Friday 29 Mar 2024
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(Sept 12): Thailand’s Market for Alternative Investment is predicting a 33 percent increase in the number of initial public offerings this year after valuations on the small-cap bourse climbed to a record versus larger peers.

The exchange estimates a total of 20 companies will have sold new shares for the whole of this year, up from 15 in 2013, Prapan Charoenprawatt, the bourse’s president, said in an interview. Ten companies that sold shares so far in 2014 raised as much as 3.28 billion baht ($102 million), he said.

Investor demand for IPOs on the MAI is strengthening after first-day returns this year averaged 96 percent, versus 34 percent on the main board of the Stock Exchange of Thailand. The 103-member MAI Index is valued at 4.3 times net assets, a record 90 percent premium over the nation’s benchmark SET Index.

“Investors’ mood on Thai equities has been very bullish, especially on small-cap stocks,” Prapan said at his office in Bangkok yesterday. “Earnings growth of those small companies will be much more vibrant as the nation’s economy has turned around with calmer politics.”

Thailand’s military coup on May 22 helped end six months of political deadlock and revived confidence that the junta will jump-start stalled investment projects. The nation’s gross domestic product rose 0.9 percent in the three months through June from the previous quarter, when it shrank a revised 1.9 percent, according to official data released last month.

High Valuations

The MAI Index has jumped 92 percent this year through its close yesterday and is poised for its biggest annual increase in more than a decade. The SET Index has risen 22 percent during the period, versus a 6.7 percent gain in the MSCI Emerging Markets Index.

The MAI Index rose 0.9 percent as of 11:54 a.m. in Bangkok today, heading for a record close, while the SET Index was little changed.

Shares of some small-cap companies are probably too high relative to earnings prospects, Prapan said, without naming any specific stocks.

While low earnings quality is a concern for some companies on the MAI, the bourse still offers attractive opportunities for investors looking for fast-growing companies, Warut Siwasariyanon, the head of research at Asia Wealth Securities Co., said by phone from Bangkok.

Market Capitalization

Companies on the MAI, which began operations in 1999 to help small- and medium-sized firms raise money, have a median market capitalization of 1.3 billion baht ($34 million), versus 4.5 billion baht for SET index companies, data compiled by Bloomberg show. About 96 percent of investors on the MAI are individuals and the rest are domestic institutions, Prapan said.

Shares of CCN-Tech Pcl, a provider of information technology products and services, nearly tripled on their debut yesterday.

“Individual investors probably foresee higher growth potential for small companies than what they see from bigger companies,” Virat Anurakputti, managing director of CCN-Tech, said in an interview in Bangkok. “Investors’ bullish optimism definitely puts pressure on me and the management to deliver the earnings growth.”
 

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