Ticon, an upbeat update.
Ticon Industrial Connection Public Co. Ltd. (6.75) An update.
So far, my 2004 Ticon forecast has held up, despite a slower growing year for Thailand in general. I consider TICON (6.75) as a growth stock trading on an attractive valuation and with a solid dividend yield of around 5%.
The Ticon web site is: www.rent-a-factory.com
You can here see my previous/original bullish report on Ticon as published on July 19 '03:
http://www.thaistocks.com/index.php?module=Pagesetter&func=viewpub&tid=2&pid=105
Since my original report at mid year 2003, this company has had a fabulous price run-up to over 11 (post the 5 for 1 split). On the current correction back to 6.75, I rate Ticon a long term buy for growth and dividend income. Below I review, update and give some analysis on various fronts regarding Ticon's continued fast track growth and achievements. I remain a long term fan of Ticon.
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From a press release on March 9 '04.: * Ticon Industrial Connection <TICN.BK>, a factory developer, said it expected to post an annual 30-40 percent rise in 2004 revenues from 557 million baht last year due to its plan to build around 40 factories this year. |
TICON recently said its occupancy rate is rising and that it has secured three more deals to supply factories to customers. During the first half of 2004, TICON has increased the number of leased out factories by 19, an increase of just over 18%, and more than the rate of increase achieved throughout the whole of 2003. The Company aims to increase the number of leased factories by 40 during 2004 and, with current strong leasing interest, anticipates achieving this year-end target. As of 30th June, the Company had pre-leased 12 factories, 10 of which are due to be handed over to tenants in Q3, and 2 half of Q4.
Japanese auto part manufacturers have dominated the list of new customers. Japanese companies overall have increased from 42% at end of year 2002 to 45% of total customers at the beginning of the year, to 49% at the end of June. Auto parts suppliers made up 7% at then end of year 2002, now make up 20% of their customer base at mid year 2004. The Yen currency has appreciated about 5% vs. the Thai Baht since the beginning of this year.
Yet here it must be noted that new car sales in Thailand have slowed recently. After some pent-up demand from previous recessionary years, the Thai new car boom has been slowing to a more sustainable rate. In China new car sales have also slowed considerably recently due to credit controls initiated by the Chinese authorities. In a telephone interview today, Ticon states it does not think the dramatic slowdown in Chinese new car sales affects them in any significant way.
Occupancy rate rises to 95%...
In a telephone interview a few months ago management said the occupancy rate for its rental factories had risen to 95% during 1Q04. TICON has concluded three more deals to build and sell factories, and for land sales worth a combined Bt190m. Construction is expected to be completed in 1H04.
Record results reported in the 1 Q and 2 Q this year. (See my table below). I think Ticon is now trading at p/e of less than 12, for expected full year 2004. If the EPS reach 0.55 (for full year 2004) then a price target of 10 commanding a p/e of 15 on trailing 2004 earnings could well be seen by year end. I think this is reasonable as Ticon is growing faster then the property sector in general.
54% upside to my target price of 10.
At 6.5 Baht, TICON is trading on a fully diluted 2004F PER of 11.8 times. A stronger baht could have some negative impact on foreign investment in Thailand, but investor confidence is affected by several variables and the Thai Baht has lost some of its luster since the 2 Quarter of this year. The Thai currency has lost about 6-7% in value vs. the US Dollar, since the beginning of this year.
TICON, June 15. Free warrants issued for existing shareholders:
TICON plans to raise the registered capital from Bt539mb to Bt692.71m by offering 153.71m new shares (par 1). These new shares will be reserved for warrants issued to existing shareholder (128m units) and ESOP (26m units). One free warrant is given for every 4 existing shares, exercise ratio of 1W for 1C/S at Bt9.05.
Since the exercise price is well above the current market price (we call this "out of the money"), the dilution concern is less concerning. (see exact details of these new non-listed warrants further below). Note these new warrants will not trade on the SET, instead they are only issued for future conversion into common shares.
Separately to this, there are still 4.8 mill. Warrants outstanding, conversion price is 1 Baht per share. Total outstanding shares is 460.9 Million shares. This tranche is so around 1% of total outstanding shares and therefore not significant. Total outstanding shares as of March 31 '04 for Ticon is 460.9 Million shares.
Here is I show some more historical/quarterly figures:
|
Sept 30, 2003 |
Dec 31, 2003 |
March 31, 2004 |
June 30, 2004 |
Four consecutive Quarters. |
|
|
213.8 Mill. |
141.7 Mill. |
227.1 Mill. |
246.5 Mill. |
829.1 Mill. |
Sales |
|
67.6 Mill. |
41.2 Mill. |
71.9 Mill |
91.4 Mill. |
272.2 Mill. |
Net Profit |
|
0.85* |
0.10 |
0.15 |
0.18 |
0.59 |
EPS |
*Q4 EPS based on shares outstanding at the end of quarter.
Here are some yearly numbers on sales and net profit, over the past 4 years:
|
2000 |
2001 |
2002 |
2003 |
|
|
226.0 Mill. |
330.8 Mill. |
381 Mill. |
617 Mill. |
Sales |
|
85.5 Mill. |
103.4 Mill. |
111.8 Mill. |
207.6 |
Net Profit |
Here is shown the progress on leased, pre-leased factories, occupancy rates and under construction statistics:
|
End 2000 |
End 2001 |
End 2002 |
End 2003 |
|
|
Leased Pre-leased Available Under construction |
63 2 3 13 |
72 4 11 18 |
86 9 7 31 |
101 19 13 39 |
|
Total |
81 |
105 |
133 |
172 |
|
Occupancy rate |
95.6% |
87.4% |
93.1% |
90.2% |
Note: Number leased factories increased from only 101 at YE03 to 121 at the end of the 2Q04,
During H1 2004, TICON has increased the number of leased out factories by 19, an increase of just over 18%, and more than the rate of increase achieved throughout the whole of 2003. The Company aims to increase the number of leased factories by 40 during 2004 and, with current strong leasing interest, anticipates achieving this year-end target.
TICON announced in early February '04, that it had completed the placement of 50m new preferred shares at Bt9.25 a piece to Thailand Equity Fund. Proceeds from this capital increase, amounting to Bt463m, will be used to expand its business including the acquisition of new land plots and construction of new factories for lease (see the full press release just below).
Press Release By Ticon, Wednesday, 11 February, 2004
Thailand Equity Fund Invests 462m Baht in TICON
TICON Industrial Connection Public Company Limited (TICON) announced today that the Thailand Equity Fund have completed their acquisition of 50m new preferred shares in the company by way of a private placement. The preferred shares, which are convertible to ordinary stock, were place at a price of 9.25 per share, raising 462,500,000 Baht.
Thailand Equity Fund is a 10b Baht special purpose mutual fund, founded with the participation of the Thai Government to make private equity investments in operationally competitive Thai businesses. The fund is managed by MFC Asset Management Public Co., Ltd., with technical assistance provided by Private Equity (Thailand) Co., Ltd., an affiliate of Lombard Investments, Inc.
Investors in the fund are leading international and Thai institutions. International institutions include International Finance Corporation, California Public Employees’ Retirement Scheme (CalPERS), Asian Development Bank, and DEG (a member of Germany’s KfW Group). The Thai investors are the Ministry of Finance, all 12 Thai commercial banks, Industrial Finance Corporation of Thailand, the Government Pension Fund, and the Government Savings Bank.
"We believe that TICON is well positioned to directly benefit from Thailand’s competitiveness as a regional manufacturing base and the growing inflow of direct foreign investment. The Company has a very strong position in this market segment and the Thailand Equity Fund will use its global and local network to help source potential business opportunities for the Company.’said Mr. Pote Videt, Managing Director of Private Equity (Thailand) Company Limited.
Increase Capital to Finance Aggressive Expansion Plan
The funds raised will finance TICON’s expansion. As at the end of 2003, the company had a total of 101 factories leased out to customers, with 13 more available for leasing and a total of 58 factories in the development pipeline, including 19 which had been pre-leased to customers.
40 New Factories to be Leased Out...
TICON plans to increase the number of leased out and income-producing factories from 102 at the end of 2003 to 142 by the end of this year. An almost 40% increase in one year appears to be ambitious growth on a portfolio which has taken the company more than 10 years to achieve, but with almost half of this target already contracted at the beginning of the year, and with a brisk rate of leasing so far this year, the company regard this as a realistic target.
***
TICON anticipates capital expenditure of around 1 Billion Baht to finance this expansion during 2004, and the proceeds of this private placement together with the further broadening of the company’s equity base will enable TICON to complete the 2004 program with a comfortable debt to equity ratio.
Exposure to the Automobile parts industry:
The company recently said that Japanese auto parts manufacturers have dominated the list of new customers. Japanese company’s, overall have increased from 45% of the total customers at the beginning of the year to 49% at the end of June. Auto part suppliers, who make up only 7% of the customer base at the beginning of 2003 and grew to almost 14% by the end of the year, have now grown to more than 21%. However, I foresee that demand potential from the Japanese auto part suppliers might slowdown in the upcoming year, after most of the major auto-makers have completed their capacity expansion plan in 2004.
On the issue of vast amount of insider buying during since June 1 '04:
Mr. Wei Cheng Kuan is the managing director and he owns 29.45 Mill Shares or some 6.4% of all outstanding shares, as was reported on March 31.'04. But this has increased sharply since then as insiders have been buying. On July 23 '04, I noticed Khun Wei buying 12.5 million shares at a price of 5.82, again as was reported by the Thai SEC web site.
Consider these composite numbers, as obtained by us at the Thai SEC web site which reports insider buying:
Over the past 3 months 2.697 Mill shares have been sold by insiders.
Over the same past 3 months, an huge 30.093 Mill. shares have been bought, by insiders.
If you exclude the "ESOP’shares portion, the net buy over net sell still comes to an impressive net buy of 13.8 Million shares. Either way you look at it, insiders are buying at Ticon.(see full tabulation below)
TICON’s development program is on-going, with regular new land acquisitions and development starts. The company last month acquired 69 rai of land on Pinthong Industrial Estate in Chonburi Province for the development of around 20 factories the first of which (in addition to the figures above) will be available for occupation from early in 2005. This will increase to 9 the number of locations at which TICON provides factories.
***
Always diversify your stock holdings.
Best Regards,
Paul A. Renaud.
Appendix Below:
1) New Capital increase and issuance of Warrants.
2) Complete list of all insider buy and sell, during the past 3 months.
May 11, 2004
Subject Capital increase and issuance of Warrants
Attention The President
The Stock Exchange of Thailand
According to TICON's Board of Directors' Meeting No. 4/2004 held on May 11, 2004 at 11.00 p.m., the Company would like to announce the Board of Directors' significant resolutions which could affect investors' decision making as follows:
1.To approve the issuance of Warrants offering to the existing shareholders, subject to Shareholders' approval, details of which are as follows:
Issued size 128,091,344 Units
Type Listed securities on the Stock Exchange of Thailand
Offering method 4 existing shares for 1 warrant Offering price free
Term 4 years
Exercise ratio 1 warrant for 1 ordinary share
Exercise price 9.05 Baht per share
Exercise date Last business day of each quarter
First exercise date will start from 1 year later after the offering date.
2.To approve the issuance of Warrants offering to the Directors and selected employees, subject to Shareholders' approval, details of which are as follows:
Issued size 25,618,000 Units (representing 5 percent of paid-up capital)
Type Name specification and non-transferable
Offering method Offering to Directors and selected employees Offering price free
Term 4 years
Exercise ratio 1 warrant for 1 ordinary share
Exercise price 9.05 Baht per share
Exercise date Exercise date Last business day of each quarter
25 percent of allocated amount can be exercised in each year
Name of Directors granted the ESOP Warrants
Amount percent of issued size
Mr. Chali Sophonpanich (Chairman) 3,846,000 15%
Mr. Wei Cheng Kuan (Managing Director) 5,124,000 20%
Mr. Direk Vinichbutr (Director) 1,280,000 5%
Mr. Jirapongs Vinichbutr (Director) 1,280,000 5%
Mr. Virapan Pulges (Director) 1,280,000 5%
Mr. Jean-Pierre Noel (Director) 512,000 2%
Mr. David Desmond Tarrant (Director) 512,000 2%
Mr. Chatchaval Jiaravanon (Director) 512,000 2%
Mr. Threekwan Bunnag (Director) 512,000 2%
Total Directors 14,858,000 58%
There is no employee granted the ESOP Warrants of more than 5 percent of issued size.
3. To approved the issuance of 153,709,344 ordinary shares, at a par value of Baht 1 per share, so as to accommodate the exercise of 128,091,344 Right Warrants offering to the existing shareholders and 25,618,000 ESOP Warrants offering to the Directors and selected employees, as mentioned in item 1 and 2 respectively, subject to Shareholders' approval
4. To approve the increase of registered capital from Baht 539,000,000 to Baht 692,709,344 by issuing the ordinary shares so as to accommodate the exercise of the warrants as mentioned in item 3, subject to Shareholders' approval
5.To approve amendment to the Company's Memorandum of Association in accordance with capital increase as follows, subject to Shareholders' approval
Clause 4
Registered capital 692,709,344 Baht (Baht Six Hundred Ninety Two Million Seven Hundred Nine Thousand Three Hundred and Forty Four)
Dividend into 692,709,344 Shares (Six Hundred Ninety Two Million
Seven Hundred Nine Thousand Three Hundred and Forty Four Shares)
Par value 1 Baht (Baht one) Divided into ordinary shares 642,709,344 Shares (Six Hundred Forty Two Million Seven Hundred Nine Thousand Three Hundred and Forty Four Shares) Preferred shares50,000,000 Shares (Fifty Million Shares)
6.To approve convene of the Extraordinary General Meeting of Shareholders No. 2/2004, on June 15, 2004, at 2.00 p.m. The venue is Grand Hall, the Bangkok Club, 28th Floor, Sathorn City Tower, 175 South Sathorn Road, Thungmahamek Sub District, Sathorn District, Bangkok. The agenda of the meeting is as follows:
1) To certify the Minutes of the 2004 Annual General Meeting of Shareholders
2) To consider and approve issuance of Warrants offering to existing shareholders
3) To consider and approve issuance of Warrants offering to Directors and selected employees
4) To consider and approve issuance of newly issued shares so as to accommodate the exercise of warrants offering to the existing shareholders
5) To consider and approve issuance of newly issued shares so as to accommodate the exercise of Warrants offering to Directors and selected employees
6) To consider and approve increase of registered capital by issuing ordinary shares to accommodate the exercise of Warrants as mentioned in agenda item 4 and 5
7) To consider and approve amendment to Memorandum of Association in accordance with capital increase
8) Other business (if any)
The share register will be closed for the right to attend the Extraordinary General Meeting of Shareholders No. 2/2004 on May 25, 2004, at 12.00 p.m., until the completion of the EGM.
7. Approved purchase of land located on Rojana Industrial Park, Ayudhya province, totaling not exceed 30 Rai, subject to the decision of the Management
Yours faithfully,
(Miss Lalitphant Phiriyaphant)
Secretary to the Board of Directors
***
Complete list of all insider buy/sell transactions over the past 3 months:
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED CHALI SOPHONPANICH Reporter Warrant-ESOP 11/08/2004 03/08/2004
3,843,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED CHATCHAVAL JIARAVANON Reporter Warrant-ESOP 11/08/2004 03/08/2004
512,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED CHATRI LAOHEMMAWONG Reporter Warrant-ESOP 11/08/2004 03/08/2004
1,000,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED CHATRI LAOHEMMAWONG Reporter Common share 26/08/2004 25/08/2004
180,000 6.05 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED CHATRI LAOHEMMAWONG Reporter Common share 30/08/2004 27/08/2004
128,300 6.34 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED CHATRI LAOHEMMAWONG Reporter Common share 30/08/2004 26/08/2004
6,500 6.30 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED CHATRI LAOHEMMAWONG Reporter Common share 01/09/2004 31/08/2004
285,200 6.70 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED DAVID DESMOND TARRANT Reporter Warrant-ESOP 11/08/2004 03/08/2004
512,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED DIREK VINICHBUTR Reporter Common share 23/07/2004 22/07/2004
2,717,500 5.82 Sell
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED DIREK VINICHBUTR Reporter Warrant-ESOP 11/08/2004 03/08/2004
1,281,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED JEAN-PIERRE NOEL Reporter Warrant-ESOP 11/08/2004 03/08/2004
512,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED JIRAPONGS VINICHBUT Reporter Warrant-ESOP 11/08/2004 03/08/2004
1,281,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED KOMKRIT LAOWAKOON Reporter Warrant-ESOP 11/08/2004 03/08/2004
600,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED LALITPHANT PHIRIYAPHANT Reporter Common share 24/06/2004 21/06/2004
56,000 6.96 Sell
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED PORNTHEP PISALANGKUL Reporter Common share 05/07/2004 29/06/2004
3,000 7.50 Sell
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED PORNTHEP PISALANGKUL Reporter Common share 03/08/2004 29/07/2004
3,000 6.05 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED PORNTHEP PISALANGKUL Reporter Warrant-ESOP 11/08/2004 03/08/2004
1,000,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED PORNTHEP PISALANGKUL Reporter Common share 30/06/2004 28/06/2004
3,000 7.30 Sell
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED SIRIPORN SOMBATWATTHANA Reporter Common share 08/07/2004 07/07/2004
200,000 7.35 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED SIRIPORN SOMBATWATTHANA Reporter Common share 09/07/2004 08/07/2004
200,000 6.97 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED SIRIPORN SOMBATWATTHANA Reporter Common share 22/07/2004 21/07/2004
200,000 6.90 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED SIRIPORN SOMBATWATTHANA Reporter Warrant-ESOP 11/08/2004 03/08/2004
1,000,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED SIRIPORN SOMBATWATTHANA Reporter Common share 16/08/2004 11/08/2004
15,000 6.20 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED SIRIPORN SOMBATWATTHANA Spouse Common share 17/08/2004 16/08/2004
50,000 6.10 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED SIRIPORN SOMBATWATTHANA Spouse Common share 17/08/2004 13/08/2004
70,000 6.15 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED SOMSAK CHAIYAPORN Reporter Warrant-ESOP 11/08/2004 03/08/2004
1,200,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED SOMSAK CHAIYAPORN Reporter Common share 17/08/2004 16/08/2004
30,000 6.10 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED SOMSAK CHAIYAPORN Reporter Common share 12/07/2004 09/07/2004
40,000 6.85 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED THREEKWAN BUNNAG Reporter Warrant-ESOP 11/08/2004 03/08/2004
512,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Spouse Common share 24/06/2004 22/06/2004
70,000 6.76 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Spouse Common share 02/07/2004 29/06/2004
20,000 7.50 Sell
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Spouse Common share 07/07/2004 05/07/2004
5,000 7.30 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Reporter Common share 08/07/2004 07/07/2004
63,000 7.11 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Spouse Common share 08/07/2004 07/07/2004
10,000 7.10 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Spouse Common share 08/07/2004 06/07/2004
20,000 7.24 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Reporter Common share 12/07/2004 08/07/2004
10,000 6.93 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Spouse Common share 12/07/2004 08/07/2004
20,000 6.95 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Reporter Common share 30/07/2004 28/07/2004
20,000 6.50 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Spouse Common share 30/07/2004 28/07/2004
20,000 6.50 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Reporter Common share 03/08/2004 29/07/2004
20,000 5.95 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Spouse Common share 03/08/2004 29/07/2004
50,000 6.27 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Reporter Warrant-ESOP 11/08/2004 03/08/2004
1,281,000 0.00 Buy-ESOP
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED VIRAPAN PULGES Reporter Common share 24/06/2004 22/06/2004
15,000 6.63 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED WEI CHENG KUAN Reporter Common share 23/07/2004 22/07/2004
12,500,000 5.82 Buy
TICON INDUSTRIAL CONNECTION PUBLIC COMPANY LIMITED WEI CHENG KUAN Reporter Warrant-ESOP 11/08/2004 03/08/2004
5,124,000 0.00 Buy-ESOP
