New Toyo

is could be that BAT dun wish to engage one who cannot meet their increased demand?
or it could be BAT paid a premium for the un-utilised capacity as operating capacity has to be 30% lesser than factory's max capacity?

I am inclined to think along the same line as you

BAT has expected at least a 30% growth in production volume during the term of the supply contract.

In the latest 2012 AR, Tien Wah cited that one of the KPIs (complaints from clients) have dropped significantly. Tien Wah is further aiming to achieve 0% defect rate, the 1st of its kind in the tobacco packaging industry.

If u check around the tobacco packaging sector, it is very rare indeed for any company to be able to secure such a long term supply contract with BAT (7 yrs + an option for 3-yr renewal). Tien Wah has shown that it is a league above the rest.

It is interesting to note that Amcor has acquired many other regional tobacco printers around the world, e.g. North/South Americans, etc. But it just did not "dare" to come and touch Tien Wah yet. Amcor also has stake in Amvig. The key reason (my personal conjecture) is very clear - BAT did not like Amcor to dominate in the Asia Pacific region. if you check the history, Amcor was previously in Malaysia and had some stakes in Tien Wah. But it was "ousted" out by BAT, and New Toyo came in to have the controlling stake in Tien Wah.

The further implication is that BAT is likely to renew the contract with Tien Wah who has served its master well. Afterall, BAT was the one who wanted to nurture Tien Wah all along as a counterweight against other regional competitors such as Amcor and Amvig. BAT did not want tobacco printing to be "over-consolidated". This is the overarching strategic view. With this backdrop in mind, the strong critics of Tien Wah/New Toyo might change their mind.

As BAT has a higher footprint in developing countries compared to PMI, Tien Wah is set to benefit further in many ways
Afterall, it is still a big smoking world in many developing countries for decades to come...

(07-06-2013, 11:04 PM)pianist Wrote: is could be that BAT dun wish to engage one who cannot meet their increased demand?
or it could be BAT paid a premium for the un-utilised capacity as operating capacity has to be 30% lesser than factory's max capacity?

(08-06-2013, 12:53 AM)Underdogger Wrote: BAT has expected at least a 30% growth in production volume during the term of the supply contract.
The further implication is that BAT is likely to renew the contract with Tien Wah who has served its master well.
In the latest 2012 AR, Tien Wah cited that one of the KPIs (complaints from clients) have dropped significantly. Tien Wah is further aiming to achieve 0% defect rate, the 1st of its kind in the tobacco packaging industry.
If u check around the tobacco packaging sector, it is very rare indeed for any company to be able to secure such a long term supply contract with BAT (7 yrs + an option for 3-yr renewal). Tien Wah has shown that it is a league above the rest .

The 30% spare production capacity at any one time required of Tien Wah under the BAT supply agreement is to meet demand fluctuation and surges, according to Tien Wah's circular dated 14 Jul 2009.

BAT gave up producing its own cigarette cartons to concentrate on cigarette production and marketing. In 2008, BAT sold its printing firm in Australia, Anzpac, to Tien Wah; and as part of the sale arrangement, Tien Wah is given the exclusive rights to supply cigarette cartons to BAT factories in Singapore, Malaysia , Australia and Vietnam for seven year, with option of renewal for another three years

It may be inferred that the long duration of the supply agreement is to enable Tien Wah to invest in infrastructure for higher printing volume and more sophisticated printing demanded by BAT. Events have proved that the RM 75m spent by Tien Wah on equipment acquisition and upgrading is highly profit-accretive.

Given the importance of cartons in BAT's overall production chain, it is reasonable to assume that BAT would want Tien Wah to operate smoothly to enable the BAT factories to churn out their final products uninterrupted.

The notion that BAT being unreasonable to Tien Wah seems far-fetched.

what do U mean by far fetched

(08-06-2013, 11:55 AM)pianist Wrote: what do U mean by far fetched

There has been suggestion that BAT is unreasonable to New Toyo/Tien Wah, insisting on 30% spare production capacity.
Taking into account the background leading to the award of exclusive supply contract to Tien Wah, and the fact that Tien Wah has been performing well and profitably, the suggestion seems improbable.

(08-06-2013, 09:50 PM)portuser Wrote: There has been suggestion that BAT is unreasonable to New Toyo/Tien Wah, insisting on 30% spare production capacity.
Taking into account the background leading to the award of exclusive supply contract to Tien Wah, and the fact that Tien Wah has been performing well and profitably, the suggestion seems improbable.

I see. correct me if I am wrong, but I tot the recent announcement indicated that the contract has not been confirmed yet rite?

(08-06-2013, 09:59 PM)pianist Wrote:

(08-06-2013, 09:50 PM)portuser Wrote: There has been suggestion that BAT is unreasonable to New Toyo/Tien Wah, insisting on 30% spare production capacity.
Taking into account the background leading to the award of exclusive supply contract to Tien Wah, and the fact that Tien Wah has been performing well and profitably, the suggestion seems improbable.

I see. correct me if I am wrong, but I tot the recent announcement indicated that the contract has not been confirmed yet rite?

Thanks portuser, underdogger, pianist for the very insightful comments (finally!) with regards to new toyo/ tieh wah. Good to break out of some forummers repetitive, almost daily run down of the company using the same old reasons.

Anyway, if im not wrong, it has not been confirmed yet but I remember reading somewhere during my research that they are 'confident' that the contract will be confirmed. Let's see how it goes..

I don't want to sound like a old broken recorder and a wet blanket - the truth is NT (no target) has yet to deliver since listing in 1997 and hence the good reason why share price remains so attractive even now.

Wind back - the Vietnamese tissue plant that has to be bailed out by Yen family eventually after NT started it as a promising business (at the turn of the 2000), SAH listing that turned out to be a cashing out of sunset packing business in China and the sale of Aluminium packaging shortly after it was started up till the long drawn dissolution of the company, the buying out of BAT Aussie/Asia Pac business (and the long lead time to ramp up the business - took almost 2 - 3 years to install capacity for the initial 7 years contract, in the process paying excessively to external contractors to fulfill BAT demands. In addition,NT continued to sit on a pile of non-core China properties...

If management is indeed caring for minorities, there would have been progressive measures proactively undertaken for the benefit of all shareholders - 16 years and still trading below book value giving high div yield...

Caveat Emptor
GG
Vested (Odd Lots)

seeing so much interest in new toyo, i decided to check its m'sia counterpart.
agree that biz is healthy n nowhere near ailing.
i noted that tien wah owns quite a lot of land in m'sia but all are leasehold n would expire in some 40-50yr.
of interest in the some 10acres of freehold land in australia which was acquired some 20yrs ago. is that value reflected in tien wah current nav? if not, this wld provide added downside guard. can this be redev into housing etc?

(08-06-2013, 09:59 PM)pianist Wrote:

(08-06-2013, 09:50 PM)portuser Wrote: There has been suggestion that BAT is unreasonable to New Toyo/Tien Wah, insisting on 30% spare production capacity.
Taking into account the background leading to the award of exclusive supply contract to Tien Wah, and the fact that Tien Wah has been performing well and profitably, the suggestion seems improbable.

I see. correct me if I am wrong, but I tot the recent announcement indicated that the contract has not been confirmed yet rite?

The contract that you refer to is the supply of specialty paper. New Toyo disclosed the following in its 1Q 2013 results announcement:
"The Specialty Papers Business has participated in a tender for a long term supply agreement with our major customer and we are confident that we would be successful in securing the contract."

Specialty paper used by the tobacco industry is laminated aluminium paper that bundles cigarette sticks which are then put in printed cigarette carton.

The contract that has attracted forumers' attention is the supply of printed cigarette cartons for seven years. It commenced in Dec 2008 and will end in Dec 2015, whereupon New Toyo/Tien Wah will have the rights to match the lowest bid; and if it does so, will continue to serve BAT in the designated territories for another three years.

Forumers' concerns revolve around losing the contract on its expiry in Dec 2015, as well as the terms of the supply being loaded against New Toyo/Tien Wah.