Thailand, largely seen as an understated market for tech listings compared to its SE Asian peers, is building traction for more domestic market outings on the back of the mega IPO track record last year, a robust pipeline and heightened investor appetite for public offerings.
Take the case of logistics company Kerry Express that made a successful debut on the Stock Exchange of Thailand (SET) in December 2020, raising nearly $280 million in IPO proceeds. Its shares as of April 2 were traded at a 64.71x P/E ratio, compared to 30x at IPO price. Kerry’s market capitalisation currently stands at around 90.9 billion baht ($2.9 billion).
“Kerry’s IPO has shown that SET is big enough to support a unicorn IPO,” noted Nat Wittayatanaseth, a Thailand-based investment associate at Monk’s Hill Ventures.
Similarly, digital and technology consulting company I&I Group, another Thai tech business that went public on SET’s Market for Alternative Investment (mai) last year, has seen its stock price jump three times since its August debut to 27.5 baht and achieve a 43.81 P/E ratio.
“A lot of retail investors are already interested in tech companies, but there’s no avenue for them to get involved,” said Pun Jaruthassanakul, senior investment manager at early-stage VC firm 500 TukTuks.
Among the most-anticipated offering this year is CVC Capital-backed Thai MFI player Ngern Tid Lor, which is offering 39.1% shares in its IPO on SET’s main bourse.
Meanwhile, the mai market or Thailand’s smaller bourse will see Lakeshore Capital-backed cybersecurity solutions provider Nforce Secure, Internet and cloud service firm Proen Corp, digital marketing startup Addtech Hub and IT services company Ditto test public market investors’ appetite.
The Stock Exchange of Thailand had in January set an ambitious target of boosting its 2021 market capitalisation by an additional 500 billion baht ($16.61 billion) through IPOs and secondary listings, compared to last year’s 555 billion baht.
Incidentally, Thailand topped the SE Asian regional IPO rankings last year, according to a Deloitte report. The total funds raised and total IPO market capitalisation in the country in 2020 increased by 45% and 39% to reach $4.36 billion and $17.6 billion respectively, compared to 2019. The tally was made up of mega listings such as Central Retail Corporation and SCG Packaging, each raising over $1 billion.
State-owned energy firm PTT Pcl is reported to be raising $1.5-2 billion for its retail unit IPO this year.
Thailand also started to see more businesses mature and transition from the smaller bourse to list on SET. Six of those businesses moved to SET each in 2019 and 2020, compared to two businesses in the previous year.
The number of Market for Alternative Investment-listed companies has also increased gradually during 2017-2020 to 175 by the end of the period, with a market cap of 235 billion baht ($7.5 billion), per SET data.
“Thai investors in public market are seeking investment opportunity in tech-related companies. And for me, the most desirable exit is an IPO,” said Prakit Worawattananon, managing director of Siam Cement Group’s VC arm AddVentures.
One of the challenges to public listing, as Jaruthassanakul points out, is whether investors will support their portfolio startups in preparing for the IPO that might take a few years to hit the market.
Furthermore, the criteria of companies requiring to generate profits for two years prior to listing could prove to be a dampener for tech companies seeking a listing exit.
However, if the Thai market sees more tech IPOs going forward, it will help investors get used to the high-growth, low-profit profile of tech companies, observed Wittayatanaseth.
The COVID-19 pandemic has already led startups to start looking at sustainable models rather than just chasing growth. “Many Thai startups have realised that profit is more important than the top line. Many of them didn’t burn at all, and some of them are even on the pathway to IPO,” Worawattananon asserted.
While M&As are seen as the most preferred route for an exit, a local ecosystem builder, who is also working for a regional VC firm, opined that all types of exits are emerging across markets, supported by the growth of the startups and new avenues for listing such as SPACs.
Thailand might not have a clear candidate for SPACs but the country’s advanced stock market is already an advantage for its tech ecosystem.
“I would be really surprised if we didn’t get at least one [major] Thai tech startup on the Thai exchange in the next 18 to 24 months. We’re getting close,” said the ecosystem builder.
More deals, more funds
Over the past two years, more and more Thai tech startups, the likes of aCommerce, SYNQA (formerly Omise), Pomelo and Flash Express, have closed late-stage funding, raising hundreds of million US dollars, pointing to a pipeline of companies that may explore exit options down the road.
Among these companies, aCommerce had earlier told DealStreetAsia that it was working on an IPO plan this year. Flash Express said during an online seminar in October 2020 that the firm could do the same after fueling its regional expansion in the coming years.
In 2020 alone, 27 deals were reported with $498 million in total proceeds announced, compared to 26 deals worth a total of $312 million in the previous year, data from DealStreetAsia’s SE Asia Deal Review Q4 2020 showed.
Based on DealStreetAsia’s data, e-commerce, fintech and logistics remained the most attractive sectors grabbing venture capital investments.
“I would expect to see more of e-commerce, fintech and logistics startups growing to the later stage. Logistics is a solid investment for us, and this year, we will look for additional investment in the area,” said AddVentures’ Worawattananon.
Another segment that is seeing a lot of deal traction in Thailand is crypto and blockchain. “The fact that these companies are global by nature has allowed crypto and blockchain companies to grow rapidly, even though they’re based in Thailand,” added Wittayatanaseth.
That said, a big chunk of opportunities will also come from areas such as healthtech, edtech, digital entertainment and B2B startups that help SMEs digitise their operations.
“It’s common for a market to take off with e-commerce and branch out to logistics and fintech. But now, there is a growing interest in Thailand around other sectors, and it reflects a certain level of maturity in the Thai market,” the ecosystem builder mentioned above added.
While later-stage deals are gaining traction, Thailand is staring at a funding gap at the early stage.
There has also been less supporting activity at the pre-seed level as several Thai accelerators, such as DTAC Accelerate and other corporate programmes, have become inactive.
“If nobody is investing at this stage, then deal flow at the Series A and B stage would dry up in a few years,” warned Jaruthassanakul from 500 TukTuks.
On the brighter side, however, a couple of new sector-focused accelerators have entered the fray including the initiatives launched by energy major PTT Group and food company Thai Union.
In addition, there is increased collaboration between corporate VCs and startups beyond financial investment, such as joint venture establishment and business partnership, according to Worawattananon. “AddVentures is doing a lot of these partnerships as we want to see more local champions in Thailand,” he added.