Tien Wah

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#11
With regard to the interest expense, I am not talking about its ability to service the debt as I have no doubt that it will have the ability to service it. I am talking about the erosion of profit and cashflow as a result of its high interest expense.

Consider the effect to the bottom line if the debt is fully cleared. Consider the total amount of interest expense that it has paid for the past 3 years. The same argument applies for its high capex of RM 75m in 3 years.
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#12
Without taking on debt in the first place, how could Tien Wah have acquired ANZPAC, win the exclusive contract and achieved growth in attributable profit from RM14m in 2007 to RM26m four years later?
Another point worth mentioning here is that it is unlikely that New Toyo is exploiting Tien Wah through MEIL, as alleged. Otherwise, it would not have converted its RM 27.4m shareholder's loan to MEIL into equity.
But I appreciate your aversion to debt financing and setback during start-up.
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#13
Portuser,
Tien Wah has posted a good set of results in 2Q 2012. Does results so far show that Tien Wah is getting adequate returns from its investment in Anzpac? Are there any reasons to believe that the good results can continue?

(04-06-2012, 07:21 PM)portuser Wrote: As pointed out by you, Tien Wah fared badly after the (7+3)-year contract with BAT took effect in Dec 2008. In 2009 and 2010, it did not have enough equipment to undertake short-run jobs required by BAT, and had to outsource some orders at a loss. Wastage and inefficiency while learning to switch from long-run printing to short-run printing also resulted in higher cost. But with new equipment, 2011 turned out to be a good year and 1Q 2012 was also not bad.
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#14
profit margins for tobacco printers (such as Tien Wah, and by extension New Toyo) for plain packaging may be squeezed...

Revenue is likely to drop at faster rate than cost - net impact will be lower profit margin...

the profit margin might drop further if printing decline sets in with lower smoking rates (starting in Australia, then as Plain Packaging fire spreads to other BAT territories, etc..)

New Toyo has reduced its dividends from 0.97 cents (half yearly) to 0.8 cents for the 1st time in 3 years - this is probably strong tell tale sign of weaker profit margins ahead

*********
Plain tobacco pack law puts the choke on fancy printing
17 Aug 2012 | Steven Kiernan | 1 Comment
Plain packaging will squash fancy embellishments but won't affect volumes at the country's largest printer of cigarette packets – unless the law stops people smoking.
This week, the High Court upheld the Federal government's plain packaging legislation, following a challenge from Big Tobacco.
It paves the way for cigarette packets – traditionally relatively high-value, highly embellished printed products – to be replaced by drab, olive-brown boxes.
The legislation will have the greatest impact on Sydney-based Anzpac, which prints cartons for British American Tobacco (BAT) and Imperial Tobacco.
The packaging company, which was established in 1900, has a long history in supplying the tobacco industry. It was bought by Rothmans in 1986, then become the regional print site for BAT following its merger with Rothmans in 1999, before being sold to Singapore-based New Toyo International Holdings for $60 million in 2008.
Cigarette packets that roll off the presses at Anzpac's Smithfield site include BAT brands Dunhill, Winfield, Benson & Hedges and Stradbroke and Imperial brands Horizon, Escort and JPS.
Printed board for Imperial brands is shipped to Imperial's factory in Petone, New Zealand, which completed a NZ$45 million overhaul this month.
Factory manager Mike McInnarney told ProPrint that Imperial had upgraded its New Zealand manufacturing after the end of a deal in which BAT's Sydney plant produced Imperial cigarettes for the Australian market.
Printed board for BAT brands is sent to either Singapore or Sydney for converting.
No one from Anzpac or New Toyo would comment directly. While it is clear that the plain packaging legislation will not immediately affect Anzpac's volumes, it is likely to hit margins.
One industry source told ProPrint: "The actual number of units should not change. So from a revenue perspective, the revenue will go down because the packs are simpler to produce and it removes a lot of complexity.
"Cigarette packs are highly embellished, and that embellishment comes at a cost, so there is an impact on revenue and profitability, not from volume initially but from simplification."
However, the source agreed that if the legislation works as intended, the total number would also drop as more people are turned off smoking. "If you listen to government, the volume will decrease."
Other suppliers throughout the print and packaging supply chain are also expected to take a hit, such as suppliers of foil and inks.

(14-09-2012, 01:07 PM)Sfsh12 Wrote: Portuser,
Tien Wah has posted a good set of results in 2Q 2012. Does results so far show that Tien Wah is getting adequate returns from its investment in Anzpac? Are there any reasons to believe that the good results can continue?

(04-06-2012, 07:21 PM)portuser Wrote: As pointed out by you, Tien Wah fared badly after the (7+3)-year contract with BAT took effect in Dec 2008. In 2009 and 2010, it did not have enough equipment to undertake short-run jobs required by BAT, and had to outsource some orders at a loss. Wastage and inefficiency while learning to switch from long-run printing to short-run printing also resulted in higher cost. But with new equipment, 2011 turned out to be a good year and 1Q 2012 was also not bad.
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#15
(14-09-2012, 01:07 PM)Sfsh12 Wrote: Portuser,
Tien Wah has posted a good set of results in 2Q 2012. Does results so far show that Tien Wah is getting adequate returns from its investment in Anzpac? Are there any reasons to believe that the good results can continue?



Tien Wah's financial statements do not provide the information required by you.
Tien Wah borrowed heavily to buy Anzpac from BAT in Dec 2008. Bank loans rose to RM 159m from RM 25m a year earlier. To sweeten the deal as Australia is a mature market, BAT also elevated Tien Wah to become its exclusive supplier of printed cigarette boxes in Vietnam, Malaysia and Singapore.
BAT's decision in 2009 to introduce brand variants for continual brand refreshing resulted in Tien Wah having to run more short-run printing jobs, which are time-consuming. To buy more equipment, Tien Wah borrowed again bringing loans to RM 176m.
Before the arrivals of new machines, some short-run jobs had to be farmed out at high costs. Pre-tax margin plunged reaching a low of 5.5% in 2010 (from 12.9% before supply contracts). When all machine were installed by 2011 and workers became more proficient, margin bounced back to 10.5%, and 14.3% in 2Q 2012. It will be interesting to see if this is sustainable.

........................................2007.....2008.....2009....2010....2011...1H2012....2Q2012

....Revenue (RM m)............130.......186.......329......355......389........203..........106

Pre-tax profit (RM m)*.........15.5......26.3......34.2.....19.5.....40.9.......23.8.........15.2

Pre-tax margin(%)...............12.3.....12.9........8.1......5.5.....10.5.......11.8........14.3
* Pre-tax profit exclude the associated company.
Tien Wah was unfazed by the margin plunge and high loans. It has paid a total of RM 33.1m in dividends after the Anzpac purchase.
Despite the RM 33.1m dividend payout and RM 75m on machine acquisition, bank loans came down to RM 95m from the peak of RM 176m, and cash built up to RM 51m:
.........................................2007.....2008.....2009....2010....2011...1H2012


Bank loans (RM m)................25.......159........176......129......112.........95

Cash (RM m).........................14.........13..........31........29........40........51

Cash should rise further as the machine acquisition spree has already ended. Tien Wah should be debt-free soon.
These developments should put paid to earlier concerns that the Anzpac purchase and the exclusive contracts are poisons for Tien Wah to swallow.
Before a new printing job commences, machine is cleaned thoroughly to remove all ink remnants from the previous job. Meticulous trial runs are then conducted to assess whether the required visual impact is achieved before the actual printing. These are time-consuming tasks. As brand variants are not allowed under plain packaging, printing of each brand will necessarily be long-run, obviating the tedium between short-run jobs. Chairman Tien Wah therefore holds the view that plain packaging may not reduce profit. He also sees no reason to believe that plain packaging will diminish the urge to smoke.
There are two interpretations of the reduction of interim dividend rate by New Toyo. One is that the cut is in anticipation of margin squeeze to be brought about by plain packaging. The other is that it is an adjustment to factor in the loss of Shanghai Asia's recurrent profit after the sales of all its operating assets.
Tien Wah CEO has referred to the expectation of reduction in smoking rate in Australia arising from plain packaging. He is aiming for mid-to-high single digit overall revenue growth. A 8.52 sen gross dividend has been proposed on the back of strong 2Q 12 results. There is no sign of rainy days ahead unless Tien Wah management is being complacent.
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#16
the Australian segment (i.e. Plain packaging) volume is only a small segment of the overall printing volume.

The key indeed should be the growth potential for the remaining Asian markets. Aussie and NZ are declining markets anyway.

Smile

(16-09-2012, 12:35 PM)portuser Wrote:
(14-09-2012, 01:07 PM)Sfsh12 Wrote: Portuser,
Tien Wah has posted a good set of results in 2Q 2012. Does results so far show that Tien Wah is getting adequate returns from its investment in Anzpac? Are there any reasons to believe that the good results can continue?



Tien Wah's financial statements do not provide the information required by you.
Tien Wah borrowed heavily to buy Anzpac from BAT in Dec 2008. Bank loans rose to RM 159m from RM 25m a year earlier. To sweeten the deal as Australia is a mature market, BAT also elevated Tien Wah to become its exclusive supplier of printed cigarette boxes in Vietnam, Malaysia and Singapore.
BAT's decision in 2009 to introduce brand variants for continual brand refreshing resulted in Tien Wah having to run more short-run printing jobs, which are time-consuming. To buy more equipment, Tien Wah borrowed again bringing loans to RM 176m.
Before the arrivals of new machines, some short-run jobs had to be farmed out at high costs. Pre-tax margin plunged reaching a low of 5.5% in 2010 (from 12.9% before supply contracts). When all machine were installed by 2011 and workers became more proficient, margin bounced back to 10.5%, and 14.3% in 2Q 2012. It will be interesting to see if this is sustainable.

........................................2007.....2008.....2009....2010....2011...1H2012....2Q2012

....Revenue (RM m)............130.......186.......329......355......389........203..........106

Pre-tax profit (RM m)*.........15.5......26.3......34.2.....19.5.....40.9.......23.8.........15.2

Pre-tax margin(%)...............12.3.....12.9........8.1......5.5.....10.5.......11.8........14.3
* Pre-tax profit exclude the associated company.
Tien Wah was unfazed by the margin plunge and high loans. It has paid a total of RM 33.1m in dividends after the Anzpac purchase.
Despite the RM 33.1m dividend payout and RM 75m on machine acquisition, bank loans came down to RM 95m from the peak of RM 176m, and cash built up to RM 51m:
.........................................2007.....2008.....2009....2010....2011...1H2012


Bank loans (RM m)................25.......159........176......129......112.........95

Cash (RM m).........................14.........13..........31........29........40........51

Cash should rise further as the machine acquisition spree has already ended. Tien Wah should be debt-free soon.
These developments should put paid to earlier concerns that the Anzpac purchase and the exclusive contracts are poisons for Tien Wah to swallow.
Before a new printing job commences, machine is cleaned thoroughly to remove all ink remnants from the previous job. Meticulous trial runs are then conducted to assess whether the required visual impact is achieved before the actual printing. These are time-consuming tasks. As brand variants are not allowed under plain packaging, printing of each brand will necessarily be long-run, obviating the tedium between short-run jobs. Chairman Tien Wah therefore holds the view that plain packaging may not reduce profit. He also sees no reason to believe that plain packaging will diminish the urge to smoke.
There are two interpretations of the reduction of interim dividend rate by New Toyo. One is that the cut is in anticipation of margin squeeze to be brought about by plain packaging. The other is that it is an adjustment to factor in the loss of Shanghai Asia's recurrent profit after the sales of all its operating assets.
Tien Wah CEO has referred to the expectation of reduction in smoking rate in Australia arising from plain packaging. He is aiming for mid-to-high single digit overall revenue growth. A 8.52 sen gross dividend has been proposed on the back of strong 2Q 12 results. There is no sign of rainy days ahead unless Tien Wah management is being complacent.

Dear Shanrui

I would like to hear your brilliant interpretation of Tien Wah 3Q 2012 results.

Tks


(05-06-2012, 04:17 PM)shanrui_91 Wrote: With regard to the interest expense, I am not talking about its ability to service the debt as I have no doubt that it will have the ability to service it. I am talking about the erosion of profit and cashflow as a result of its high interest expense.

Consider the effect to the bottom line if the debt is fully cleared. Consider the total amount of interest expense that it has paid for the past 3 years. The same argument applies for its high capex of RM 75m in 3 years.
[I am not here to promote any stocks. Please always do your own research before embarking on any investment decision. I will not be liable for any of your own decisions. Your use of any information or materials is entirely at your own risk. It is your responsibility to ensure that any products, services or information meet your specific requirements. I do not produce material which meets the objectives of any specific financial and risk profile of investors.]
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#17
(01-12-2012, 09:23 AM)Curiousparty Wrote: Dear Shanrui

I would like to hear your brilliant interpretation of Tien Wah 3Q 2012 results.

Tks


(05-06-2012, 04:17 PM)shanrui_91 Wrote: With regard to the interest expense, I am not talking about its ability to service the debt as I have no doubt that it will have the ability to service it. I am talking about the erosion of profit and cashflow as a result of its high interest expense.

Consider the effect to the bottom line if the debt is fully cleared. Consider the total amount of interest expense that it has paid for the past 3 years. The same argument applies for its high capex of RM 75m in 3 years.

You have flattered me, I am not that brilliantSmile

It is certainly a huge positive for Tien Wah to have Capex of only 4.68m as compared to 28m for 9m2012. If Tien wah can maintain this way for its remianing years of contract, then they will be able to compensate for their previous 75m capex in 3 years.

May Tien Wah and New Toyo huat
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#18
May I also ask your view on the impact of plain packaging on the revenue and profit/profit margin of Tien Wah?

Tks,

(01-12-2012, 10:28 AM)shanrui_91 Wrote:
(01-12-2012, 09:23 AM)Curiousparty Wrote: Dear Shanrui

I would like to hear your brilliant interpretation of Tien Wah 3Q 2012 results.

Tks


(05-06-2012, 04:17 PM)shanrui_91 Wrote: With regard to the interest expense, I am not talking about its ability to service the debt as I have no doubt that it will have the ability to service it. I am talking about the erosion of profit and cashflow as a result of its high interest expense.

Consider the effect to the bottom line if the debt is fully cleared. Consider the total amount of interest expense that it has paid for the past 3 years. The same argument applies for its high capex of RM 75m in 3 years.

You have flattered me, I am not that brilliantSmile

It is certainly a huge positive for Tien Wah to have Capex of only 4.68m as compared to 28m for 9m2012. If Tien wah can maintain this way for its remianing years of contract, then they will be able to compensate for their previous 75m capex in 3 years.

May Tien Wah and New Toyo huat
[I am not here to promote any stocks. Please always do your own research before embarking on any investment decision. I will not be liable for any of your own decisions. Your use of any information or materials is entirely at your own risk. It is your responsibility to ensure that any products, services or information meet your specific requirements. I do not produce material which meets the objectives of any specific financial and risk profile of investors.]
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#19
Massive sell-off by one of the substantial shareholders recently....
Lembaga Tabung Angkatan Tentera (Armed Forces)
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#20
The margin for Q3 2012 has dropped!!
High margin may not be sustainable plus the recent sell-off by Armed forces....Has the Armed Forces "sensed" the complacency of Tien Wah's management?


(16-09-2012, 12:35 PM)portuser Wrote:
(14-09-2012, 01:07 PM)Sfsh12 Wrote: Portuser,
Tien Wah has posted a good set of results in 2Q 2012. Does results so far show that Tien Wah is getting adequate returns from its investment in Anzpac? Are there any reasons to believe that the good results can continue?



Tien Wah's financial statements do not provide the information required by you.
Tien Wah borrowed heavily to buy Anzpac from BAT in Dec 2008. Bank loans rose to RM 159m from RM 25m a year earlier. To sweeten the deal as Australia is a mature market, BAT also elevated Tien Wah to become its exclusive supplier of printed cigarette boxes in Vietnam, Malaysia and Singapore.
BAT's decision in 2009 to introduce brand variants for continual brand refreshing resulted in Tien Wah having to run more short-run printing jobs, which are time-consuming. To buy more equipment, Tien Wah borrowed again bringing loans to RM 176m.
Before the arrivals of new machines, some short-run jobs had to be farmed out at high costs. Pre-tax margin plunged reaching a low of 5.5% in 2010 (from 12.9% before supply contracts). When all machine were installed by 2011 and workers became more proficient, margin bounced back to 10.5%, and 14.3% in 2Q 2012. It will be interesting to see if this is sustainable.

........................................2007.....2008.....2009....2010....2011...1H2012....2Q2012

....Revenue (RM m)............130.......186.......329......355......389........203..........106

Pre-tax profit (RM m)*.........15.5......26.3......34.2.....19.5.....40.9.......23.8.........15.2

Pre-tax margin(%)...............12.3.....12.9........8.1......5.5.....10.5.......11.8........14.3
* Pre-tax profit exclude the associated company.
Tien Wah was unfazed by the margin plunge and high loans. It has paid a total of RM 33.1m in dividends after the Anzpac purchase.
Despite the RM 33.1m dividend payout and RM 75m on machine acquisition, bank loans came down to RM 95m from the peak of RM 176m, and cash built up to RM 51m:
.........................................2007.....2008.....2009....2010....2011...1H2012


Bank loans (RM m)................25.......159........176......129......112.........95

Cash (RM m).........................14.........13..........31........29........40........51

Cash should rise further as the machine acquisition spree has already ended. Tien Wah should be debt-free soon.
These developments should put paid to earlier concerns that the Anzpac purchase and the exclusive contracts are poisons for Tien Wah to swallow.
Before a new printing job commences, machine is cleaned thoroughly to remove all ink remnants from the previous job. Meticulous trial runs are then conducted to assess whether the required visual impact is achieved before the actual printing. These are time-consuming tasks. As brand variants are not allowed under plain packaging, printing of each brand will necessarily be long-run, obviating the tedium between short-run jobs. Chairman Tien Wah therefore holds the view that plain packaging may not reduce profit. He also sees no reason to believe that plain packaging will diminish the urge to smoke.
There are two interpretations of the reduction of interim dividend rate by New Toyo. One is that the cut is in anticipation of margin squeeze to be brought about by plain packaging. The other is that it is an adjustment to factor in the loss of Shanghai Asia's recurrent profit after the sales of all its operating assets.
Tien Wah CEO has referred to the expectation of reduction in smoking rate in Australia arising from plain packaging. He is aiming for mid-to-high single digit overall revenue growth. A 8.52 sen gross dividend has been proposed on the back of strong 2Q 12 results. There is no sign of rainy days ahead unless Tien Wah management is being complacent.
[I am not here to promote any stocks. Please always do your own research before embarking on any investment decision. I will not be liable for any of your own decisions. Your use of any information or materials is entirely at your own risk. It is your responsibility to ensure that any products, services or information meet your specific requirements. I do not produce material which meets the objectives of any specific financial and risk profile of investors.]
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