Bangkok Metro Plc (BMCL), the operator of Bangkok's subway, is to cut the percentage of its initial public offering shares allocated to institutional and foreign investors following lukewarm interest in the build-up to the public offering.

Institutional and foreign investors will be allocated only 35 per cent of the shares, instead of the earlier 40 per cent to 50 per cent.

Kim Eng Securities (Thailand), BMCL's financial adviser, blamed high volatility in the stock market for the lower-than-expected interest.

"As institutional investors have expressed interest in subscribing to around 800 million or one billion shares from this IPO, we'll have to reallocate the [percentage of] shares for retail and institutional investors," said Kim Eng Securities' chief executive Montee Sornpaisarn.

Under the new ratio, BMCL is to offer 2.7 billion shares to the public, of which 65 per cent will be allocated to retail investors while the rest will be offered to institutional and foreign investors, at a price of Bt1.31 each.

The company expects to raise Bt3.6 billion from the IPO, making it the second-largest initial offering this year after Rayong Refinery Plc. Although 65 per cent of the IPO shares will be allocated to retail investors, Montee said there was no concern that BMCL stock will fall below the IPO price.

"Even though the IPO allocation for retail investors is huge, it should not be a problem because the price is discounted to suit the current market momentum. Also, investors are confident in this business as it can generate a regular income. It's best for long-term investment. We expect a 14-per-cent return per year from holding BMCL stock," Montee said.

He said the subscription period for BMCL's IPO runs from tomorrow untilSeptember 13, which he viewed as appropriate because many factors weighing on the bourse are showing signs of recovery. Besides, both the Democrat and Thai Rak Thai parties support the underground rail network in their main policies, should they form the next government.

Proceeds from the IPO will be used to buy five electric trains, adding to the present 19, to service debt and as working capital. BMCL currently shoulders a Bt12-billion debt and is expected to lower its debt-to-equity ratio from 2:1 to 1:1.

The company recorded revenue of Bt689.5 million in the first six months of the year, up by 71.5 per cent over the corresponding period last year, due to increased fares.

BMCL managing director Sombat Kijjalak said funds raised in the IPO would be used to purchase more underground bogeys and about Bt2 billion would go on loan repayments.

With regard to a government proposal that ticket prices be fixed at a flat rate of Bt15 for all routes, Sombat said the issue would need to be negotiated because BMCL's contract stipulates fares in the Bt14-to-Bt36 range.

Sombat said the company would take about four years before it could start paying dividends to shareholders. Its dividend allocation policy has been set at 40 per cent of annual profit.

BMCL yesterday signed the underwriter deal for selling the IPO shares with 17 securities firms. Kim Eng acts as the lead underwriter while SCB Securities, Thanachart Securities and Siam City Securities are the co-leading underwriters. The  other 13 brokers serve as co-underwriters.

Meanwhile, Thai Hua Rubber Plc is considering listing on the Singapore stock market.

"We originally planned to list on the Thai stock market, but Singapore's stock market authority has approached us to list there. We have yet to make a decision, but will decide before late next year," president Luckchai Kittipol told the Thai-language news agency Infoquest.

Thai Hua Rubber plans to issue 300 million shares to raise funds to finance business expansion.

Early this year, Thai Beverage Plc became the second Thai company to list its shares on the Singapore Exchange, after Total Access Communication Plc (DTAC).

Siriporn Chanjindamanee

The Nation