Another major turnaround stock.

ITALIAN THAI DEVELOPEMENT ITD (27) IS A LEADING CONTRACTOR WITH SOLID TURNAROUND STORY

I just reviewed all the various broker buy opinions on ITD stock (just published early this week) and must say I am now convinced as well that this large cap stock in the property sector is a solid buy.

ITD is Stecon's largest competitor and by far the largest construction/infrastructure company in Thailand. Previously ITD was not interesting as this firm was sattled with debt. Restructuring proved long and painful for years.

Because some smaller Bond holders where not willing to take the final haircut, ITD could not conclude this process. With this final burden now nearly out of its way, ITD is on the way, in the same price direction Stecon was a few months ago.

Indeed, I now think ITD has allot of catching up to do with Stecon's stock price.

ITD is expected to complete its debt restructuring process and get out of the Bangkok Central Bankruptcy Court by this coming August. Although the news disclosed that objections from some creditors remained, many now strongly believe that ITD's debt restructuring will finally go through as the plan was approved by the Central Bankruptcy Court on April 4th and was approved by 80% of the creditors.

This restructuring will improve ITD's financial health tremendiously.

Given that ITD has a leading position and vast proven track record, the firm will be the prime beneficiary once the local construction industry recovers.

Its backlog of Bt50 Billion Baht is enough to generate more than three years of healthy income, suggesting that ITD is well protected against any downturn.

While at first skeptical, I now as well, see this restructuring plan as very positive for ITD.

ITD has an undemanding valuation currently because this year is a recovery year and next year could prove much better. Credible local brokerage reports tentative normalized EPS forecast for 2002 at Bt3.20, suggesting that ITD is currently trading at a fairly cheap of p/e of less then 9. Undemanding for such a power house and absolute leader in its industy. Also institutions will learn to love ITD as it a highly liquid stock and so should command a premium p/e to its sector.

Other encouraging news is that the company plans to use its legal reserve and share premium to wipe out its retained loss in 2Q02, giving the way for ITD to pay a dividend next year.

This company's financial status will now be considerably improved, with net debt to equity falling to 0.5x and interest expenses declining from around Bt1.2bn a year to only Bt150mn.

I myself would rate these shares a "strong buy" below 28. Like Stecon, you want to own this sort of company early in the business cycle. And that is where we are in Thailand.

Very Best Regards

Paul Renaud.