BGC: A Capital Increase to Buy Its Own Shares

People went wild as soon as BG Container Glass Public Company Limited (BGC) announced the capital increase of 403.40 million newly issued ordinary shares divided into 3 categories…(a) 245.10 million shares for the Rights Offering (RO) (b) 88.86 million shares for the warrants and (c) 69.44 million shares for Private Placement (PP).

The purpose of capital increment is to raise a fund of 3,978 million baht in order to acquire 3 companies including Bangkok Visypak Company Limited (BVP), BG Packaging Company Limited (BGP), and Kabinburi Glass Industry Company Limited (KBI).

Consequently, the share price of BGC last Friday (Oct 16, 2020) collapsed 20.56% to trade at ฿9.85/share with a total trading value of 338.31 million baht, while the price yesterday (Oct 19, 2020) dropped 5.08% to ฿9.35/share with a trading value of 85.70 million baht.

This capital increase is expected to reinforce BGC, who operates in the glass packaging business, to be more comprehensive. Bangkok Visypak is a manufacturer and distributor of paper packaging and logistics industry. BG Packaging is a manufacturer of plastic packaging including PET bottles, preform tubes, plastic caps, plastic crates, plastic films for packaging labels. Kabinburi Glass Industry is a manufacturer of float glass for various functions including for architectural and automotive purposes, such as tempered glass and laminated glass.    

There are notices going up that 1) the acquisition of 3 companies (BVP, BGP and KBI) is expected to purchase from the same group of people “Bhirombhakdi Group” and 2) All 3 companies have unsatisfied operation performances.     

Bangkok Visypak reported a total income of 618 million baht in 2017 with a net profit of 9 million baht. 2018’s profit was 11 million baht before experiencing a loss of 0.78 million baht in 2019. While revenue for the first six months of this year was 319 million baht with a net profit of 20 million baht.  

BG Packaging’s 2017 revenue was 505 million baht, while net profit stood at 18 million baht. In 2018, total income was 1,001 million baht with a net profit of 46 million baht. In 2019, income was 964 million baht and profit was 48 million baht. For the first six months of 2020, the company recorded an income of 444 million with a net profit of 25 million baht.

Kabinburi Glass Industry had a revenue in 2017 of 226 million baht with a net loss of 26 million baht. In 2018, revenue was 1,522 million baht with a net loss of 173 million baht. In 2019, the company posted a sharp loss of 244 million baht with an income of 1,611 million baht, meanwhile the revenue for January – June period in 2020 was 632 million baht and net loss was 147 million baht.

It seems like BGC budgets 4,000 million baht in exchange for collecting loss in its portfolio. The current question is when and how will loss transform to profit. Many shareholders are now waiting for the answer.