Tat Seng Packaging

[dydx]

I guess, at the end of the day, the fair value of Tat Seng as a business will be depedent on (1) the size and quality of the business and its present customer base; (2) the size and quality of its present fixed and operating assets; (3) whether the management team is good-enough; (4) its present earnings and cash generation capacity; and (5) any good potential for the business to grow further.

Based on Tat Seng's FY10 (ended 31Dec10) results....
http://info.sgx.com/webcoranncatth.nsf/V...penelement
in FY10, the business earned $6.225m in NP, produced a pretax operating free cash flow (before accounting for changes in working capital items, and capex) of $13.104m, and ended the year with an equity position of $56.66m. Based on Tat Seng's 157.2m outstanding issued shares, these numbers translate to an EPS of approx. $0.04, a FCF/share of approx. $0.083, and a NAV/share of $0.36.

By rational thinking, given enough time, Mr Market, and any trade sale of the entire business in the future, should be guided by the above parameters and investors' assesments on them and other relevant factors.

[dydx]

Lacklustre 1H-FY11 results.....
http://info.sgx.com/webcoranncatth.nsf/V...00031B3A8/$file/TS_Result_Announcement_1H_201.pdf?openelement
While revenue continued to post healthy y-o-y increase, the rather sharp fall in PBT was mainly due to higher raw material prices. FCF continues to cover capex for capacity expansion and upgrading.

As expected, an unchanged Interim div. of $0.01/share declared.

[pianist]

it seems like tat seng is exposed to customer risk
http://info.sgx.com/webcoranncatth.nsf/V...00038AC6C/$file/Tat_Seng_Announcement_for_investment_in_JV_Co_1_and_2.pdf?openelement

RATIONALE FOR THE PROPOSED TRANSACTIONS
4.1 Strengthen the relationship with a major customer
The Company’s subsidiary, Hefei Dansun Packaging Co., Ltd. (合肥丹盛包装有限公司) (“Hefei Dansun”) has a major client, which is a Fortune 500 company with registered offices in the Netherlands and the United Kingdom and owns a factory in the Hefei Economic and Technological Development Zone (合肥经济技术开发区) with sales value of approximately RMB 10 billion in Hefei, PRC (the “Customer”). The purchase orders from the Customer account for 40.7% of the total business of Hefei Dasun in 2010. The Company expects purchase orders from the Customer with Hefei Dansun to drop if it does not set up factories in Tianjin Binhai New Area (天津滨海新区). The Company stands to lose substantial revenue if the Customer reduces or terminates its purchase orders with Hefei Dansun. In addition, Hefei Dansun may be engaged as the Customer’s major supplier of paper boxes if the Company sets up a factory near the Customer’s factory in Tianjin. Therefore, the Investments are crucial for the Group to strengthen its existing relationship with the Customer and secure its existing and future purchase orders from the Customer.

[dydx]

I don't believe the proposed 2 new JV's which will bring Tat Seng into the fast-growing Tianjin Binhai New Area (天津滨海新区) is a bad idea at all. Firstly, Tat Seng will be expanding into this new geographical market in northern part of PRC under the wings and 'sponsorship' of an existing major Fortune 500 MNC customer of its subsidiary Hefei Dansun Packaging based in the Hefei Economic and Technological Development Zone (合肥经济技术开发区). We don't know who this customer is yet, but we can make a guess by looking at the existing big industrial enterprises operating in Hefei Economic and Technological Development Zone.....
http://www.hetda.com/english/list.php?catid=792
It could well be Unilever.

Secondly, Tianjin Binhai New Area (天津滨海新区) is indeed a very promising major national development initiative and area in PRC.....
http://www.bh.gov.cn/
The longer term market potential there for Tat Seng has to be positive.

Thirdly, in the 2 JV's Tat Seng has a PRC partner engaged in similar businesses. And both partners have committed to develop the 2 JV's in up to 4 stages over 2 years. So at least on paper it looks like the 2 JV's are quite carefully planned out in scale development, risk management, and finances.

[pianist]

today tat seng announced appointment of executive director - Tang Cheuk Chee who is also the wife of the executive chairman. Madam Tang Cheuk Chee has a deemed interest of 100,529,000 in the capital of the Company.

i just wonder what kinda prudential/governance processes are available in such hiring case?

[dydx]

today tat seng announced appointment of executive director - Tang Cheuk Chee who is also the wife of the executive chairman. Madam Tang Cheuk Chee has a deemed interest of 100,529,000 in the capital of the Company.

i just wonder what kinda prudential/governance processes are available in such hiring case?

It doesn't look very proper. Apart from being the wife of Chairman Dr Allan Yap, Mdm Tang's available background info doesn't give much evidence or comfort that she is aptly qualified to run or contribute to Tat Seng's business as an ED....
http://info.sgx.com/webcorannc.nsf/Annou...endocument
http://info.sgx.com/webcoranncatth.nsf/V...B0026A58F/$file/BizNet_MrsYap.pdf?openelement

It is also relevant to note that Mdm Tang's deemed interest in the 100,529,000 Tat Seng shares is based on PSC Corp's 63.95% controlling stake in Tat Seng. Mdm Tang's total interest in PSC, in fact, is only 17.36% - including a direct stake of 8.89% bought from Super Group on 7Jun11, and a deemed stake of 8.47% owned by other related entities.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument

A relevant question: Should a less-than-qualified indirect shareholder be allowed to run a listed company, just because her husband happens to be the Chairman?

[pianist]

this is a difficult question - because the sgx announcement wasn't very detailed enough for me to make a good assessment of her. In the next agm or analyst briefing..hopefully someone can assess her capabilities and share with us..

[pianist]

2011, 14 September 2011 and 29 September 2011 (the “Previous Announcements”) in
relation to a proposed investment by the Company to acquire a 25% equity interest in
the Registered and Paid up Capital of a Sino-Foreign Joint Venture (“Proposed JV
Company 2”) in the People’s Republic of China (“PRC”) with Shanghai Yunyi
Packaging Products Co. Ltd (“Proposed JV Partner”) taking the remaining 75% with
the proposed business of investment holdings (“Proposed Investment 2”). The stated
aim for Proposed Investment 2 was to acquire a pre-identified plot of land in the
Tianjin Binhai New Area China (天津滨海新区) (“the Land”).
Unless otherwise defined, all terms used or referred to in this announcement have the
meanings assigned to them in the Previous Announcements.
The application to the PRC authorities for land in Tianjin Binhai New Area that was deemed
by the Management as suitable was unfortunately unsuccessful. Consequently, the Board
has decided to terminate the previously announced Proposed Investment 2, prior to any
investment being made. Other than the proposed joint venture agreement, no contracts were
entered into with any party nor was any entity formed for the purposes of Proposed
Investment 2.

[pianist]

Further to the announcements dated 2 August 2011, 11 August 2011 and 3 January 2012 made by the Company in respect of the Joint Venture 1 and Joint Venture 2 between Shanghai Yunyi Packaging Products CO., Ltd. (上海蕴怡包装制品有限公司) (the “JV Partner”) and the Company, the Company wishes to announce that the phase 1 of the injection of the investment by both the Company and the JV Partner into JV Company 1 as its registered capital was effected on 18 January 2012 with RMB8.04 million out of the total RMB12 million being paid by the Company payable as phase 1 into JV Company 1 as its registered capital.

[pianist]

today tat seng announced appointment of executive director - Tang Cheuk Chee who is also the wife of the executive chairman. Madam Tang Cheuk Chee has a deemed interest of 100,529,000 in the capital of the Company.

i just wonder what kinda prudential/governance processes are available in such hiring case?

as if inviting his wife to the board is not enough, sgx today announce appointment of a new face Ms Chong Eng Wee to be the company's Joint Company Secretary. Guess what she happens to be the Sister-in-law of Madam Tang Cheuk Chee. Oo..come on, this is really a small world.