Rich Asia Steel Plc yesterday emerged as the best-performing debut stock so far this year, with a 36.84-per-cent gain above the initial public offering (IPO) price.

The stock started the day at Bt3.20, compared with its offer price of Bt2.25, and headed further north to the day's high of Bt3.34, before weakening to close at Bt3.08.

The SET Index rose almost 1 per cent to close at 690.90 yesterday.

The steel-maker is the eighth company to have started trading on the main bourse this year. Aside from Rich Asia Steel, only Rayong Refinery Plc and Ekarat Engineering Plc have had successful debuts, coming in 1.67 per cent and 4.44 per cent higher than their IPO prices on their opening trading days.

The number of unsuccessful debuts has whittled down investors' appetite for IPO shares and caused a lower number of companies to list on the stock market in the first eight months of the year.

Rich Asia Steel's sharp gain could be ascribed to the allocation of a portion of the IPO shares to the company's suppliers and customers, who by nature are long-term investors, said SET president Patareeya Benchapolchai.

"The share-allocation pattern of Rich Asia Steel is in line with the stock exchange's idea to offer shares to parties related to those companies. The SET would suggest that financial advisers of other companies lining up to list on the market offer a higher portion of IPO shares to those firms' suppliers and customers to stabilise share prices," she said.

She forecast that IPO shares in the remainder of the year would be active due to several companies queuing up to list on the bourse. For example, Bangkok Metro Plc, the subway operator with market capitalisation of Bt15.6 billion - representing 0.3 per cent of the bourse's overall capitalisation - will launch its IPO this month.

Rich Asia Steel issued 100 million shares at Bt1 par value to the public late last month.

Chief executive officer Angkakarn Tantiviroon said she was satisfied with the debut performance of her company's stock.

"The share price can stay above the IPO price as our share price is cheaper than our industry peers and our business growth will continue. Also, the company has allotted the IPO shares to suppliers and clients," she said. The company's sales this year are expected to rise 10 per cent from last year's Bt4.9 billion, she added, acknowledging that this is a revised-down target following postponement of the government's mega-infrastructure projects.

Its gross margin this year is expected to increase from 3 per cent last year to more than 6 per cent this year due to good cost controls.

The company's debt-to-equity ratio declined from one to 0.6 after it used a portion of the proceeds arising from the share allocation to pay its short-term debts.

The company is to expand its annual production capacity from 125,000 tonnes to 215,000 tonnes in the middle of next year.

Ayudhya Securities recommended investors sell Rich Asia Steel's stock with a fair value estimate of Bt1.96 apiece. This is based on a price-to-equity ratio of eight .

Although the firm's normalised profit in the first half chalked up 120 per cent year-on-year growth, the business outlook for the second half is less optimistic and steel prices have already peaked, the broker said.