, Singapore

Is Thai Bev’s Charoen unimpressed with his own company’s growth prospects?

He sold 534m warrants last week.

Thai tycoon Charoen Sirivadhanabhakdi has reportedly sold 534m Thai Bev warrants last week. The exercise, which was done by his investment vehicle Kindest Place, will allow warrant holders to convert 1-for-1 to Thai Bev shares on July 2018.

The exercise was priced at $0.9941, which represents a 32% premium over the company’s current share price. 

According to CIMB, the move probably means that Charoen does not expect ThaiBev’s earnings to deliver a CAGR beyond 10% over the next three years.

“Chaoren is probably taking the view that market is peak-ish and is getting some call premium upfront for a promise to sell his shares at S$0.9941 in three years’ time, if the share price get there. We think this is a sensible move by Charoen. With the bulk of Thai Bev’s earnings coming from low-growth spirits division, we think this is a reasonable assumption,” CIMB said.

And while management selling is always taken as a bad thing, CIMB noted that the amount involved is small and translates to only 2.1% of Charoen’s majority stake in Thai Bev.

“We interpret that buyers of the warrants would be those bullish on Thai Bev's long-term prospects, betting that the transformation into a true ASEAN F&B giant will reap a higher valuation multiple. Yet, the warrant holders do not want to commit a large capital outlay on a stock that is not exactly high-growth," CIMB said. 

"By subscribing to the warrants, they get the same dividend as the Thai Bev shareholders, yet only need to put down 4.2% of the capital needed to invest in the stock. Sure, their risk is that if the stock only appreciates 20-30% over the next three years, they will lose their upfront warrant premium paid. The reprieve is that they will enjoy dividends to offset the warrant premium paid,” CIMB added.

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