Figures added in article "On the High-Charge Ladder"

BAT-3K, is the country largest automobile battery producer. It enjoys strong market share (market leader) both domestically and in the Asian Region. Production capacity is about (September '97) to increase to 200,000 car batteries per month, up from 180,000 currently. Some 91% of all sales are car batteries; the rest are motorcycle batteries. Original Equipment Manufacturers (OEM) represents only a scant 2.4% of total sales, so exports and the local replacement market represents near all its business. Sales of this kind have much higher margins and are far less cyclical to Thailand's internal slowing economy.

For one, exports are now more competitively priced in the region by Bat-3K. The battery replacement market, just like instant rice noodles for the home, should do even better due to the slowing economic situation. New car sales are down. But what about all the enormous new cars from the previous boom times? I bet these batteries are getting old like anywhere else in the world and the current Thai economic reality is that you change batteries, before you change cars. I have seen a recent chart by the Bank of Thailand, showing YOY (% change) on Thai sales of new cars. During 1993, this figure peaked at + 25 -28 % annual growth rate. Since the average age of most new car battery is no more than 4-5 years, I would bet many are now coming up for replacement. An unrealized build up in demand for car replacement car batteries, is one factor why this company will continue to grow in the medium term, all the while the general economy is nearing an expected annual growth rate of only 3 % in 1997. Down sharply from the 7-11% typical annual growth rates of the previous boom period.

There is an expected forex currency loss of 127 million Baht (at 32 Baht per U.S.$) which the company expects to depreciate evenly over an allowed accounting period of 5 years. This came to happen, due to a 30 mill US $, un-hedged loan, taken out in early '97. If this FX loss were all included now the company's debt to equity ratio would still only be 0.8,; very low for this industry. Cash flow is not a problem for this highly profitable company. (see separate tables and numbers).

Imported lead is the company's main raw material. The downturn in global lead prices has much cushioned the negative of the Baht's depreciation vs. the US $. Half the total expenses of the cost of goods sold are for lead, so to manufacture all these batteries. Datastream has a graph called "Metal Bulletin-Lead Battery Plates Price" . Here it shows prices of this key raw material have dropped and are currently more favorable. I have read that BAT-3K, has recently invested in a local lead recycling JV which will begin operations in mid-'98. This will lower its cost of raw material supply and reduce exposure to volatile currency and less so, lead prices.

A main positive for my recommendation, is that BAT-3K has most minute exposure to the OEM's. This is an integral part of my recommendation, please for a synopsis of these some numbers go directly to:

http://www.set.or.th/cgi-bin/hsims.ksh

(then enter company stock symbol : BAT-3K)

Best regards,

Paul Renaud.