Humour

Would you believe it if I said that Thailand is the second best performing market in Asia this year? Nearly +4.5% in USD termsstockmarket_image

Airlines

Nok

Let’s start with Nok Airways, it appears that ever since its ludicrously expensive IPO nok no one has been a believer in Nok Airways, perhaps its the way that they put a silly cartoon image on the front of their planes nok. Or perhaps its the fact that this company entered into an industry that is not only incredibly competitive but well known for having one of the worst return on investments and that unless you have the balance sheet, management capability, and ability to source traffic and network. And that even with all you are still effectively screwed. Now there are several issues at play with the company all of which are fairly public, their financial performance is crap (loss since 2014, negative FCF, ), pilots are now leaving in droves b/c of safety standards and one would expect for bookings to decline tremendously. Will someone buy them? What’s the point? Perhaps if it was offered for 1 cent and a 95% haircut on the debt then you may see Tony Fernandes swoop in as he did with  AirAsia  but there is no real tangible value here and if I was AirAsia, Bangkok Airways, (not Thai Airways b/c they own 40% of the company, here comes another write off!)  I would be toasting the loss of a competitor.

Thai Airways & AirAsia

Thai Airways stock price  has been on a huge run in the past week thaiairwaysthanks to some clever reporting  that Somkid raised the idea that Thai Airways should work with AirAsia through a share purchase (Bangkok Post). AS IF THIS WAS EVER POSSIBLE! But the market believed it, until the news came out that this was not not on the cards (Bangkok Post) and I had multiple messages about why weren’t we purchasing Thai Airways…I will whenever they recap until then I’d rather believe that pigs can fly.

TCAP

It’s been in the news since December ’15 that Bank of Nova Scotia has been planning to sell their 49% stake in TCAP.tcap


Latest events suggest that there are two buyers lined up, basically Japan and China (
Bangkok Post). Traditionally we normally heard rumours that Malaysian Banks were interested in expanding here and they were typically the parties willing to pay high multiples of BV. But with TCAP’s relatively smaller customer base, loan book etc etc and to compound this the fact that the world isn’t doing well either, it isn’t quite the attractive proposition as other entities in the past. In any case if you believe in the foolishness of buyers don’t be surprised to see a deal happen @ 2x P/BV.

Politics

Well the draft charter has been in the news, Yingluck has invited reporters to visit her garden and Thaksin has allowed himself to be interviewed in Singapore. (I do wonder how long it will be before BEC makes a drama similar to this) And in the past week’s Economist there was a piece on Thailand (Economist) I’ll let you read the article in its entirety but it did end the following “…that Thailand’s self-chosen leaders have no real strategy at all. “ Which is rubbish they do, protect the status quo, protect their positions, ensure no one can have full control of parliament and other things which I can’t mention unless I want to be invited for attitude adjustment.

Par Value

One of the easiest ways in this country to make one’s stock price go up is to decrease its par value/a stock split/par split. Why? Basic finance principles imply that this should have no impact upon the valuation of a business, in reality animal spirits are different….So the SET has come out with a new criteria stating that there would be a floor limit for par value set at 50 satang (Bangkok Post). So one should applaud them for the best efforts to limit the number of unscrupulous companies and owners that are just looking for the ability to manipulate their share prices. Of course there is an easy way around this…do a reverse par, wait a few years and then split it again and again….

  1. It’s only human nature for some retail investors to view a 400baht share to be more expensive than say a 40 baht share irrespective of the fundamentals and financials. Also I never really believed in the “liquidity” argument for par splits. I think it just comes down to perception.

    Take WEH for example who analysts are expecting to IPO in the 600-700 baht range making it one of the most expensive per share prices on the exchange. The only question here is will we see a par split before the IPO to make it seem more “palatable” to prospective subscribers or after the IPO?

    • Yes it’s rather standard to see a par split before ipo to make things palatable for investors as well as fit the SET/SEC’s minimum requirement of # of shares.

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