A Win-Win Situation for ADVANC under GULF’s Tender Offer Deal

The share price of Advanced Info Service Public Company Limited (ADVANC) continued to edge higher after the announcement of a tender offer by Gulf Energy Development Public Company Limited (GULF) for both ADVANC and its major shareholder, Intouch Holdings Public Company Limited (INTUCH)

 

On April 19, 2021, GULF announced a tender offer for INTUCH at Bt65.00 per share and ADVANC at a surprisingly low price of Bt122.86 per share, resulting in a slight drop of ADVANC’s share price at the open on April 19.

However, ADVANC was able to keep its share price afloat to close the day with a 0.89% gain, followed by an increase of 3.24% in the next trading day. ADVANC has gained 6.54% since the tender offer announcement to close at Bt179.00 as of April 21, 2021.

 

It was a normal reaction for ADVANC’s investors when seeing a lower tender price, but after a short while when everything had been cleared and clarified, the movement returned to its normal self.

 

Two major shareholders of ADVANC are INTUCH and a Singaporean telecommunication company, Sintel, at a proportion of 40.45% and 23.32%, respectively. To make things more complicated than it already is, Singtel also holds 21% stake in INTUCH as well, making this tender offer both direct and indirect acquisition of ADVANC.

According to the other news reports, Singtel stated that the company is satisfied with the earnings from INTUCH as of now, meaning that the Singaporean company may not be interested in selling its stake in INTUCH and ADVANC to GULF.

Meanwhile, Mr. Smith Banomyong, Chief of Asset Management and Investment of GULF, stated that the company will proceed with the tender offer for INTUCH even without Singtel’s interest in selling its shares at a proportion of 21%. The decision to acquire INTUCH was due to a satisfying dividend payment, while expecting further business synergy to create a full-cycle infrastructure.

 

If the tender offer succeeds, GULF will be a major shareholder of INTUCH and possibly ADVANC, followed by Sintel as a second major shareholder.

 

Then it comes to management directions. As a long-time shareholder in INTUCH and ADVANC such as Singtel, the Singaporean company did not intervene with the management unlike some other companies with low free float. Singtel has been enjoying the dividend payment from both INTUCH and ADVANC, leaving the business plan and management to the Board of Directors and shareholders to decide.

Singtel’s concept is the same as GULF. After acquiring nearly 19% of INTUCH, the company remained passive and did not intervene with any management of INTUCH. Just like the company had said, it is satisfying with the dividend payment and the tender offer is not an intention for a delisting. That goes to ADVANC as well in an assumption that the business direction is perfectly on the right path.

 

This is a win-win situation for ADVANC no matter who is the major shareholder of the company. If the tender offer is a success, the company would have a Thai company as a major shareholder with an increased customer base and unlimited possibilities for further growth from a business synergy with GULF. GULF is well-known for its power generation business, but the company has been expanding its business into Thailand’s infrastructure several years ago. GULF is currently a co-project owner of highway, railway and port operators in Thailand. To make these projects fully-equipped with high and modern technology, a 5G technology is the key to its success.

 

If the tender offer fails,ADVANC will just shrug it off and continue developing 5G like nothing has happened after enjoying the rally in share price from the anticipation of business synergy with GULF.

 

Prior to the announcement of the tender offer, DBS Vickers Securities (DBSVS) gave a “BUY” recommendation on ADVANC with a target price of ฿222.00/share (DCF, WACC 7%, TG 4.5%) and a dividend yield forecast at 4%, seeing revenue to start recovering from a dull economy last year.