New Toyo

[BlueKelah]

Haha New Toyo likes to do rights issues. They did some rights issues in 2011 as well. This means NT will need to "foot" some of the bill as well though impact on asset and cash will be minimal. This could mean they are planning on redeveloping the Malaysian properties, which could provide a small catalyst. 

Fo a bigger catalyst, hoping for them to find a buyer for their Aus property soon for good premium before the market there crashes too much.

Value wise it is somewhat undervalued but good thing going for NT now, the earnings from TW have recovered well. 

Perhaps after this rights issue NT can privatise Tien Wah as their percentage holdings will surely increase more.

[budgetier]

New Toyo recently reported sterling performance for its 4th quarter and full year ending 31 Dec 2015. It proposes to pay a final dividend of 1 ct, bringing the total dividend payout for the year to 1.6 cts or 7.1% of last Friday’s closing price of 22.5 cts.  
 
Am wondering over the sterling performance given that the company had expected its business conditions to remain challenging for the year in view of the uncertainty in global economy and likely increases in interest rates and other business costs. What had gone right or been done right?
 
Wld appreciate comments from readers.

Tien Wah, 54% owned by New Toyo, has proposed a one-for-two rights issue at RM1 apiece (a huge discount to the latest share price of RM 2.79) to "raise funds for its expansion into the Middle East region and/or Indonesia without incurring interest cost compared to bank borrowings".

The exercise will gross RM 48.2m, but the proposed 14-sen final dividend (to be payable on 30 June 16) will amount to RM 13.5m. 

Why is Tien Wah going through a rights issue for RM 34.7m (48.2m - 13.5m)?

Tien Wah's  2015 group profit was RM 35.8m (a mere RM 6m in the first half). In addition, depreciation & amortisation amounted to RM 35.7m.

Tien Wah's balance sheet was strong, with cash matching bank borrowings as at end-2015:

.......................................RM m
Shareholders' fund............132
PPE...................................242
Cash....................................71
Borrowings..........................72

Unless the planned expansion is very substantial, the proposed rights issue seems unnecessary.

Tien Wah's strong showing helped New Toyo to book a group profit of $ 20.6m in 2015 ($6.2m in first half).

New Toyo's balance sheet is far stronger than Tien Wah's, with net cash of $51m:

..........................................$ m
Shareholders' fund............212
PPE.....................................85
Cash....................................79
Borrowings...........................28

It 38.6c NAV is understated as the value of its land holdings likely far exceeds the book value.

New Toyo itself used to buy real estates for businesses in several countries. Although some businesses have ceased, the properties are retained for rental incomes. 

As at end-2014, the market value of the investment properties was $ 25.7m vs book value of $8.4m, giving rise to a surplus of 4c per New Toyo share. 

Tien Wah has planned to partner Lum Chang to redevelop its factory in Petaling Jaya into a commercial property. The site's area is 140,000-sq ft; and the combined value of the factory and land was RM 26.5m as at end-2014

Tien Wah also owns a factory in Smithfield (30 km from the Sydney CBD and near the second airport that is to be constructed). The land area of 358,000 sq ft (the size of four football fields) and floor area of 150,800 sq ft are too large for the general printing business. (The cigarette box printing business was shifted to Vietnam in the first half of 2015.) 

As at end-2014, the book value of the freehold land is RM 27m, and that of the factory RM 13m. What is the redevelopment potential of the land?

Blue Kelah :


Appreciate very much your response to my questions. I guess the sterling performance would be both of having things gone right and done right during 2015. It sure is a welcoming outcome in these uncertain and challenging times.
 
By the way, New Toyo has not proposed a rights issue. (It has no valid reason to do so with $51m net cash.) The party going for a rights issue is Tien Wah.
 
 
Portuser :

There are lots of insightful information in your post.
 
First, I am happy to read that New Toyo’s NAV is 38.6 cts, higher than yesterday’s closing price of 22.5 cts. Furthermore, this could even be understated as the value of land holdings was likely to be more than their book value.
 
Second, I got your point that the 2nd half of the year showed a large increase in group profit over the 1st half  -  
from $6.2m to $20.6m, helped by Tien Wah’s strong performance in the 2nd half. Would I be realistically hopeful that the 2nd half year’s strong performance would be carried over into 2016?   
 
Third, I am heartened to know that Tien Wah has valuable land with great potential for development which the company is actively looking into.

[BlueKelah]

Budgetier : yes i know its TW only that's doing the rights issue this time. just saying NT management like to utilise rights issue, in this case for TW which is basically controlled by NT. If you read back into NT history you can see they did similar thing with Shanghai Asia Holdings I think in 2011, i think back then was rights issue for both NT and SAH.

The drop in business last year is more likely because of relocating a significant amount production to vietnam factory. Now that operations are running smoothly again, business could go back to baseline and might even grow.

On the risk side, whether or not the supposed decline in tobacco use globally is going to affect growth in tobacco printing is something we probably have to wait and see, given that global economy is not that good anyways.

I do hope NT doesn't go and do property development but just sell off their land at current inflated property asset prices.

[BlueKelah]

Requested for trading HALT...

-v and crossing fingers-

[Radon]

TIEN WAH PRESS HOLDINGS BERHAD ("TWPH")
­PURCHASE OF BRITISH AMERICAN TOBACCO INDONESIA PRINTING BUSINESS AND SUPPLY AGREEMENT

http://sgx.i3investor.com/servlets/anpth/258708.jsp

[BlueKelah]

TIEN WAH PRESS HOLDINGS BERHAD ("TWPH")
­PURCHASE OF BRITISH AMERICAN TOBACCO INDONESIA PRINTING BUSINESS AND SUPPLY AGREEMENT

http://sgx.i3investor.com/servlets/anpth/258708.jsp

Unexpected good news!! 

Looks like TWPH just managed to get the ok to expand into the massive Indonesian market by clinching this 6 year contract. This also means TWPH has managed to foster an even closer relationship with BAT and the printing contract renewal with BAT would not be a concern anymore (according to Wiki : Bentoel Internasional Investama is the second biggest cigarette company in Indo which BAT acquired in 2009.)

So we can expect a big boost to revenue and profits and dividends in the coming year  

[The Board of Directors is pleased to announce that on 4 October 2016, TWPH has been awarded the
tender by PT Bentoel Internasional Investama Tbk (“Bentoel Group”), a member of British American
Tobacco Group (“BAT Group”) in Indonesia, whereby TWPH or through its subsidiaries shall be entitled to
acquire the entire issued and paidup
shares of PT. Bintang Pesona Jagat (“BPJ”), one of the subsidiaries
in Bentoel Group which undertakes Bentoel Group Printing Business in Indonesia. It comes together with
an award of a 6years’
Manufacturing and Supply of Packaging Materials Agreement where Bentoel Group
shall appoint TWPH Group as the supplier of the printing supplies.]


lets hope in the coming decade, BAT can diversify into Medical Marijuana market and benefit TWPH. Or else just make a GO and privatised TWPH

-v-

[BlueKelah]

Whilst the Indonesian contract may not be that big, if BAT gives some of the USA printing business to Tien Wah after this merger, it will be a windfall for New Toyo.
------------------------------------------------------------------------------
BAT offers to buy U.S. tobacco firm Reynolds in $47 billion deal

By Paul Sandle and Martinne Geller
LONDON (Reuters) - British American Tobacco (BATS.L) has offered to buy out U.S. cigarette maker Reynolds American Inc (RAI.N) in a $47 billion (38.45 billion pounds) takeover that would create the world's biggest listed tobacco company with brands including Newport, Lucky Strike and Pall Mall.

The cash-and-stock deal would mark the return of BAT to the lucrative and highly regulated U.S. market after a 12-year absence, making it the only tobacco giant with a leading presence in American and international markets.

It would also give the British company - which has been bolstered by a strong share price since the country voted to leave the European Union - more premium brands such as Camel, which it can sell in countries like Russia and Turkey where demand for Western cigarettes is still growing.

The marriage would also unite each company's efforts in the fast-developing world of e-cigarettes, which the companies say are less dangerous than smoking - a habit that kills about six million people worldwide each year.

[Young Investor]

bluekelah

Do you have the size of Tien Wah Indonesian contract? Pls share. Thanks.

[BlueKelah]

Nope I do not, but bentoel has only 7% of indon market share. Indo population is 259m , 7% of that is only 18m.

Malaysia has 32m pop, bat has 61%+ market share there so about 19m+

Assuming similar rate of smokers, the Indo contract should be worth only roughly the size of Malaysian part.

A rough guess maybe top line for cartons increase 30% next year? (Again I am assuming less for Indo printing as cigarette packs are dirt cheap over there.)

Reynolds global business is another kettle of fish. They probably have their own printing partners in different regions. But under bat, it is possible the Asian printing market FOR REYNOLDS could be passed to tien wah, much like the Indo printing business of bentoel some time in the future.



sent from my Galaxy Note 7

[portuser]

Smoking in Indonesia is prevalent -- 16 Indonesian smokers to one Malaysian smoker, based on page 15 and 32 of Tien Wah rights issue prospectus dated 30 June:


...................Number of smokers........As % of population
Malaysia............................4.1m............................17.8%
Indonesia.........................63.1m............................34.3%


BAT Bentoel recently also concluded a rights issue, and the following two statements from its prospectus are relevant.

"Indonesia is the second largest market by volume for cigarettes globally after China, with approximately 277.5 billion sticks sold in 2014 according to AC Nielsen Retail Index Indonesia. The large market of cigarettes in Indonesia caused by the level penetration of cigarettes, with approximately 65% of men are smoker in 2015 according to TRACK." (page 122)

"..Bentoel is the fourth largest cigarette manufacturer in Indonesia with approximately 7% overall market share as of December 2015 based on AC Nielsen Retail Index (Indonesia), Bentoel has sold more than 23 billion cigarettes in 2015, with 22.2 billion cigarettes sold domestically and the remainder exported." (page 113) 

As Reynolds' brands outside USA were acquired by Japanese Tobacco International back in 1999, BAT's acquisition of Reynolds may not benefit New Toyo.