As venture-backed startups explore public offerings, the Thailand stock market is gearing up for a bunch of tech IPOs in the coming year.
Thai e-commerce enabler aCommerce is said to be eyeing a listing on the local market in the first half of 2022, according to a source familiar with the company.
As reported by DealStreetAsia earlier, aCommerce had targeted to raise $200 million in a domestic IPO transaction in 2021. However, its IPO plans are now understood to be delayed till next year following the pandemic.
Earlier this year, fashion commerce platform Pomelo was also reported to raise funds via an IPO. Pomelo co-founder and CEO David Jou told DealStreetAsia that the company was considering different options that include SPAC merger, IPO and even staying private for longer.
“These companies have talked to us to explore the opportunity to list on the Stock Exchange of Thailand (SET), especially after we launched a new regulation that supports companies from the new-age industries to list,” said Manpong Senanarong, senior executive vice president and head of SET’s issuer and listing division.
Krungsri Finnovate, the venture arm of Krungsri Group, is also bullish about the IPO potential of several of its portfolio firms. “We hope to see more tech startups to IPO in 2023 onwards. There are 13 startups in my portfolio apart from Builk, and four of them are planning to list,” according to Sam Tanskul, managing director of Krungsri Finnovate.
The potential liquidation events over the next two years are seen to further bolster investor appetite in the country’s tech startup ecosystem, according to market observers.
Thai tech firms that have expressed IPO plans
|aCommerce||E-commerce||$119m||Indies Capital Partners, January Capital, Emerald Media, DKSH, MDI Ventures, others||NA|
|Pomelo||E-commerce||$89m||Lombard Investments, Central Group, InterVest, JD.com, Provident Capital Partners, others||$228.3m|
|Flash Express||Logistics||$350m||Buer Capital, eWTP Capital, SCB 10X, PTT OR, others||At least $1b|
|Bitkub||Crypto||$547m||Siam Commercial Bank, dtac Accelerate, SeaX Ventures||$1.05b|
|Builk||SaaS||NA||Krungsri Finnovate, AddVentures by SCG, Beacon Venture Capital, 500 TukTuks, others||NA|
Source: DealStreetAsia – DATA VANTAGE, reports
The Thai stock market’s new regulation, issued in May, aims to ease listing processes for 14 sectors including digital platforms, biotechnology, automotive, and clean energy, among others.
Apart from the Main Board of the SET, growth-stage companies can opt to list on the Market for Alternative Investment (MAI) that has less stringent listing requirements.
MAI has seen the proportion of tech companies increase from 6% in 2019 to 10% currently, according to Senanarong. Some of the companies that tapped the MAI include design management software firm Applicad, hotel management software Comanche, and internet services firm Proen.
Last year, Sri Trang Gloves raised $475 million and Kerry Express raised $281 million, amongst the top IPO transactions in the market. The top IPOs in the Thai market since 2020 include PTTOR ($1.8 billion), Central Retail ($1.77 billion), SCG Packaging ($1.27 billion), and microfinance firm Ngern Tid Lor ($1.1 billion).
“The Stock Exchange of Thailand consists of mostly traditional companies and aCommerce’s IPO will start the next era of digital-first and technology companies,” Kesara Manchusree, an independent board member of aCommerce, said in June. aCommerce had in June appointed three board members, who were former executives of the SET as well as blue-chip companies in Thailand, as a preparatory move for its anticipated IPO.
SET vs SPAC
Special purpose acquisition companies or SPACs have also become an attractive option for Southeast Asian tech firms seeking US IPOs.
“The US is still the biggest exchange for tech companies. That’s not an option that we can rule out,” Jou said.
For an investor, whether it’s a local listing or a SPAC, it’s an encouraging moment as the companies get to that stage.
“The more options the better,” said Harold Ong, partner at Singapore-based Indies Capital Partners, an investor in aCommerce.
However, SPACs might not be for everyone, Ong added.
“Are you sizable enough to generate demand in the US market? The US has a deeper market, but it also has a plethora of choices,” he said.
Ong is bullish about the Thai IPO market that “is hungry for tech exposure.”
For Thailand to see a mechanism for SPACs, it will need the presence of big, reputable sponsors as well as a pipeline of many large tech companies, according to Tanskul.
“We’re taking a look at SPACs, but it is not in our pipeline yet within the next year. The focus now is on the new regulation to encourage new-age companies to list,” Senanarong told DealStreetAsia.
Deloitte Thailand partner Wilasinee Krishnamra said: “From the share prices of recently registered tech companies on MAI, we could see that they captured the interest of the public market as their share prices compared to IPO price are still the best performers of the year so far.”
“Thai SET has been one of the strongest performers in terms of IPO in the world. Hence, this [domestic IPOs] is still a good option for Thai tech companies,” she added.
Local companies can still tap overseas investors with a domestic listing too, given that international investment banks, who underwrite the deals, distribute to their global investor base regardless of where the listing is, Pomelo’s Jou said.
“A fair number of IPOs are primarily taken up by foreign investors. The understanding of how to value technology businesses is also there. All of that makes the Thai Stock Exchange a very interesting option for us,” Jou added.
The COVID-19 pandemic has led to accelerated digital adoption and an omnichannel model like Pomelo has benefited from the trend.
“There’s going to be a lot of pent-up demand coming back into the market as people go back to offices and meet their friends and family. Our business has already grown almost 300% over the last two months from the increase in demand,” Jou said.
Fashion platform Pomelo – which operates a tech-assisted tap-try-buy model, runs 26 stores across Thailand, Singapore, Indonesia, Malaysia, and the Philippines. It has reopened in several markets where the COVID-19 restriction has been lifted.
While he did not confirm the company’s profitability status, Jou said Pomelo was “in good shape financially”.
Meanwhile, aCommerce was profitable ahead of schedule, on the back of average revenue growth per client by over 120% since the first quarter of 2019, it said in July 2020.
Builk too has been a profitable company for two years, according to Tanskul.
The debut of Kerry Express in 2020 and Ngern Tid Lor earlier this year had created a lot of ripples in the technology space. While the SET does not strictly classify these firms as technology assets, they are related to the tech sector.
Kerry Express’ market capitalisation has risen 25% from its IPO reference price in December 2020. The firm’s P/E ratio currently stands at 58.5, compared to the SET market of 28.84 in 2020.
Meanwhile, Ngern Tid Lor’s market cap is $2.7 billion compared to $2.6 billion on the IPO day. Its P/E is 29.6%.
SET’s new regulation will allow non-profitable businesses from new-age sectors to list on a new trading platform. However, it will be restricted to investors with certain qualifications.
“We understand that some specific industries cannot get into the listing status with profits. So we are trying to make regulations practical to attract new assets,” said Senanarong.
“That is really interesting. I think more and more companies are going to accelerate their growth,” Pomelo’s Jou said.
The 180 MAI-listed companies performed significantly better in H1/2021 compared to the same period in 2020, the SET said in a statement. Their total sales reached 85.3 billion baht, and operating profits and net profits were 5.27 billion baht and 3.85 billion baht, up 9.8%, 62.3% and 3.88%, respectively.
Thailand dominated SE Asia’s IPO market in 2020, with 23 transactions raising $3.94 billion in proceeds, accounting for 62% of the entire region’s value, according to a Deloitte report.
In H1/2021, Thailand also topped with $2.8 billion raised via IPOs, or 57% of ASEAN’s total, per Bloomberg data. In July, Indonesia took over the top slot with the big-ticket $1.5-billion offering by tech unicorn Bukalapak.
However, the SET said that during the first 10 months of this year, the fundraising value via IPOs on its bourse outpaced other ASEAN peers again, without divulging the number.
The SET had earlier set a target of doubling IPO and secondary offering in 2021 compared to last year’s 555 billion baht. Senanarong said the exchange had exceeded that target.
“The goal for 2022 remains the same as this year, but we will focus more on the new economy sectors,” he said.
Krungsri Finnovate’s Tanskul called the new regulations and the stock market prospects promising for the local tech ecosystem. “When venture capital funds, or even angel investors, invest in a startup, they would like to see what the exit plans are. This will make investors confident in participating in the very first rounds.”