Thai Skytrain Raises $2.1 Billion In Mega I P O

[webfact]

Thai SkyTrain raises $2.1 billion in mega IPO

BANGKOK, April 6, 2013 (AFP) - The Thai operator of Bangkok's SkyTrain system said Friday that it had raised $2.1 billion in one of the biggest initial public offerings (IPOs) worldwide this year.

BTS Group Holdings PCL plans to use the proceeds from the kingdom's largest ever flotation to participate in the government's planned expansion of mass transit systems to drive future economic growth.

The SkyTrain system, which started operating in 1999, now comprises two lines of elevated track running for more than 30 kilometres with 32 stations through Bangkok's traffic-clogged commercial, business and tourist districts.

The company said it had priced the nearly 5.8 billion shares in its BTS Rail Mass Transit Growth Infrastructure Fund at 10.80 baht each, at the top end of its target range thanks to strong investor interest.

That values the flotation at about 62.5 billion baht ($2.13 billion), close to the $2.24 billion raised by US drugs giant Pfizer's animal-health division Zoetis in January, which was Wall Street's biggest IPO since Facebook.

The BTS IPO is Thailand's biggest ever, according to a company spokeswoman.

"We plan to invest the money to expand with more lines in the future."

The shares are due to begin trading on April 19. Shares in BTS Group, which are already listed, closed down 0.55 percent at 9.0 baht, outperforming Bangkok's SET 100 index which slid 2.55 percent in line with falling regional markets.

Thailand's cabinet last month approved a plan to spend $68 billion on a high-speed railway and other transportation mega projects to drive the nation's economic development.

Under the seven-year scheme, 200 high-speed trains will whizz across the kingdom on four lines linking the capital Bangkok with the north, south and east of the country. A metropolitan rail network is also envisaged for Bangkok.

-- (c) Copyright AFP 2013-04-06

[StreetCowboy]

Can anyone add any detail on what the BTS Infrastructure fund will actually be used for?

LIke specific lines?

To what extent will future lines be funded by BMA, central government, operators?

SC

[Plastic Brontosaurus]

It's nice to raise truckloads of cash without actually saying what it will be used for. Not sure what developing new lines cost, but with this kind of money one would expect they could develop new lines by banking the cash and using the interest alone? Should be realistic to expect well in excess of $100 million in interest per year on this amount, if not significantly more...

Edited April 6, 2013 by Plastic Brontosaurus

[soi41]

It's nice to raise truckloads of cash without actually saying what it will be used for. Not sure what developing new lines cost, but with this kind of money one would expect they could develop new lines by banking the cash and using the interest alone? Should be realistic to expect well in excess of $100 million in interest per year on this amount, if not significantly more...

The BTS-group are building a mega Ponzi-scam right in front of our (and SEC's) eyes!

They are listing the infrastructure fund based on assets already owned by the shareholders of BTS.

Since the Kanjanapas family took over the majority ownership in the BTS-group (for peanuts), they have been extremely good at using SET to get very rich. Not to difficult with a not very informed investorgrup and a weak regulator (SEC).

Last year they paid a record high dividend of 1.7 billion bath to the shareholders, IMO as a bait for the infrastructurefund, and most of the dividendmoney went to the Kanjapanas family anyway. (36%). So from this smallish company, who investors now have trusted with 62 billion baht, they are now going to pay dividend to the unitholders of the fund to the tune of around 3.6 billion baht/year plus dividends to the shareholders of BTS. Going to be very interesting to follow!

BTW I bought units, for a short in/out, because if enough people believe that the naked emperor is wearing a goldrobe, so be it.

[Locationthailand]

BTS and MRT are essential p[arts of removing the traffic congestion of Bangkok. I'm all for it even if we all know there will be 30% or more skimmed from the top. It's a trade off and I frankly don't care as the benefit will be far greater overall.

[belg]

the ceo and board of directors can except a nice bonus of a few millions of dollars, the price of the ticket is sure to go up soon

[HarryMilton]

BTS and MRT are essential p[arts of removing the traffic congestion of Bangkok. I'm all for it even if we all know there will be 30% or more skimmed from the top. It's a trade off and I frankly don't care as the benefit will be far greater overall.

I'm not saying there is corruption in those two organisations but you appear to be suggesting that corruption is acceptable in some circumstances in your eyes if it suits you?

Hope we don't see any posts from you in the future moaning about corrupt practices elsewhere.

[Arkady]

It's nice to raise truckloads of cash without actually saying what it will be used for. Not sure what developing new lines cost, but with this kind of money one would expect they could develop new lines by banking the cash and using the interest alone? Should be realistic to expect well in excess of $100 million in interest per year on this amount, if not significantly more...

The BTS-group are building a mega Ponzi-scam right in front of our (and SEC's) eyes!

They are listing the infrastructure fund based on assets already owned by the shareholders of BTS.

Since the Kanjanapas family took over the majority ownership in the BTS-group (for peanuts), they have been extremely good at using SET to get very rich. Not to difficult with a not very informed investorgrup and a weak regulator (SEC).

Last year they paid a record high dividend of 1.7 billion bath to the shareholders, IMO as a bait for the infrastructurefund, and most of the dividendmoney went to the Kanjapanas family anyway. (36%). So from this smallish company, who investors now have trusted with 62 billion baht, they are now going to pay dividend to the unitholders of the fund to the tune of around 3.6 billion baht/year plus dividends to the shareholders of BTS. Going to be very interesting to follow!

BTW I bought units, for a short in/out, because if enough people believe that the naked emperor is wearing a goldrobe, so be it.

This is very funny. You post a whole load drivel about the fund, which you suggest is a crock, and the background to it, indicating that your are a totally uninformed investor and then say that you are investing in it. With this type of investment style you could probably qualify as a 25 year old whizz kid fund manager who punts people's pensions in the markets or one of the sleazy expat "independent" financial adviser cold caller types.

First of all one part of the Kanchanapas family, the owners of Thanayong, actually set up the BTS from scratch rather than acquiring it later for peanuts. They did get a very sweet deal on the restructuring of their non-performing debt later on which could be interpreted as repurchasing their own asset at a discount but that is not what you said.

If shareholders owning 36% of a company receive 36% of the dividend payment, that indicates that dividends are paid pari passu, or the same to all shareholders which is a legal obligation for Thai public companies. What is the issue there? Would you expect the major shareholders to waive their dividend?

What I do agree with is that the Kanchanapas family are sleaze buckets and have fleeced SET investors in the past with their Thanayong and Bangkok Land listings, not to mention the huge losses racked up by their bond holders, property buyers and even contractors who didn't get paid in full or on time. Therefore some caution is merited. Large foreign investors are in this but the Ks have ripped those off before without a qualm and now there is a new generation of whizz kids in charge at those firms who have no institutional memory of what happened in the 90s. Somehow I think corporate governance is going to have to be a bit better in this fund than it was at Thanayong and Bkk Land but we will have to see. There are risks around and the Bkk governor is facing prosecution for allegedly extending the BTS concession without authority.

When they talk about the dividend yield, please note that this includes an element of repayment of capital because the fund owns no tangible assets and will be worth nothing at the end of the agreement or the end of the BTS concession whichever comes earlier. Therefore it has to repay all the investors' capital as well as provide them a return on the capital through the dividend stream. This overstates the yield which should really be shown net of return of capital but this is not required by Thai regulations.

For those who complain they can't understand what the funds are to be used for, here is the prospectus. The fund will purchase the right to the fare revenue from the existing BTS lines but not the extensions (a carve out). BTS will sell this right to the fund and use the proceeds of this sale to extend the line. This is known as recycling of capital.

.

BTSGIF Prospectus.pdf

[Arkady]

It's nice to raise truckloads of cash without actually saying what it will be used for. Not sure what developing new lines cost, but with this kind of money one would expect they could develop new lines by banking the cash and using the interest alone? Should be realistic to expect well in excess of $100 million in interest per year on this amount, if not significantly more...

Read the prospectus. The funds are not being raised to develop new lines. They will be used to purchase the right to the fare revenue from the existing lines. BTS will use the proceeds from selling the rights to the fare revenues to build the new lines.

Cost of light rail systems in the US averaged between US$50-100 per route kilometre including rolling stock and stations at 2002 dollars - seehttp://vbn.aau.dk/files/14076659/Comparison_of_Capital_Costs.pdf. So you could only extend the system by a couple of km for US$100 million and the US$2bn odd raised here is not going to be enough by itself to the extend the system significantly.

Edited April 6, 2013 by Arkady

[Thereisnoif]

It's nice to raise truckloads of cash without actually saying what it will be used for. Not sure what developing new lines cost, but with this kind of money one would expect they could develop new lines by banking the cash and using the interest alone? Should be realistic to expect well in excess of $100 million in interest per year on this amount, if not significantly more...

Read the prospectus. The funds are not being raised to develop new lines. They will be used to purchase the right to the fare revenue from the existing lines. BTS will use the proceeds from selling the rights to the fare revenues to build the new lines.

Cost of light rail systems in the US averaged between US$50-100 per route kilometre including rolling stock and stations at 2002 dollars - seehttp://vbn.aau.dk/files/14076659/Comparison_of_Capital_Costs.pdf. So you could only extend the system by a couple of km for US$100 million and the US$2bn odd raised here is not going to be enough by itself to the extend the system significantly.

It's nice to raise truckloads of cash without actually saying what it will be used for. Not sure what developing new lines cost, but with this kind of money one would expect they could develop new lines by banking the cash and using the interest alone? Should be realistic to expect well in excess of $100 million in interest per year on this amount, if not significantly more...

Read the prospectus. The funds are not being raised to develop new lines. They will be used to purchase the right to the fare revenue from the existing lines. BTS will use the proceeds from selling the rights to the fare revenues to build the new lines.

Cost of light rail systems in the US averaged between US$50-100 per route kilometre including rolling stock and stations at 2002 dollars - seehttp://vbn.aau.dk/files/14076659/Comparison_of_Capital_Costs.pdf. So you could only extend the system by a couple of km for US$100 million and the US$2bn odd raised here is not going to be enough by itself to the extend the system significantly.

I am sorry but all the new lines and future extensions , are now under MRTA control and the infrastructure is being paid by the Thai taxpayer .

[thunder30101]

So the company is selling the revenue from the business they own to a new company they own ??? Am I missing something here ? And please dont quote costs from us light rail systems to those in thailand, thats a joke to compare the cost and quality between the two.

[surangw]

suckers

[hellodolly]

BTS and MRT are essential p[arts of removing the traffic congestion of Bangkok. I'm all for it even if we all know there will be 30% or more skimmed from the top. It's a trade off and I frankly don't care as the benefit will be far greater overall.

well I am not familiar with the traffic on the proposed new routes but I am a little concerned about the amount of good they will do if it takes to long to complete them.

I guess what I am saying is are they being built for future traffic or just what we have today?

[Almera]

Looks like a whole load of experts on here.... who'd have thought!

[Ricardo]

Wasn't it the selling of future revenue-flows, from mortgages & car-loans & so-on, one of the things which led to financial-problems in farangland about five years ago ?

One can only hope that history doesn't repeat itself, and also that no populist BTS low-fares or fare-holidays are legislated, by future-governments.

[Plastic Brontosaurus]

To a degree it will be self-regulating: if they crank up the fares too much, traveler numbers will drop and they won't make enough money... But I guess they will probably try to crank things up as much as they can get away with.

[Arkady]

So the company is selling the revenue from the business they own to a new company they own ??? Am I missing something here ? And please dont quote costs from us light rail systems to those in thailand, thats a joke to compare the cost and quality between the two.

This model is taken from property developers like Quality Houses, TICON, Central Pattana etc. They sell developed rental property to property funds they control through a large minority stake and recycle the capital generated from the sales to develop more rental property. The funds are an efficient structure for holding rental property because of the tax concessions as long as they always pay out 90% of net profits as dividends. They attract external investors who want exposure to high yield property investments where the dividends are not taxed twice. Key distinctions between these funds are whether they own the freehold of the properties or only long term leases. Most of the latter type, while TICON's funds own the freeholds. That means lower yields but to compare apples with apples you have to adjust the yields on the leasehold funds to take into account that a portion of the dividend flow is actually repayment of capital, since the fund will be worth zero at the end of the leases, if no more leases are injected into them. TICON's freehold funds can continue into perpetuity or sell all the properties for the benefit of unit holders, whereas BTSGIF is definitely of the leasehold type.

[zakk9]

BTS and MRT are essential p[arts of removing the traffic congestion of Bangkok. I'm all for it even if we all know there will be 30% or more skimmed from the top. It's a trade off and I frankly don't care as the benefit will be far greater overall.

Existing and planned city rail systems in Bangkok are only a drop in the ocean if you look at the total need. Little will happen with the traffic congestions as a result of the new lines, since there won't be enough capacity available for that (too few lines, too short platforms on the stations, too short trains, little or no coordination between lines etc.). But those who live near a station will obviously be getting more efficient transportation.

[tartempion]

Under the seven-year scheme, 200 high-speed trains will whizz across the
kingdom on four lines linking the capital Bangkok with the north, south
and east of the country. A metropolitan rail network is also envisaged
for Bangkok.

April's fool every day here in Thailand