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Disappointing First Day for G Steel Shares

Posted on: Thursday, 26 January 2006, 00:00 CST

By Ploy Chitsomboon, Bangkok Post, Thailand

Jan. 26--G Steel Plc made a disappointing debut on the market with its share prices falling 16.8 percent from its initial public offering of 1.60 baht despite the market rally.

Shares of G Steel, a manufacturer of hot-rolled steel coil, kicked off at 1.50 baht, 10 satang lower than the IPO level, before closing at 1.33 baht, in trade worth two billion baht. The shares traded in the range of 1.29 and 1.59 baht throughout the day in heavy trade worth 1.99 billion baht.

Somsak Leesawadtrakul, president and CEO of G Steel, said the reason why the share price declined below the IPO was that some investors did not have sufficient understanding of the steel business.

In fact, he said, the company has solid fundamentals and the pricing was fairly appropriate. It has a relatively low debt-to-equity ratio of 0.2 times.

"Global steel demand should increase no less than 10 percent each year. While the world's leading steel manufacturers like China are now reducing production capacity, Thailand can export more steels," he said.

G Steel projected 2005 revenue to exceed 23 billion baht with a net profit of around 2.6-2.7 billion baht, thanks to effective cost management and high margin of its premium steel products.

This year, the company expects its revenue to grow by 5-10 percent on the back of improving steel prices, in line with the average expansion of the steel industry of about 6-8 percent each year.

"We hope to see a better growth this year since steel prices saw a base adjustment for quite sometime last year, so now it's time to pick up," Dr Somsak said.

The company believed that the private placement of 2.7 billion shares before the IPO was unlikely have a significant impact on its share prices even though some portions of the shares do not have a silent period.

"Most of PP share buyers were suppliers, which were familiar with our business. They will look for long-term investment," Dr Somsak said.

G Steel posted a net profit of 206.88 million baht during the third quarter of 2005, declining from 427.15 million baht during the same period last year.

Total revenues for the nine-month period stood at 17.76 billion baht and a net profit was two billion baht, a big drop from 4.7 billion baht during the same period last year.

Udomsak Chakreyavanich, president of Asia Plus Securities, which is the financial advisor for G Steel, said the SET has shown a strong concern about the plunge of IPO shares on first-day trade. There will be a meeting of the IB Club today to tackle this problem.

Sopawadee Lertmanaschai, a SET executive vice-president, said the fall of G Steel share prices could have an initial psychological effect on the market because it was the first IPO, but it wouldn't cause a delay in any new listings.

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Copyright (c) 2006, Bangkok Post, Thailand

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Source: Bangkok Post

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