Thursday, September 16, 2010

UPDATE 2-Thai Air falls as prices $488 mln issue at discount

* Shares down nearly 9 pct at one stage to seven-week low

* Prices stock offer at 31 baht/share, 14.5 percent discount

* To offer 484 mln new shares to raise 15 bln baht

* Expects debt to equity ratio to drop to 1.71 from 2.17 (Adds details, analyst comment)

By Manunphattr Dhanananphorn and Arada Kultawanich

BANGKOK, Sept 15 (Reuters) - Thai Airways THAI.BK shares slumped after it priced new stock worth 15 billion baht ($488 million) at a 14.5 percent discount to the market, cheaper than analysts had expected.

The Thai flag carrier said on Wednesday it would sell 483.89 million new shares at 31 baht each, including 246.93 million to the finance ministry, which had committed itself to maintaining its 51.03 percent stake.

Shares in Thai Airways International Pcl slid nearly 9 percent to a seven-week low as trading in the stock resumed after a brief delay while details of the new issue were announced.

By the midsession, the stock was down 6.9 percent at 33.75 baht, underperforming a 1.3 percent fall in the overall market .SETI.

The shares had fallen 3 percent on Tuesday, when Reuters reported the new stock would be offered at a price as low as 31 baht, compared with analysts' previous expectations of 34-36 baht. [ID:nSGE68D08H]

Analysts are optimistic on the outlook for Thai Airways, which is trying to turn itself round after a bumpy ride in the past couple of years, and say the cash infusion will help.

"Its financial status will be stronger, which will enable the airline to spend on new fleet procurement, and that should help boost its competitiveness and revenue," said Pichai Lertsupongkij, head of sales at Thanachart Securities.

The airline plans to buy 15 planes in 2010-2014, seven Airbus A330-300s (EAD.PA) and eight Boeing B777-300ERs (BA.N).

Thanks to a revival in international traffic, the fortunes of its Asian rivals have also picked up. Singapore Airlines Ltd (SIAL.SI), the world's No. 2 airline, posted strong profit in April-June [ID:nSGE66P0EH] and first-half profit at Hong Kong's Cathay Pacific Airways (0293.HK) beat forecasts. [ID:nTOE67104F]

Some 221.83 million of the new shares of Thai Airways will be offered to existing shareholders other than the Finance Ministry at a ratio of 0.2667 new share for every one held.

The proceeds will also be used to repay debt, strengthen the airline's financial status and support its business expansion.

The subscription will run from Sept. 16-17. Morgan Stanley (MS.N), Thailand's Phatra Securities PHAT.BK and Finansa Pcl FNS.BK are advisers for the public offering.

"After the capital raising, our debt to equity ratio will fall to 1.71 from 2.17 at the end of June," Thai Airways Chairman Ampon Kittiampon told a news conference.

PROFIT IMPROVES

The airline, which has registered capital of 17 billion baht, is in the process of overhauling operations and restructuring management as t aims to take a place among the top three airlines in Asia and top five in the world.

The airline's financial performance has improved this year, after cashflow problems and a huge net loss of 21.4 billion baht in 2008 attributed to surging fuel costs, the global economic slowdown and airport closures caused by political protests,

In the first half of 2010, it reported a net profit of 12.3 billion baht, bolstered by huge gains on foreign exchange.

Analysts say Thai Airways' outlook has improved as the political situation in Thailand has stabilised after unrest in April and May that deterred visitors. The final quarter is the high season for tourism in Thailand.

The airline is expected to report a mean net profit of 7.8 billion baht this year, up from 7.3 billion baht in 2009, according to Thomson Reuters I/B/E/S Estimates. ($1=30.73 Baht)

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