April 4, 2013 / 12:50 PM / in 4 years

UPDATE 2-SkyTrain operator BTS raising $2.13 bln in record Thai IPO

5 Min Read

* Fund prices at 10.80 baht/unit, high end of range

* BTS chairman says fund sale to be oversubscribed

* IPO set to be Thailand's biggest ever

By Khettiya Jittapong and Elzio Barreto

BANGKOK/HONG KONG, April 4 (Reuters) - Bangkok SkyTrain operator BTS Group Holdings Pcl is set to raise $2.13 billion through an initial public offering of its infrastructure fund, sources told Reuters, making it Asia's biggest offering so far this year.

The IPO, which will be a record for Thailand, reflects strong investor interest in the country. Thailand is on track for a second straight year of robust economic growth and had the best-performing equity market in southeast Asia last year.

The sale also highlights a surge in equity fund raising in southeast Asia. Indonesia's PT Matahari Department Store raised $1.3 billion in a share sale in March and Mapletree Greater China Commercial Trust, a Temasek Holdings-backed real estate investment trust, conducted a $1.3 billion IPO in February.

The BTS Rail Mass Transit Growth Infrastructure Fund is selling 5.79 billion units at 10.80 baht each - at the top of a marketing range - putting the total value at 62.5 billion baht ($2.13 billion), the two sources with direct knowledge of the process said.

They declined to be identified because they were not authorised to speak publicly about the matter.

Earlier, BTS Chairman Keeree Kanjanapas told Reuters the IPO price was likely to be at the high end of an indicative range of 10.4-10.8 baht per unit.

"The fund is oversubscribed as we get strong demand from investors," Keeree said.

The IPO was priced to yield 5.8 percent for the fund's investors. This compared with a yield on the benchmark five-year Thai government bond of around 3.1 percent.

A unit of Tesco priced its $600 million property fund at 6.5 percent a year ago, and a rally in its shares brought the yield down to 4.5 percent by February, according to Merrill Lynch.

"For investors who prefer stable return, it will be a good choice," Yernyong Thepjumnong, Chief of Equity Fund Manager of Krung Thai Asset Management.

"If you are happy with a yield of about 5 percent or slightly higher than 5 percent, it will be an interesting alternative for investment at a time that domestic interest rates are quite low."

Benchmark interest rates for 12-month deposit accounts are about 2.25-2.85 percent.

The IPO is the largest in Asia so far this year, followed by Mapletree's offering. It is also the biggest ever in Thailand, surpassing $727.6 million raised by Thai Oil Pcl in 2004, according to Thomson Reuters data going back to 1985.

Mass Transit

SkyTrain is an elevated train system in service since 1999 that covers about 23.5 km (14.5 miles) in greater Bangkok and carries more than 600,000 passengers per week day.

About half of the IPO proceeds will be used to bid for four new mass transit lines, BTS Group has said, as robust economic growth increases demand for transport infrastructure.

Thailand's economy, Southeast Asia's second biggest after Indonesia, grew 6.4 percent in 2012 and some economists predict growth of up to 5.7 percent this year.

The benchmark stock average rose nearly 36 last year and this year is up about 9 percent, while the baht has risen to its highest against the dollar since the 1997 financial crisis, due to capital flows into equities, bonds and infrastructure.

The cabinet has approved a bill to borrow 2 trillion baht to fund long-term infrastructure projects and the government has launched a massive expansion of Bangkok's mass-transit system in a bid to ease congestion in the city.

It aims to expand the system by more than six times, with 508 km of lines by 2029, from 79.5 km now. The bulk of the expansion is planned for 2017, when about 146 km of new lines are set to start running.

The four lines that BTS Group plans to bid on would require nearly $4.35 billion of investments, with bidding slated for 2013 and operations starting in 2017. The new lines would link directly to the SkyTrain network.

Morgan Stanley, Phatra Securities and UBS acted as joint bookrunners for the IPO. The banks stand to earn 2.15 percent of the total in fees excluding the sponsor tranche.

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