Purchase Recommendation

In this issue I wish to highlight one of our many current favorites' as chosen from our master smorgasbord value table. Note that we are continually updating with new obtained information the 30 firms of the master "value" table.

METCO (current price 68, trailing p/e of 2, export oriented, foreign partner, quality management and a product line with in an above average growth industry.)

Muramoto Electrocnic (Thailand) Public Co. in 1997 celebrated its 10th year of operations in Thailand. This firm is a leading manufacturer and exporter of electrical and electronic components. Trough it's decade of local experience it has gained the trust of a worldwide clientele. It enjoys a leadership & dominant position in Thailand in its field. It also benefits greatly from a fruitful relationship with its mother company Muramoto Industry of Japan.

Due to the economic crisis the latest available annual report describes METCO will fortify the traditional domain of VTR/CRT parts with further efforts to capture greater market share, including through aggressive cost cutting in all areas of operations. They also aim to increase the export oriented automobile electronics sector as well as other high precision parts through the use of advanced technologies so to establish the company in the field of information technology equipment. In 1997 METCO started producing electronic automobile parts and in 1996 they started production of the "Electron Gun" which is a major component of the cathode ray tube. Among other various components it produces personal computer parts such as components for monitors and floppy disk drives. This is a growth industry in Thailand and the world.

Most raw materials consist of steel sheets, plastic resins and semi-finished metal or plastic components. Mold making is a crucial step that requires a high degree of technical know how and meticulous care. Metco has mastered the range of sophistical techniques in metal stamping, plastic molding as well as assembly of intricate components-such as this "Electron gun". Technical training, both at home and in Japan, is regularly available to METCO technicians. Further technical resources are regularly supplied from Muramoto of Japan.

In 1995 the company received promotional privileges from the Board of Investment (BOI) in respect to manufacturing of metal, plastic and assembly parts and electronic parts. Under these privileges the company is excempt from paying certain Thai taxes and duties for a period of eight years or until year 2003.

The board of directors shows an impressive list of Muramoto family member's (3), as well as a certain Mr. Somjate Moosirilert here is an executive from "inward looking" National Finance & Securities (NFS), a person I met once and spoken on the phone to several times. Mr. Somjate has much the sort of "old line thinking" reminiscent of the 1997 collapsed finance industry. (NFS research is on record in projecting a negative GNP growth rate of -10% for Thailand in 1999. This is ridiculously low and far off the consensus.) As an METCO board member he does not appear active in the management so this does not concern me much.

Southeast Asia, with its increasing long-term prosperity has a fast growing long-term growth trend for the electrical and electronic appliance industry. The changes in lifestyle and its huge & growing population will assure high demand over the long run. METCO is an excellent example of an export -resurgence oriented firm with a much stronger long-term trend growth rate than the most all bloated "big cap’sector in Thailand. Yet it's current valuation is ridiculously low. Dataquest, a leading US market research firm, confirms the rising trends in the global market for such devices, which METCO manufactures.

A DOUBLE DIGIT DIVIDEND ON A 68 BAHT STOCK?The Annual Ordinary Shareholders' Meeting for the year 1999 is set for January 29, 1999 at 14.00 hours at Convention Hall 1, Rama Garden Hotel, 9/9 Vipavadeerangsit Road, Bangkhen, Bangkok, with the agenda to among others, "consider the allotment of profit, payment of dividends and to fix the dividends payment date". While impossible to guess the dividend to be declared should be impressive. The company has a stated policy of not paying less than 30% of net profit after taxes. Our records show that for the first 9 months of 1998, the firm earned 26.98 per share before FX adjustment and 34.04 after. I expect the calendar, after FX adjustment, 1998 earnings to come in near 40 Baht per share.

For some key numbers and relative comparisons, please see our master Table released to all subscribers on Jan 2 '99.

Best Regards to our subscribers,

Paul A. Renaud.

Thaistocks.com