Jasmine International Plc.
(JASMIN) shares have doubled over the last few weeks to
Bt4.34 due to speculation that the company will soon
conclude a very favourable debt restructuring deal. The deal
looks much closer to conclusion now that 59% of creditors
have approved the plan.
In September 2002, JASMIN and
its subsidiary-JIOC submitted a petition of business
rehabilitation with the Central Bankruptcy Court and
appointed Chaengwatana Planner Co., Ltd as the administrator
and planner.
According to the news
released yesterday, Bt11.8bn of JASMIN's Bt13.8bn total
outstanding debt is being restructured. Bt8.3bn, or 70.59%
of the restructured debt, will be terminated and another
2.29% will be converted to 18 million new shares at Bt15 per
share. The debt-equity conversion would represent only 4.1%
of JASMIN's total paid-up shares.
Following the haircut and
debt-to-equity conversion, the company has to raise an
additional Bt300mn fresh capital for debt repayment. Based
on this structure, JASMIN will end up with Bt3.2bn net
outstanding debt after restructuring. It will also raise
JASMIN's equity value from a negative to Bt10.43 per share,
effectively lowering the company's long-term debt-to-equity
ratio to 0.4x.
Creditors owed 60% of total
outstanding debt have approved this proposal, with the
remaining creditors voting against. The major creditors are
Bangkok Bank and HSBC bank. If no opposed petition, the
Court is likely to sentence the case by next 3-5 weeks. We
caution investors, however, that the creditors who voted
against the plan may still try to block the restructuring
deal.
JASMIN recently reported a
net loss of Bt1.6bn in 2002 due to Bt3.5bn non-recurring
expenses, mostly from a Bt1.4bn provision for asset
impairment and a Bt2.1bn unrealised loss from currency
translation. Excluding these extra items, JASMIN had a
normalised profit of Bt189mn.
In 2002, JASMIN produced a
Bt4.7bn operating revenue, an increase of 12% from Bt4.2bn
in 2001. The major sources of JASMIN’s revenue were ACUMEN
and JST businesses, representing 68% of total revenue.
JASMIN’s future revenue has already secured by
concessions; thereby contributing Bt3.4bn in recurrent
revenues throughout its concession period until 2006.
Meanwhile, JASMIN's overseas investment arm JIOC remains the
biggest drag on the company's earnings.
Assuming that the debt
restructuring deal goes through, we value JASMIN shares at
Bt5.7 apiece based on a 4x PER. This is roughly in line with
the industrial average for companies with limited revenue
growth opportunities.
JASMIN shares may have
another few days of big gains as this news is circulated in
the market. We recommend investors to take the opportunity
to SELL ON STRENGTH during this period based on 1)
remaining uncertainties on whether creditors opposing the
plan can successfully block the deal, 2) limited growth
potential from concession assets and 3) short duration of
asset utilisation.
