March 19, 2012 / 3:05 AM / 8 years ago

Tesco Thai property fund debuts strongly as yield play

BANGKOK/HONG KONG (Reuters) - The property fund of Tesco’s (TSCO.L) Thai unit jumped nearly 10 percent in its trading debut on Monday as investors who were shut out of Thailand’s largest IPO in six years scrambled to get a piece of the high-yielding security.

A man rides a motorbike with his son outside a Tesco Lotus supermarket in Bangkok January 12, 2012. REUTERS/Sukree Sukplang

The IPO raised about $600 million (378.82 million pounds), the biggest in Thailand since Rayong Refinery’s $710 million offering in May 2006, but the supply of units fell far short of the demand, according to bankers involved in the transaction and analysts.

With interest rates around the world hovering near record-lows, the 6.5 percent yield on the property fund, which is similar to a real estate investment trust, or REIT, helped to lure investors in uncertain global markets, although stocks have steadied recently around the world.

Tesco also benefited from its wide brand recognition in Thailand, where it has more than 900 stores around the country, including 133 hypermarkets.

“The property fund is outstanding in terms of its brand,” said analyst Sureeporn Teewasuwet at broker Finansia Syrus Securities. “Demand was overwhelming at the IPO offering. So investors who missed the allotment bought from the market today.”

Tesco Lotus Retail Growth Freehold and Leasehold Property Fund’s (TLGFu.BK) units opened at 11.40 baht on the Bangkok stock exchange, after pricing the IPO at 10.40 baht, the top of an indicative range.

The units were trading up 6.7 percent at 0625 GMT. At that level the fund is valued at about 19.65 billion baht ($640 million).


The yield on the Tesco property fund compares with 7.7 percent for CPN Retail Growth Leasehold Property Fund CPNRu.BK, which owns three malls and an office tower in Bangkok, according to brokerage KT-Zmico estimates.

The offering received orders worth nearly 11 times the amount of shares made available to international investors, according to a banker directly involved in the transaction.

Overall, the deal was about four times oversubscribed, with 70 percent of the property fund’s units going to local investors in Thailand.

“Obviously, there is a substantial amount of unsatiated demand out there,” said the banker, who was not authorized to speak publicly on the matter.

The unit of the world’s third-largest retailer injected into the fund 17 shopping malls anchored by a Tesco Lotus hypermarket in cities including Bangkok and tourist destinations such as Krabi and Koh Samui. The IPO proceeds are to be used for expansion in the country, it said.

The closed-end property fund plans to pay dividends no more than four times a year at a rate of at least 90 percent of net profit.

Bank of America Merrill Lynch, Nomura Holdings Inc (8604.T), Phatra Securities PHATRA.BK and Royal Bank of Scotland (RBS.L) managed the IPO.

($1 = 30.725 Thai Baht)

Additional reporting by Saranya Suksomkij and Viparat Jantraprap; Editing by Muralikumar Anantharaman

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