Head of Research, Krungthai XSpring

Waraporn Wiboonkanarak

Head of Research

A full service Thai brokerage

Krungthai XSpring

Krungthai XSpring is a full service broker. The company provides a wide range of investment services such as Securities Brokerage, Derivative Agent Business, Securities Borrowing and Lending, Securities Trading, Underwriting, Financial Advisory, Wealth Advisory, Private Fund Management and International Markets Securities Trading. 

In terms of credibility, Fitch Ratings has assigned Krunghtai XSpring a long-term rating of AA- and a national short-term rating of F1+ with stable outlook.

Equity Bottom-Up

<ul><li>The SET Index is expected to move in the narrow range of 1,655-1,665 points due to the concern that the Fed will hike the fed funds rate further following the reports of strong US economic figures.</li><li>However, private consumption held up well (+5.70% YoY), especially expenditures in the hotel and restaurant sector (+92.80% YoY), which is expected to create positive sentiment for stocks in the retail and food sectors.</li><li>The agency now expects Thailand's 2023E GDP growth to return to the pre-COVID-19 level at +3.7% YoY.</li></ul>

The SET Index is expected to move in the narrow range of 1,655-1,665 points due to the concern that the Fed will hike the fed funds rate further following the reports of strong US economic figures.However, private consumption held up well (+5.70% YoY), especially expenditures in the hotel and restaurant sector (+92.80% YoY), which is expected to create positive sentiment for stocks in the retail and food sectors.The agency now expects Thailand's 2023E GDP growth to return to the pre-COVID-19 level at +3.7% YoY.

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
On the 5 July 2021, <a href="https://www.smartkarma.com/entities/major-cineplex-group-pcl" target="_blank" data-smartkarma-citation="entities:16662:1" rel="noopener">Major Cineplex Group (MAJOR TB)</a>'s board <a href="https://major.listedcompany.com/newsroom/050720211745440725E.pdf" target="_blank" rel="noopener">approved</a> the entering of a MOU with <a href="https://www.smartkarma.com/entities/central-pattana-pcl-0b7fb113-16e1-4535-be8b-02dce5bbcd92" target="_blank" data-smartkarma-citation="entities:17188:1" rel="noopener">Central Pattana Pub (CPN TB)</a> in relation to its shares in shopping mall operator <a href="https://www.smartkarma.com/entities/siam-future-development-pcl" target="_blank" data-smartkarma-citation="entities:4373:1" rel="noopener">Siam Future Development (SF TB)</a>, at a price of Bt12/share. An IFA was appointed to assess the sale and its opinion on the <a href="https://major.listedcompany.com/newsroom/060820211832280109E.pdf" target="_blank" rel="noopener">19 July</a>, concluded the "Transaction is reasonable with price and conditions that are fair". A SPA was <a href="https://major.listedcompany.com/newsroom/250820211847500685E.pdf" target="_blank" rel="noopener">entered into</a> on the 25 August with an expected completion on the 30 August. 
</div>
<div>
CPN <a href="https://www.set.or.th/set/newsdetails.do?newsId=16302807319920&amp;language=en&amp;country=US" target="_blank" rel="noopener">completed</a> the purchase of shares in Siam Future on 30 August 2021. After the completion of shares purchase, the number of shares held by CPN was 56.26%. In Thailand, the obligation to make a mandatory offer is triggered when an acquirer obtains shares of the target company of more than 25%, 50%, or 75% of the total voting rights of the target company.  Therefore, CPN was required to make a Tender Offer for the remaining shares in Siam Future, also at Bt12/share. A mandatory Tender Offer is always unconditional. 
</div>
<div>
The Tender Offer doc (247-4) for Siam Future was <a href="https://www.set.or.th/set/pdfnews.do?newsId=16311444618740&amp;sequence=2021100646" target="_blank" rel="noopener">tabled</a> on the 9 September. The Offer period was for 25 business days - and closed on the 18 October. The payment date was the 20 October. The IFA reckoned the Offer was <a href="https://www.set.or.th/set/pdfnews.do?newsId=16326998697600&amp;sequence=2021104947" target="_blank" rel="noopener">fair</a>. At the close of the Offer, CPN held <a href="https://www.set.or.th/set/pdfnews.do?newsId=16346869712030&amp;sequence=2021112797" target="_blank" rel="noopener">96.24%</a>. 
</div>
There are no provisions regarding minority squeeze-out mechanisms under Thai law. However, if the board of directors approves a proposed de-listing,  an independent financial adviser provides its opinion to shareholders on the merits of the proposal, and the company gains approval (≥ 75% for, ≤10% against) from its shareholders to voluntarily delist, then a company can be delisted. The company is permitted to purchase shares tendered in accordance with SEC and Capital Market Supervisory Board rules. 
On page 57 (of Siam Future's Tender Offer doc's <a href="https://www.set.or.th/set/pdfnews.do?newsId=16311444618740&amp;sequence=2021100646" target="_blank" rel="noopener">PDF</a>), it states:
<blockquote>
After the Tender Offer, the Offeror has an intention to delist the Business from being a listed company on the SET during the period of 12 months after the end of the Offer Period. Currently, the Offeror is under the possibility study of proceeding such transaction under relevant rules and regulations, including but not limited to, assessment of possibility of obtaining the approval from the shareholders meeting of the Business, of which has not reached a conclusion on delisting of the Business from being a listed company on the SET.
</blockquote>
With 96.24% held, a Delisting Offer from CPN is likely imminent. Such an Offer at the prior Tender Offer price provides 20% upside to the current price.


On the 5 July 2021, Major Cineplex Group (MAJOR TB)'s board approved the entering of a MOU with Central Pattana Pub (CPN TB) in relation to its shares in shopping mall operator Siam Future Development (SF TB), at a price of Bt12/share. An IFA was appointed to assess the sale and its opinion on the 19 July, concluded the "Transaction is reasonable with price and conditions that are fair". A SPA was entered into on the 25 August with an expected completion on the 30 August. 


CPN completed the purchase of shares in Siam Future on 30 August 2021. After the completion of shares purchase, the number of shares held by CPN was 56.26%. In Thailand, the obligation to make a mandatory offer is triggered when an acquirer obtains shares of the target company of more than 25%, 50%, or 75% of the total voting rights of the target company.  Therefore, CPN was required to make a Tender Offer for the remaining shares in Siam Future, also at Bt12/share. A mandatory Tender Offer is always unconditional. 


The Tender Offer doc (247-4) for Siam Future was tabled on the 9 September. The Offer period was for 25 business days - and closed on the 18 October. The payment date was the 20 October. The IFA reckoned the Offer was fair. At the close of the Offer, CPN held 96.24%. 

There are no provisions regarding minority squeeze-out mechanisms under Thai law. However, if the board of directors approves a proposed de-listing,  an independent financial adviser provides its opinion to shareholders on the merits of the proposal, and the company gains approval (≥ 75% for, ≤10% against) from its shareholders to voluntarily delist, then a company can be delisted. The company is permitted to purchase shares tendered in accordance with SEC and Capital Market Supervisory Board rules. 
On page 57 (of Siam Future's Tender Offer doc's PDF), it states:

After the Tender Offer, the Offeror has an intention to delist the Business from being a listed company on the SET during the period of 12 months after the end of the Offer Period. Currently, the Offeror is under the possibility study of proceeding such transaction under relevant rules and regulations, including but not limited to, assessment of possibility of obtaining the approval from the shareholders meeting of the Business, of which has not reached a conclusion on delisting of the Business from being a listed company on the SET.

With 96.24% held, a Delisting Offer from CPN is likely imminent. Such an Offer at the prior Tender Offer price provides 20% upside to the current price. 

Buy Siam Future Development (SF TB). Then Buy Some More

On 14 December 2016, <a href="https://www.smartkarma.com/entities/agc-inc" target="_blank" data-smartkarma-citation="entities:2167:1" rel="noopener">AGC Inc (5201 JP)</a> <a href="https://www.set.or.th/dat/news/201612/16094295.pdf" target="_blank" rel="noopener">entered into</a> an agreement with Solvay Chemicals and Plastics Holding, and Solvay Vinyls Holding (collectively, Solvay) to acquire 696,511,059 shares, or 58.77% of shares out, in <a href="https://www.smartkarma.com/entities/vinythai-public-co-limited" target="_blank" data-smartkarma-citation="entities:14107:1" rel="noopener">Vinythai Public Co (VNT TB)</a>, at Bt15.00/share, for a total consideration of Br10.4bn.
AGC completed the acquisition of shares in VNT on <a href="https://www.set.or.th/dat/news/201702/17013362.pdf" target="_blank" rel="noopener">22 February 2017</a>. This share acquisition triggered a mandatory tender offer. VNT received an Announcement of Intention to Make a Tender Offer (<a href="https://www.set.or.th/dat/news/201702/17013376.pdf" target="_blank" rel="noopener">Form 247-3</a>) on 23 February 2017.
On 1 March 2017, AGC submitted a copy of the Tender Offer (or <a href="https://www.set.or.th/dat/news/201703/17019209.pdf" target="_blank" rel="noopener">Form 247-4</a>) to purchase shares not held or 41.23% of shares out, at Bt15/share. The Tender Offer period was from the 3 March 2017 to 7 April 2017, a period of 25 business days.
At the close of the Offer, 152,450 shares tendered - or 0.01% of shares out - giving AGC <a href="https://www.set.or.th/dat/news/201704/17029860.pdf" target="_blank" rel="noopener">58.78%</a>. The second-largest shareholder was <a href="https://www.smartkarma.com/entities/ptt-global-chemical-pcl" target="_blank" data-smartkarma-citation="entities:19852:1" rel="noopener">PTT Global Chemical (PTTGC TB)</a> with 24.98%.
Then crickets.
<h3>The New News</h3>
Following a board directors meeting, VNT <a href="https://www.set.or.th/dat/mds_news/news/0475NWS190320210801090046E.pdf" target="_blank" rel="noopener">announced</a> PTTGC and AGC have indicated their intention to delist VNT from the SET.
PTTGC  will offer to purchase shares at Bt39/share. AGC will not tender any of its 57.78% stake in such a tender offer.
This looks done and dusted, and trading tight to terms.
More below the fold.

On 14 December 2016, AGC Inc (5201 JP) entered into an agreement with Solvay Chemicals and Plastics Holding, and Solvay Vinyls Holding (collectively, Solvay) to acquire 696,511,059 shares, or 58.77% of shares out, in Vinythai Public Co (VNT TB), at Bt15.00/share, for a total consideration of Br10.4bn.
AGC completed the acquisition of shares in VNT on 22 February 2017. This share acquisition triggered a mandatory tender offer. VNT received an Announcement of Intention to Make a Tender Offer (Form 247-3) on 23 February 2017.
On 1 March 2017, AGC submitted a copy of the Tender Offer (or Form 247-4) to purchase shares not held or 41.23% of shares out, at Bt15/share. The Tender Offer period was from the 3 March 2017 to 7 April 2017, a period of 25 business days.
At the close of the Offer, 152,450 shares tendered - or 0.01% of shares out - giving AGC 58.78%. The second-largest shareholder was PTT Global Chemical (PTTGC TB) with 24.98%.
Then crickets.
The New News
Following a board directors meeting, VNT announced PTTGC and AGC have indicated their intention to delist VNT from the SET.
PTTGC  will offer to purchase shares at Bt39/share. AGC will not tender any of its 57.78% stake in such a tender offer.
This looks done and dusted, and trading tight to terms.
More below the fold.

Vinythai (VNT TH): Delisting Offer From PTTGC

<ul><li>The deal to acquire Tesco seems to be better than expected due to the joint investment with the CP Group, which means no capital increase will be required for CPALL.</li><li>However, increasing interest expenses and the business restructuring in the early stage are expected to drag down CPALL's earnings in the next 3-4 years.</li><li>We view that these negative factors have been largely priced in and believe the deal will help strengthen CPALL's market position and business prospects over the long term.</li></ul>

The deal to acquire Tesco seems to be better than expected due to the joint investment with the CP Group, which means no capital increase will be required for CPALL.However, increasing interest expenses and the business restructuring in the early stage are expected to drag down CPALL's earnings in the next 3-4 years.We view that these negative factors have been largely priced in and believe the deal will help strengthen CPALL's market position and business prospects over the long term.

To Acquire Tesco in Thailand and Malaysia

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

In this next part of a Smartkarma Originals Series on ASEAN Retail, we look at Thailand and specifically two companies including <a href="https://www.smartkarma.com/entities/cp-all-pcl" target="_blank" data-smartkarma-citation="entities:13889:1" rel="noopener">CP All PCL (CPALL TB), </a>the operator of over 11,600 7Eleven stores in the country, as well as cash &amp; carry operator Makro and, <a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB),</a> a relative newcomer and owner of number two hypermarket operator Big C Supercentre.
In this report, we take a deep dive into both <a href="https://www.smartkarma.com/entities/cp-all-pcl" target="_blank" data-smartkarma-citation="entities:13889:1" rel="noopener">CP All PCL (CPALL TB)</a> and <a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB)</a> having had face to face meetings with the management of both companies in Thailand, as well as visiting a number of their stores in Bangkok.
Both companies are pushing forward with innovative strategies in their own sub-segments, with <a href="https://www.smartkarma.com/entities/cp-all-pcl" target="_blank" data-smartkarma-citation="entities:13889:1" rel="noopener">CP All PCL (CPALL TB)</a> gradually increasing the size of its convenience store offering and adding to the services side of its revenue mix. It is also exploring some higher-end offerings, with a greater range of ready-to-eat options in a new clean shiny environment.  
Big C rapidly pushing out it's Mini Big C offering, with larger size convenience stores, more like mini-markets, targetting top-up shoppers in residential areas. It has also introduced a new Big C Food Place concept targetting more affluent customers in urban areas. Its other major business is consumer packaging and consumer supply chain, which are stable growth businesses with significant synergies with its retail business. The company's aluminium can business has growth potential given a switch from other packaging mediums to cans.
The other major player in Thailand is TESCO through its TESCO Lotus stores. It operates around 400 supermarkets and hypermarkets and 1,500  Tesco Express convenience stores and recent newsflow suggest that it is looking to sell those assets together with its 74 Malaysian stores for a price tag of US$9bn.
A potential front-runner to buy those assets is <a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB),</a> which would further transform that company's business towards being a purer retail play and the number one player in the hypermarket space by a significant margin. Should this transaction take place, it would likely narrow the valuation gap between the two players, though <a href="https://www.smartkarma.com/entities/cp-all-pcl" target="_blank" data-smartkarma-citation="entities:13889:1" rel="noopener">CP All PCL (CPALL TB),</a> would likely continue to trade at a premium, given its higher ROE and pure retail status.
In terms of upside, both companies look attractive versus there 3-year average PER multiples. <a href="https://www.smartkarma.com/entities/cp-all-pcl" target="_blank" data-smartkarma-citation="entities:13889:1" rel="noopener">CP All PCL (CPALL TB)</a> trades on a forward PER of 25.9x FY20E versus a three year average PER multiple of 29.4x implying upside of 13.5% or a target price of THB85.00. <a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB)</a> looks even more attractive, trading on a forward PER of 21.8x versus a 3-year mean forward PER of 30x implying upside of 37% to a target price of THB56.70.

In this next part of a Smartkarma Originals Series on ASEAN Retail, we look at Thailand and specifically two companies including CP All PCL (CPALL TB), the operator of over 11,600 7Eleven stores in the country, as well as cash &amp; carry operator Makro and, Berli Jucker (BJC TB), a relative newcomer and owner of number two hypermarket operator Big C Supercentre.
In this report, we take a deep dive into both CP All PCL (CPALL TB) and Berli Jucker (BJC TB) having had face to face meetings with the management of both companies in Thailand, as well as visiting a number of their stores in Bangkok.
Both companies are pushing forward with innovative strategies in their own sub-segments, with CP All PCL (CPALL TB) gradually increasing the size of its convenience store offering and adding to the services side of its revenue mix. It is also exploring some higher-end offerings, with a greater range of ready-to-eat options in a new clean shiny environment.  
Big C rapidly pushing out it's Mini Big C offering, with larger size convenience stores, more like mini-markets, targetting top-up shoppers in residential areas. It has also introduced a new Big C Food Place concept targetting more affluent customers in urban areas. Its other major business is consumer packaging and consumer supply chain, which are stable growth businesses with significant synergies with its retail business. The company's aluminium can business has growth potential given a switch from other packaging mediums to cans.
The other major player in Thailand is TESCO through its TESCO Lotus stores. It operates around 400 supermarkets and hypermarkets and 1,500  Tesco Express convenience stores and recent newsflow suggest that it is looking to sell those assets together with its 74 Malaysian stores for a price tag of US$9bn.
A potential front-runner to buy those assets is Berli Jucker (BJC TB), which would further transform that company's business towards being a purer retail play and the number one player in the hypermarket space by a significant margin. Should this transaction take place, it would likely narrow the valuation gap between the two players, though CP All PCL (CPALL TB), would likely continue to trade at a premium, given its higher ROE and pure retail status.
In terms of upside, both companies look attractive versus there 3-year average PER multiples. CP All PCL (CPALL TB) trades on a forward PER of 25.9x FY20E versus a three year average PER multiple of 29.4x implying upside of 13.5% or a target price of THB85.00. Berli Jucker (BJC TB) looks even more attractive, trading on a forward PER of 21.8x versus a 3-year mean forward PER of 30x implying upside of 37% to a target price of THB56.70.

Thailand: A Two-Player Retail Market? - CPALL and Berli Jucker

Thailand

Big C Supercenter Public Company Limited is a leading grocery and general merchandising retailer operating hypermarkets, supermarkets, and convenience stores in Thailand and other ASEAN countries. It offers a wide range of products including fresh and dry food, household goods, apparel, and electronics, alongside an expanding online platform. The company was founded in 1993 by the Central Group and is headquartered in Bangkok, Thailand.

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Big C Supercenter (BIGC TB)

Krungthai XSpring Zoom

The SET Index is expected to move in the narrow range of 1,655-1,665 points due to the concern that the Fed will hike the fed funds rate further...

Krungthai XSpring

Buy Siam Future Development (SF TB). Then Buy Some More

Buy Siam Future. Then buy some more. I think you're looking at a minimum 10% upside from here - if using Big C Supercenter's delisting example -...

David Blennerhassett

Vinythai (VNT TH): Delisting Offer From PTTGC

This looks done and trading accordingly with a gross/annualised return of 1.9%/5.0%, assuming completion on 11 August. Not a lot in it. Pus there...

David Blennerhassett

To Acquire Tesco in Thailand and Malaysia

The deal to acquire Tesco seems to be better than expected due to the joint investment with the CP Group, which means no capital increase will be...

Krungthai XSpring

Thailand: A Two-Player Retail Market? - CPALL and Berli Jucker

In this next part of a Smartkarma Originals Series on ASEAN Retail, we look at Thailand and specifically two companies including CP All PCL (CPALL...

Angus Mackintosh

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