Bangkok--Dec 17--TICON Industrial Connection
TICON Industrial Connection Public Company Limited, Thailand leading factory developer, has appointed Bualuang Securities as its Financial Adviser and Lead Underwriter to establish a new industrial property fund of up to 2 Billion Baht, to be set up as a Type 1 Fund (Property Fund for Public Offering). The Fund plans to acquire approximately 40 leased factories currently owned by TICON. In turn, TICON expects to use the proceeds from this asset sale to further expand its business, which would help keep its high growth rate without capital increase. Investors will also benefit from having a new investment alternative that can provide high yield, and capital gain as a result of asset appreciation.
Commenting on the fund, Matthew Kuan, Managing Director of TICON, said:
“As our shareholders have seen, TICON has shown continued growth since our IPO in June 2002. However, developing for the industrial rental market is capital intensive and, in order to continue growing at our current rate, further share capital increases would be necessary unless we restructure our capital base.
“The establishment of this property fund will provide such a restructuring, and will enable us to grow faster without having to raise further share capital. In essence, by divesting a portion of our leased factory portfolio to the fund, TICON will be able to apply our enhanced resources to our areas of expertise — development, marketing, investment creation, property management and customer service.”
Matthew Kuan said that Bualuang Securities was chosen from a number of financial advisors and financial institutions that expressed interest since TICON announced its intention to launch the fund in November 2004. He said that TICON finally chose Bualuang because it has a deep investor base that can be accessed through its sales force and through the network of its parent, Bangkok Bank. Furthermore, Bualuang Securities has a thorough understanding of TICON’s business, as it was the lead manager and underwriter of the company’s IPO in 2002.
Investment in a property fund is similar to investments in equity in that the fund can grow through rental rate increase, property value appreciation, and asset acquisitions. However, property funds can only invest in property assets, and must pay out 90% of their profits as dividends. In turn, property funds enjoy tax advantages such as being exempted from corporate tax and capital gains tax. These tax savings enable property funds to provide a higher yield than comparable property companies.
Chong Toh, President of Bualuang Securities, said that the timing of the launch was just right. He said, “Investors are currently sacrificing higher yield for fear of capital loss. The Property Fund provides a good arbitrage. Investors can enjoy the higher yield due to tax savings, not due to higher risks. If the fund continues to grow, there will also be capital gains, instead of capital loss. The Industrial Property Fund will raise around Baht 2.0 billion to acquire approximately 40 factories from TICON. This portfolio of carefully selected factories will have a very attractive rental yield, and the factories will continue to be managed by TICON. This way, investors will be able to enjoy returns as landlords of factories that have consistently commanded premium rental due to the great service provided by TICON.”
Chong Toh added that, “Bualuang Securities will continue to come up with different innovations. In a volatile market, Bualuang’s investors will have an advantage because we will have a variety of product offerings. We see that the growing popularity of Property Funds, not just for Thailand, but globally. There is a very strong resurgence of interest in Property Funds, or Real Estate Investment Trusts (REITs) in Asia, and Bualuang is determined to stay at the forefront of innovations.”
Since its inception in 1990, TICON has remained one of Thailand’s leaders to provide standard factory buildings on lease basis. As of 30 September 2004, Ticon has expanded its portfolio to 133 leased factories with a further 84 units either available or under construction. Those factories,with sizes ranging between 1,000 and 6,000 square meters and are located on 10 industrial estates in Ayudhaya, Chonburi, Rayong, Samutprakarn, and Bangkok.
Matthew Kuan explained that the creation of this property fund will benefit many. It will enable TICON to continue to grow its standard factory development program at its current rate whilst expanding its customer base into custom-developed factories and warehouses without diluting shareholder equity. It will provide a secure, high-yielding new investment vehicle with regular dividend distributions for institutional and retail investors, with the potential for the fund to grow exponentially. TICON’s customers will be unaffected, as TICON will continue to manage the properties and provide the same customer services. Finally with a major stake in the fund, and as the fund’s Property and Asset Managers, TICON will be fully committed to the fund in the long term.
PRESS ENQUIRIES, PLEASE CONTACT:
TICON Industrial Connection PCL.
1. Ian Hamilton, Business Development, tel: 66(0) 2-679-6569,
email: [email protected]
2. Lalitphant Phiriyaphant, Finance Manager, tel: 66(0) 2-679-6569,
email: [email protected] End.