Analysts have a negative view about the Esso IPO Pricing.
They claim that the Esso IPO shares offer price are on the tighter side, given the valuations it has. The limited upside it has to offer, is difficult for achieving given the offer price.
As per the IPO details, Esso IPO is planning to collect capital in the range of 10 billion baht by offering a total of 1.099 billion shares in the price band of 9 to 13 baht per share. The Esso IPO will remain open from April 21-22, comprising 773.3 million new shares and 326.3 million existing shares to be sold by the Finance Ministry. Another 84.6 million shares are being reserved under a greenshoe option.
Offering the greenshoe option provides some cover and shield, but the high offer price may mean that the Esso IPO may not get the expected subscription.
From the IPO filings, the PE ratio for Esso looks in the range of 4.3 to 6.3 i.e. the price to earnings ratio. This looks like a great deal compared to the overall market in Thailand which has a PE valuation of around 12.
But Kosin Sribaiboon, a senior vice-president with UOB Kay Hian Securities, said that once the dilution effect of the new shares was considered, and from a forward-looking earnings perspective, the stock was quite expensive.
Esso also reported to have profits of 7.05 billion baht in 2007 on revenues of 199.9 billion, up from profits of 1.57 billion on revenues of 195.3 billion baht the year before.
Profits were largely driven by restructuring gains, as the company's liabilities dropped to 46.42 billion baht at the end of last year compared with 78.19 billion in 2006.
Under the restructuring plan, Exxon Mobil put up 14.69 billion baht in cash in return for 1.469 billion shares, while the Finance Ministry received 262.5 million shares for 2.63 billion baht. Exxon Mobil Chemical also participated in the restructuring and received 368 million shares for 3.68 billion baht.
Related: Thailand AsiaSoft IPO Review
According to Esso's share prospectus, downstream operations accounted for 92.3% of total income last year, with the rest from petrochemical operations. Gross refining margins averaged $7.29 per barrel last year, compared with $3.38 the year before.
Esso has 374 agents with 423 stations nationwide, as well as a refinery with average capacity of 177,0000 barrels per day. The company also operates an aromatics plant with paraxylene production capacity of 500,000 tonnes per year.
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