BCPG Plc, one of Thailand’s power producers, shocked the market when it announced that it was raising capital, citing the need for it to be able to take the opportunity to pay down debts and expand its capacity in the years ahead.
BCPG, which is more than 70 per cent owned by Bangchak Corporation Plc., said that it was raising its registered capital by 1.3 billion shares at 5 baht par value to take its registered capital to 3.3 billion shares.
The news of the capital increase sent the share price to fall by more than 10 per cent during the trading session to about 13 baht a piece or down 10.34 per cent.
BCPG, in an announcement to the Stock Exchange of Thailand (SET), said that its board had approved the capital raising on the Board of Directors’ Meeting on Thursday to increase the company’s registered capital from 2 billion shares to 3.3 billion shares by issuing 1.3 billion new ordinary shares at par value of 5 baht per share.
Bundit Sapianchai, President of BCPG, revealed that this capital increase provides an opportunity for existing shareholders to take part in fundraising through the right offering (RO) subscription at the ratio of 8:1 at 11.5 baht per share along with a warrant for all those who participate in the capital increase.
BCPG also said that part of the newly issued shares would be issued via Private Placement (PP) at the same price.
Power plant projects
Phatpuree Chinkulkitnivat, the Chief Finance Officer of BCPG, told Thai Enquirer that the capital increase was aimed to expand investment according to its five-year strategic plan which includes a wind energy power plant project in Laos and a solar power plant in Thailand.
Currently, as of the end of the first quarter of 2020, BCPG said on its investors’ relations webpage that it has a power purchase agreement to sell up to 562 megawatts of electricity which are spread from Thailand, Laos, Philippines, and Indonesia to Japan.
BCPG also said that the company planned to use proceeds for loan repayment to financial institutions.
The company stated that foreign institutional investors expressed their intention to acquire capital increase shares with a total value of 4.5 billion baht, reflecting confidence from the market.
To help its subsidiary, Bangchak Corporation Plc (BCP) also came out Friday morning with a statement that its board has also resolved to support the move by BCPG and that it would participate in the capital increase. They added that they would be willing to take up the unsubscribed shares (if any).
The offerings are subjected for approval at the General Meeting of Shareholders on October 7, 2020.
Negative sentiment
Analysts came out to say that the move by BCPG was not the best decision at the current moment, with Asia Plus Securities downgrading its recommendation of BCPG from ‘BUY’ to ‘SWITCH.’
Asia Plus’ analyst said BCPG shares are believed to be under pressure from the capital increase issue and will underperform in the market for a while.
This capital increase is considered suspicious that it would increase the number of shares from 1.99 billion to 3.30 billion shares, or up 65.2 per cent.
The new price objective for 2020 is at 11.90 baht per share, reduced from a previous target price of 19.70 baht per share.
Another analyst from Kasikorn Securities also said that BCPG will gain more net profit in the third quarter from hydropower plants while they revised their 2020-2022 estimated earnings by 6, 6, and 7 per cent respectively for each of the next three years.
However, Phatpuree told Thai Enquirer that the negative sentiment is usual at the beginning of the capital increase issuing, as the company is looking for a sustainable long-term plan.
