The Siam Cement PCL (SCC)’s Initial Public Offering (IPO) of its subsidiary packaging firm received a great response with the shares jumping by 4.66 per cent to 359 baht, an increase of 16.00 baht, at 10:25 a.m. on Monday morning.
SCC is a leading business conglomerate in the ASEAN region with three main businesses including cement-building materials, chemicals, and packaging.
The surge reportedly resulted from the announcement of its subsidiary SCG Packaging PCL (SCGP)’s Initial Public Offering (IPO) subscription which amounted to 169 million shares to SCC’s shareholders – a ratio of 7.095 per 1 (Pre-emptive Rights).
SCC’s Board of Directors set the record date on September 11, 2020.
In the past few weeks, SCC shares went down by 10 per cent, reflecting market concerns over the 2020 second-half earnings outlook which is expected to contract.
Positive sentiment
Nomura Securities said that the IPO subscription is considered a supporting factor for the SCC in the short term due to demand for SCGP’s packaging business, which wasn’t as severely affected by the COVID-19 pandemic.
The research team upgraded SCC’s recommendation to ‘Trading Buy’ from ‘Neutral’ while maintaining the 2021 mid-year target price at 362 baht per share.
Analysts from Yuanta Securities also recommend “Buy” on SCC at the target price of 395 baht per share, saying that the IPO subscription is not the only factor.
“The SCC’s downside risk is limited due to the lower average of PBV63 at 1.4x, the growth of HDPE petrochemicals and the benefit from the construction cost after the flood is resolved.”
New normal business
The SCC packaging business marked the most profitable growth among its three core businesses, with the 22 per cent profit contributing during the first half of 2020. The proportion stood less than 10 per cent in the last seven years.
Asia Plus Securities said that SCGP shares would receive great interest from investors as a result of proactive marketing strategies and changing consumer behavior.
SCC targeted another 100 per cent on revenue growth in five years through its packaging business in the ASEAN region.
A positive long-term business outlook under a strong business model could enable SCC to generate long-term growth with consistent dividend payments, said Asia Plus.
As Monday’s morning session ended, SCC shares stood at 357.00 baht per share, an increase of 14 baht or +4.08 per cent, with the transaction value of 1,227 million baht.
