included in the Thailand Sustainability Investment Index (THSI), which includes 170 companies that are continuously creating long-term returns through responsibilities to society (Social) and the environment (Environmental) and transparency in line with corporate governance principles (Governance). 

 

Overall, these 451 listed family businesses have been an important component of the Thai economy and have made significant contributions to society. In 2022, their combined revenue was as high as 39.3 percent of Thailand’s gross domestic product (GDP). They paid US$2.9 billion (THB101.59 billion) in taxes, constituting 27.1 percent of the overall listed companies’ corporate income tax payments or 13.6 percent of all collected corporate taxes. The 2021 figures showed that together, they employed 925,256 people.

 

Apart from the access to capital to accelerate growth, going public makes family businesses more attractive to talents and consequently puts solid management mechanisms in place to pave the way towards a resilient and sustainable future, while keeping the family legacy alive.

 

Full story: THAILAND NOW 2023-10-25

 

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