The total offering will include a private placement of up to $87 million, which could result in an overall deal size of as much as $232 million.
Asia Aviation, which currently owns 51 percent of budget airline Thai AirAsia, kicked off the bookbuilding yesterday for an initial public offering that is aiming to raise between Bt4 billion and Bt4.6 billion ($126 million to $145 million).
Asia Aviation is a holding company that is wholly-owned by Thai AirAsia’s management and whose sole investment is its stake in the Thai airline. The remaining 49 percent of Thai AirAsia is owned by Malaysia’s AirAsia, Asia’s biggest low-cost carrier.
In addition to the IPO there will be a private placement of up to $87 million worth of secondary shares, which is due to be completed the day after the listing. There will be a concurrent bookbuilding for the two offers, which means the total amount of shares on offer will range between $202 million and $232 million. A private placement alongside an IPO is common practice in Thailand and is a way for the major shareholders to get around paying capital gains tax on their share sale.
In the IPO portion of the offering, Asia Aviation is looking to sell 1.2 billion shares, or 25 percent of the enlarged share capital, at a price between Bt3.30 and Bt3.80 per share. About 61.9 percent of the shares are new, while the remaining 38.1 percent of the deal is made up of existing shares. Two-thirds of the shares will be offered to institutional investors, while the remaining third is targeted at retail investors.
The private placement comprises 727.5 million existing shares, or 37.5 percent of the combined offering size of 1.94 billion shares. It will be offered to domestic institutions and retail investors and will account for a further 15 percent of the enlarged share capital. The price range is the same as for the IPO.
The selling shareholders include Thai AirAsia’s chief executive, Tassapon Bijleveld, and other company executives.
If successful, this will be the second-biggest IPO in Thailand this year, after the $600 million offering by the Thai unit of UK supermarket chain Tesco in March.
Asia Aviation plans to use the IPO proceeds to subscribe for new shares in Thai AirAsia to increase its shareholding to 55 percent from the current 51 percent, according to the term sheet. This will ensure the money raised is transferred to the operating unit. Thai AirAsia will use the money to expand its fleet between 2012 and 2014, as well as for working capital and general corporate purposes.
Thai AirAsia has three hubs in Thailand and serves both domestic and international routes. Its international destinations include Malaysia and Hong Kong.
The price range values the company at a 2012 enterprise value-to-Ebitda multiple of between 7.4 and 8 and at a 2013 EV/Ebitda multiple of 6 to 6.5, based on consensus estimates, a source said.
That puts Thai AirAsia at a slight discount to major comparables such as Tiger Airways, a Singaporean low-cost carrier, and Malaysia’s AirAsia. Tiger Airways trades at 2012 and 2013 EV/Ebitda multiples of about 11.6 times and 6.3 times respectively, while AirAsia trades at 2012 and 2013 EV/Ebitda multiples of about 8.3 times and 7.3 times respectively, the source said.
According to the current timetable, the bookbuilding is expected to end no later than Thursday, and the listing is scheduled for May 31. The international roadshow will kick off in Singapore today and then move on to Hong Kong. The management already met with domestic investors in the week of April 23.
CIMB, Credit Suisse and Thanachart Securities are joint global coordinators and bookrunners, although Credit Suisse will not be involved in the private placement portion of the deal.
The IPO comes as major airlines in the region face pressure on their earnings. Just last week, Singapore Airlines said that high fuel prices and an uncertain global economy weighed heavily on the group’s earnings in the 2011-2012 financial year, and pushed down net profit by 69 percent to $336 million.
Emirates Airlines posted a 72 percent drop in earnings for the year, even as its revenue rose 15 percent.
One source noted, however, that compared with full-service airlines, low-cost carriers can manage costs in other parts of their business to partly compensate for the pressure of higher oil prices.
Meanwhile, Tesco Lotus’s share price performance so far has been encouraging for upcoming listings in Thailand. The stock has traded above its IPO price of Bt10.40 since the debut in late March and yesterday closed about 10 percent above the offering price.
The local stock market has also shown signs of strength. According to the Stock Exchange of Thailand (SET), foreign investors were net buyers of Thai shares worth approximately $2.7 billion from January to April, the highest foreign net buying during this period in the past six years.
Elsewhere in Asia, Ascendas Hospitality Trust is looking to kick off the roadshow in the middle of next week for a Singapore IPO that is expected to raise between $600 million and $700 million, a source said yesterday. The trust, which owns hotels in Australia and several Asian markets, including China, is expected to list in mid-June. Nomura and Standard Chartered are joint global coordinators, while DBS and HSBC are joining them as bookrunners.