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STRD 015/2004
January 30, 2004
SubjectThe opinion of the business regarding the tender offer form (Form 250-2)
ToThe President
The Stock Exchange of Thailand
Referring to Mr. Vichai Limpanyakul, Mrs. Karanjana Manathamphaiboon, Mrs. Jintana Surapanich
and Mr. Kitti Cheevakittigul intent to purchase the rest of company's share of 5,199,000 shares,
the details as shown on the tender offer form ( form 247-4).
The meeting of the board of directors no. 2/2004 had a unanimous resolution that the offering price
of 10 Baht was appropriate. The independent financial advisor agreed that the share value of the
company should be suitably assessed by the book value method and the adjusted book value method.
Therefore the share value of the companies under both methods is between 3.39-5.23 Baht per share.
The offering prices higher than the assessed value so the financial advisor believes that the tender
offer was appropriate but the shareholders may choose to accept or reject the tender offer on their
judgement and may look into the opinion of the independent financial advisor to support their decision.
Please be informed accordingly.
Sincerely yours,
Vitoon Somboon
(Vitoon Somboon)
Assistant Managing Director
Opinion of the Business Regarding the Tender Offer Form (Form 250-2)
January 27, 2004
Dear All Securities Holders,
According to Sino-Thai Resources Development Public Company Limited (hereinafter called "the
company") received the tender offer from Mrs. Suladda Asawapayukkul, Mr. Vichai Limpanyakul, Mrs.
Karnchana Manathamphaiboon, Mrs. Jintana Surapanich, and Mr. Kitti Cheevakittigul (hereinafter called
"the tender offerors") on January 12, 2004 as the detail as follows:
Securities Amount of Tender Offer Percentage of Tender Offer Offering Offering
Price/Unit* Price
(Baht) (Baht)
Share/Unit Voting Total Total
Right Disposed Voting Right
Securities of the Company
Ordinary Share 5,199,000 5,199,000 25.99 25.99 10.00 51,990,000
Preferred Share
Warrant
Convertible Bond
Others (if any)
Total 25.99 Total 51,990,000
* The Offerees are subject to a brokerage fee of 0.25% of the offering price and value added tax (VAT) at
the rate of 7% of the brokerage fee. Therefore, the net price received by the offerees will be Baht 9.973
(nine point nine seven three baht) per share.
The tender offer period will be a total of 25 business days from January 15, 2004 to February
18, 2004 during the hours of 9.00 a.m. to 4.30 p.m.
The company considered and expressed its opinion regarding the tender offer for highest
benefit of company's shareholders as follows:
1. The company's performance, contingent performance and forecasted assumption.
Sino-Thai Resources Development Plc. (STRD), formerly named Aokam Thai Co., Ltd., was
incorporated in 1978. Its current paid-up registered capital is Baht 200 million divided into 20 million
ordinary shares each of Baht 10 par value.
STRD engages in offshore tin ore dredging operations in two concessioned areas of totally
25,920 rais in Phuket Gulf and Bang Thao Gulf of Phuket Province. Its operations have come out
satisfactory all along. However, in 1993, tin prices on the world market slumped successively to the
extent lower than the Company's production cost. This forced STRD to temporarily halt tin mining with
its own dredgers.
STRD's management then tried to boost revenues by diversifying its business. It considered
construction stone quarrying was a business with growth potential. Meanwhile, the marble mining
business of its related company yielded non-worthwhile returns. It subleased two concessioned areas for
construction stone quarrying in Muak Lek District of Saraburi Province from its related company covering
around 294 rais and set up a stone crushing plant that started production in December 1997.
For the tin ore mining which is its original business, the Company has since March 1998
contracted Kobchai Mineral Dredger Co., Ltd. to operate the mining. As such, the Company can
significantly reduce its operating expenses, and has also brought in revenues from tin ore and asset
rental. Consequently, profits from the operations were recorded in 2000 and 2001. In early 2002, STRD
remodeled its dredgers and constructed a new dressing plant to resume its tin ore mining until
September 16, 2002 when it stopped such operations using its own dredgers due to low returns on
investment. Meanwhile, the Company negotiated with its creditor for debt restructuring by postponement
of principal and interest payment with a debt restructuring agreement signed on November 4, 1999.
Besides, it has taken and will keep on taking measures to reduce operating cost and improve work
efficiency.
On December 14, 1999, STRD's 1/2542 extraordinary shareholders' meeting gave resolution
approving a 5-year (1999-2003) plan to rectify the ground for its shares' fall within the delisting purview of
the Stock Exchange of Thailand.
The Company expects to have the SP sign removed from its shares on the SET by 2004.
However, since March 6, 2000, the SP sign has been approved to be removed and its shares have
resumed trading under the REHABCO category. This was resulted from a successful debt restructuring
of which 50% of total debt was reduced and the debt restructuring plan was approved by shareholders.
In 2003, STRD negotiated with its creditor for another debt restructuring and came to a
conclusion that the Company is allowed to settle debts through debt set-off by the mortgaged and non-
mortgaged assets as well as cash payment and debt to equity swap. The debt restructuring plan was
approved by the shareholders ordinary general meeting and the debt restructuring process was complete
on July 21, 2003. As at September 30, 2003, STRD had the total assets of Baht 84.98 million, the total
liabilities of Baht 10.03 million, the shareholders' equity of Baht 74.95 mllion, and the debt to equity ratio
of 0.13.
At present, the major income of the business is generated from sales of tin ore. In 2002, the
business earned incomes from the tin mining and sale of industrial stones for 27.06 and 15.27 million
Baht or 53.77% and 30.34%, respectively. In comparison with the first nine months of 2003, the
business has earned 12.75 and 8.27 million baht from tin mining business and sale of construction
stones or 53.14% and 34.46%, respectively, of the total income. In 2002 the business had a net
operating profit of 20.91 million Baht or 1.61 Baht per share while the first nine months of 2003 the
business could make a net operating profit of 76.14 million Baht or 12.90 Baht per share.1
The decline in income and net profit in 2003 is because sales of tin ore are lower than the
projected amount. The business has temporarily suspended its mining with its dredges since the return
from the mining has not reached the breakeven point while the cost of production, particularly, the fuel
price, has gone up but the tin price remains in the low level.
Sales of construction stones are lower than the projected level are sauced by the suspension of
the stone crushing plant for repair and change of equipment and parts of machines which has expired
from the work. The work suspension was about two months so the output and sales have decline during
such period.
The competition in the offshore tin mining for two plots covering an area of 25,920 rai will expire
in February 2004 and August 2004, respectively. Thus the income from tin mining business in 2004 will
be generated only in the first quarter.
For the construction stone mining business, the competition in this business is anticipated to be
high as there are a number of competitors undertaking the work in the project site of the business but
the demand in the market has declined in response to the current economic conditions. Therefore, the
price cut or special offer has been made to convince the customers. However the construction stone of
the business is the quality stone which could be used with ready-to-mix concrete, animal feeds or
component of the cosmetics.
According to the ninth national economic and social development plan, the government is
required to develop the overall economic system through domestic consumption with spending of the
private and the development of the public sectors. The government has put its focus on development of
large basic infrastructure system to facilitate the economic expansion. Thus the construction to support
the infrastructure in the public sector, growth in gross national production and stagnant long-term interest
rate of the bank are the key factors for continued growth in real estate business.
The major policy of the government to expedite the construction of the infrastructure system in
the medium term includes (1) construction of Ua-Arthorn housing for 1,000,000 units, (2) construction of
Suwannabhum Airport with completion schedule in 2005, (3) extension of the Bangkok sky train, (4)
additional highway construction, (5) construction of underground train, and other projects launched after
the economic recovery.
1 The business has recognized incomes of 87.87 million baht received from transfer of assets to settle the
debt obligations and profit on disposal of assets, for 8.11 million baht, accounting for 73.23% and 6.76%
of the total income, respectively.
Financial Statements of Sino-Thai Resources Development Pcl.
(in million of Baht, except per share amounts)
2000 2001 2002 Sept 30, 2003
Total assets 374.56 369.03 284.64 84.98
Total liabilities 242.86 237.95 257.04 10.03
Shareholders' equity 131.70 131.08 27.60 74.95
Registered capital 130.00 130.00 130.00 200.00
Paid-up capital 130.00 130.00 130.00 200.00
Total revenues 128.97 138.64 50.34 119.98*
Total expenses
(Included interest expenses) 126.40 137.01 71.25 43.84
Net profits 2.56 1.63 (20.91) 184.74 **
Net profits per share 0.20 0.13 (1.61) 12.90
Net profits per share-diluted (if any) - - - 5.32 ***
Dividend per share 0.00 0.00 0.00 0.00
Book value per share 10.13 10.08 2.12 5.23
* Profits from asset transfer for debt set-off of Baht 87.87 million and from disposal of assets of Baht 8.11 million
** Profits from debt restructuring of Baht 108.60 million
*** Profits per share arising from normal operations, not from debt restructuring
Projected Operating Results
At present, the tender offeror group is the major shareholder of the business with total
shareholding of 74.01% as of the tender offer. Therefore, the tender offeror group has significant power
to determine the policy and control the management of the business. Besides, one member of the
offerors, the director of the business has appointed another director in the business on January 13,
2004, so it is held that the offeror group has a significant control over the management.
Regarding the tender offer, the offerors group has indicated that there is no intention to sell or
transfer shares of the business for a significant portion within 12 months since the expiry date of the
purchase period except for the case that the tender offeror group is required to comply with the laws,
rules and regulation effective at the time, or the tender offeror group has restructured its business or
organization in its group in the future and the person who will take the transfer of shares of the business
where the tender offeror group has restructured its business or organization within the group is required
to be the person under Article 258 of the tender offeror group.2
The Offerors have an intention to continue operating offshore tin ore mining under the
government concession and construction stone quarrying, which are the Company's current businesses.
It will have its market expanded more to large-scale construction contractors and intends to diversify its
business to a new line of finished oil brokerage.
The Company's future projects are as below:
1.Trading of imported finished oils through large traders overseas.
2.Entering into lease contracts for tanker warehouse and terminal in Phetchaburi Province for
handling of imported finished oils.
3.Entering into sales contracts with large oil dealers and gas stations in the country.
4.Application to the Ministry of Commerce for oil dealing license as per Section 7 of the Fuel Oil
Trade Act, B.E. 2543.
In detail, the Company will import finished oils from oversea agents and/or purchase from local oil
refineries. The oils will be sold to approximately ten large oil dealers (jobbers), then the oils will be sold
to gas stations. It is expected that 20 - 30 million liters of oils will be traded monthly, annual revenue will
be Baht 3,000 - 4,000 million and profit margin will be approximately 1-2%. It is also expected that the
operation can begin within the third quarter of 2004. The Offerors and the new management team are
experienced in finished oils trading business. Professional staffs will also be employed to strengthen the
management team. Therefore, the Offerors are confident that, the Company will have better performance
resulted from the additional income from oils trading business.
Expanding business to finished oils trading, the Offerors will seek for credit line from the banks, letter of
guarantee, and credits from oversea traders and/or local oil refineries to buy finished oils. The sale will
be on cash and/or promissory note issued by financial institutions.
The Offerors will also change the Company's shareholding structure. However, the nomination
and appointment of directors are subject to the criteria of the SEC and the SET.
2 Details indicated in Clause 5.11 in Form 247-4 of the bidding group in page 10.
With regard to the current dividend policy, there is no change in compliance with the action plan
arranged to terminate the cause for delisting the company from the Stock Exchange of Thailand. Over
the past 5 years, the company paid no dividend in accordance with the 5-year action plan between 1999
and 2003. The generated profit has been used to enhance its liquidity and debt repayment. If there is
any prospective change, an approval in the meeting of shareholders is needed.
2. Comments on the accuracy of the information of the company presented in the tender offer.
The board of directors of the company agreed that the information related to the company as
indicated in the tender offer (Form 247-4) was correct.
3.Any relationship or agreement between the directors of the company and the tender
offeror group on behalf of the person, the directors of the company or the agent of the
tender offeror group, including shareholding of the directors of the company in a juristic
person of the tender offeror group and the contracts agreements in existence or to be
made together in various aspects such as management, etc.).
Before the tender offer date, the tender offeror group has purchased ordinary share of
6,270,000 shares of the company or 31.35% of the total issued shares and has entered into 3 share
sale-purchase agreements to buy and sell ordinary share of the company for 8,531,000 shares at 10
baht a share (first share sale-purchase agreement dated December 30, 2003, for 2,000,000 shares3,
second share sale-purchase agreement dated December 30, 2003 for 3,531,000 shares and third share
sale-purchase agreement dated December 30, 2003 for 3,000,000 shares from the major shareholders
of the company.4 Such agreement had been entered by the bidding group with an objective for
significant sale/purchase shares of the company before the tender offer was made.
3 As of January 9, 2004, Mrs. Karnchana Manathamphaibon has purchased 2,000,000 shares
from Mr. Kitti Cheevakittigul.
4 Details of the conclusion of the sale and purchase agreement provided in Form 247-4 of the
bidding group in pages 8 and 9.
The top ten major shareholders as at January 20, 2004
Name Shareholding (shares) Percentage
1. Mrs. Suladda Asawapayukkul 4,831,000 24.16
2. Mrs. Karnchana Manathamphaiboon 4,200,000 21.00
3. Mrs. Vichai Limpanyakul 2,277,700 11.39
4. Mr. Kitti Cheevakittigul 2,000,000 10.00
5. Mrs. Jintana Surapanich 1,500,000 7.50
6. Ministry of Finance 650,000 3.25
7. Ms. Saowanee Cheevakittigul 505,435 2.53
8. Mr. Phirun Shinawatra 500,552 2.50
9. Mr. Suthisak Lohsawat 500,000 2.50
10. Mr. Ruepob Shinawatra 500,000 2.50
Total 17,461,687 87.33
After the tender offeror group is a major shareholder with shareholding 74.01% of total issued
shares, the four of ten directors resigned from the board of directors of the company, and the new
directors were appointed for replacement.
List of Board of Directors (as at January 13, 2004):
1. Mr. Suthisak Lohsawat*
2. Mr. Kitti Cheevakittigul*
3. Mr. Siwavong Changkasiri
4. Mr. Yongyut Manathamphiboon*
5. Mr. Chawarat Charnvirakul
6. Mr. Voraphan Chonthong
7. Mr. Vitoon Somboon
8. Mr. Sanguen Sabanantachai*
9. Mr. Cholapan Vongsing
10. Mr. Somkiet Poothongchairit
*The new directors were appointed by the board of directors meeting
held on January 13, 2004 ( 1 day after the company received tender offer
document from tender offerors )
3.1 Relationship between the Offerors and the Company
-Director
There was a director in the tender offeror group as the detail follows:
Name Title of the Tile of the tender
company Offerors group
1.Mr. Kitti Cheevakittigul Director Tender Offeror
-The shareholding of directors in tender offerors group
- None- (as at January 12, 2004)
3.2Related Loan Transaction
- None- (as at January 12, 2004)
3.3Related Business Transaction
- None- (as at January 12, 2004)
3.4Related Agreement
- None- (as at January 12, 2004)
However, should there be any transactions considered as related transactions in the future, the
Offerors will propose for approvals from the board of directors' meeting and/or the shareholders'meeting
before such transaction in order to comply with the Public Company Act and the rules and regulations of
the Stock Exchange of Thailand.
4.The opinion of the board of director to company's shareholders
- As the Attachment A
5. The opinion of independent financial advisor regarding the offering price of tender offer
As Mrs. Suladda Asawapayukkul, Mr. Vichai Limpanyakul, Mrs. Karncha Manathamphaiboon,
Mrs. Jintana Jurapanich, Mr. Kitti Cheevakittigul ("the tender offeror group") has made an tender offer for
ordinary share of Sino-Thai Resources Development Public Co., Ltd. ("Company") as per the copy of
tender offer dated January 12, 2004, Intel Vision Securities Co., Ltd. ("Financial advisor") as the financial
advisor approved by the Office of the Securities Exchange Commission and Stock Exchange ("SEC"),
appointed by the company to be an independent financial advisor for making advice to minor
shareholders as this tender offer, regarding the advice, the financial advisor has made a study on the
information in the tender offer (Form 274-4) of the tender offerors, information and documents received
from the company, including public information as a basis for analysis and advice, the advice of the
financial advisor is based on the following assumption.
- Information in the tender offer, information and documents received from the company are
true and correct.
- The consideration is made on the current conditions. If there is any change or incident, it
may reguificantly affect the business operation and projected financial forecast of the company as well
as the decision of the shareholders towards such tender offer.
The comment of independent financial advisor may be concluded as follows:
5.1 The offering price appropriation compared with theoretical assessed price.
Offering Price Appropriation
The financial advisor considered the offering price and referred to the value assessment
methods as follows:
5.1.1Book Value Method
5.1.2Adjusted Book Value Method
5.1.3Historical Pricing Method
5.1.4Market Multiple Method
5.1.4.1Price to Book Multiple - P/B
5.1.4.2Price to Sales Multiple - P/S
5.1.4.3Price to Earnings Multiple - PER
5.1.5Discounted Cash Flow Method
The assumption of assessment comprised of (1) the comparison based on shares price and (2)
The shares price as at January 9, 2004 ( 1 day prior to the tender offer dated) or referred to financial
statement as at September 30, 2003.
5.1.1Book Value Method
The book value method was assessed by the company's book value and financial statement as
at September 30, 2003 which was reviewed by certified auditor. The book value method was assessed
are as follows:
Unit :Million Baht Financial Statement
Capital shares 200.00
Share discount - net (3.59)
Retain earnings
Appropriated - statutory reserve 13.00
Unappropriated (deficit) (134.46)
Total shareholders' equity 74.95
Total ordinary shares (million shares) 14.33
Price as book value method (Bath/share) 5.23
The share value under book value method is 5.23 Baht/share while the offering price is 10 Baht/share,
that is, 4.77 Baht or 47.70% higher.
5.1.2Adjusted Book Value Method
The value assessment under adjusted book value method is computed from the total assets as
at September 30, 2004 added commitments and contingent liabilities and deducted by impairment of
some fixed assets that appraised by a company and deducted by total liabilities and divided by total
shares.
Table of total assets concerned with construction stone quarrying operation.
Cost of Book Valued Fair Value of Impairment of
Description Assets of Assets Assets Appraisal* Assets
(Unit: Million Baht) (30-9-02) (30-9-02) (16-1-04)
2 of Pro. Bor. Tor. Lands 1.75 1.75 0.94 0.82
Buildings 9.86 7.27 5.48 1.79
Machine and equipment 76.97 57.42 33.70 23.72
Total 88.57 66.43 40.12 26.32
Remark:* the appraisal report be prepared by Thobthawee Appraisal and Service Co., Ltd. on
January 16, 2004
The independent financial advisor referred to the appraisal report of Thobthawee Appraisal and
Service Co., Ltd. to adjusted the value of some fixed assets as the financial statements as at September
30, 2003 which audited by certified auditor the adjusted book value could be concluded as follows:
Adjusted Value
Value before Impairment of Value after
(Unit: Million Baht) Adjusted Assets adjusted
Total assets 84.98 26.32 58.66
Total liabilities 10.03 10.03
Book value 74.95 48.63
Average number of ordinary 14.33 14.33
shares between periodicity
(million shares)
Share price as book value 5.23 3.39
(Baht/share)
The share value under the adjusted book value method 3.39 Baht/share, while the offering price is
10.00 Baht/share, that is, 6.61 Baht or 66.10% higher.
5.1.3Historical Pricing Method
The value assessment under historical pricing method is computed from average historical
pricing of the Stock Exchange of Thailand. The financial advisor considered and referred to closing price
360 days backward until January 9, 2004. (1 day prior to the tender offer date), the details are as
follows:
Closing Price Average Trading Percentage of
Calculated Period (Baht/share) Volume/day Trading
(share) Volume/Disposed
Share of the
Max. Min. Avg. Company
11 Nov 03 - 09 Jan 04 Last 30 days 22.10 13.00 15.13 328,217.47 2.29
17 Sep 03 - 09 Jan 04Last 60 days 22.10 13.00 14.61 167,540.62 1.17
30 Jan 03 - 09 Jan 04Last 90 days 22.10 4.90 12.96 123,603.30 0.86
12 Nov 02 - 04 Jan 04Last 180 days 22.10 2.92 8.77 79,765.54 0.56
09 Aug 01 - 09 Jan 04Last 360 days 22.10 2.92 7.43 54,102.84 0.38
The share value under historical pricing method is 7.43-15.13 Baht/share. The offering price 10
Baht/share is higher than the mentioned minimum price 2.57 Baht/share or 25.00%, and lower than the
mentioned maximum price 5.13 Baht/share or 51.30%.
However, should be realized that the average trading volume during the calculated period is
lack of liquidity and trading volume is lower than the disposed shares 2.30%.
5.1.4Market Multiples Method
The value assessment under market multiples method is compared with market ratio of the
listed mining compaines in overseas and Asian region (1) TongKah Habour Public Co., Ltd. ("THL TB")
(2) Malaysia Smelting Corporation Berhad ("SMELT MK") (3) Rio Tinto Limited ("RIO AU") (4) Ton Yi
Industrial Corporation ("9907 TT") (5) Yunnan Tin Co., Ltd ("000960 CH") and (6) Perusahaan Sadur
Timah Malaysia (Perstima) Berhad ("PER MK").
Closing Price Closing Price Closing Price Closing Price
Bloomberg Jan 9, 2004 Ratio1 Ratio2 /Retrospective Profit2
Ticker (Unit/Share) (Price to Book) (Price to Sales) (PER)
(time) (time) (time)
THL TB 6.35 4.96 84.96* NMF*
SMELT MK 4.60 1.74 0.53 12.78
RIO AU 36.30 1.37 1.16 41.68
9907 TT 9.40 0.90 0.92 88.02
000960 CH 9.17 2.84 2.70 3,056.67*
PER MK 1.73 1.32 0.51 8.83
Average 2.19 1.16 37.83
Median 1.56 0.92 27.23
Maximum 4.96 2.70 88.02
Minimum 0.90 0.51 8.83
1 Book Value as at September 30, 2003
2The last 4 quarters information (October 1, 2002 -September 30, 2003)
*Not be calculated
NMF = N/A
The independent financial advisor referred to the median value for assessment of market
multiples method as shown on 5.1.4.1-5.1.4.3.
5.1.4.1Price to Book Multiple Method- P/B
The value assessment under price to book multiple method is referred to the book value of
financial statement as at September 30, 2003 multiplied with the median value of closing price per book
value of the compared companies is equal to 1.56 times.
Value
Total shareholders' equity (million Baht) 74.95
Average number of ordinary share between periodicity
(million shares) 14.33
Book value/share (Baht) 5.23
Median value of price to book multiple 1.56
Share price (Baht/share) 8.16
The value assessment is made from price to book multiple method, share value of the company
is 8.16 baht per share while the bid price is 10.00 baht per share, that is, higher than the share value
under this method of 1.84 baht per share or 18.40%.
5.1.4.2 Price-to-Sales Method (P/S)
The value assessment under this method is made from the incomes of the company in the past
12 months (starting from October 1, 2002 to September 30, 2003) multiplied with the median of the
closed price and the past earnings per share of the comparative group companies of 0.92 time. It may
be concluded as follows:
Value
Retrospective income (million Baht) 33.34
Weighted average number of common stock outstanding during the
period (million shares) 14.33
Past Earnings per share (Baht) 2.33
Ratio of median of the closed price and the past earnings per share 0.92
(times)
Share price (Baht) 2.14
The share value under the price-to-sales method is 2.14 baht per share while the bid price is 10
baht per share, that is, 7.86 baht or 78.60% higher.
5.1.4.3 Price to Earnings Multiple Method(PER)
The value assessment under this method is computed from the profit per share of the company
over the past 12 months (from October 1, 2002 to September 30, 2003) timed with the ratio of the
median of the closed price and the earnings per share of the comparative group of companies at 27.23
times. However, the company has operated at loss in 2002 even though the operating results in the
latest three quarters are positive. The company made a debt restructure in the first quarter of 2003 so
the company has recognized incomes from transfer of assets for debt repayment and profit from the
debt restructure. Thus, the value assessment under the price-to-earnings multiple method is not reliable.
5.1.5 Discounted Cash Flows Method
The value assessment under this method is based on the earnings capability of the company
and its subsidiaries in the future through computation of the present value of the operating cash flows
expected to receive in the future according to the financial projection of the company and its subsidiaries
in the next 5 years, 2004-2010, prepared by the management of the company with going concern basis
for the business of the company and its subsidiaries.
Such financial projection is prepared with an objective to determine the fair value of the share
under the current economic conditions and situations and to determine the share value in comparison
with the bid price for this time. If the economic conditions and other external factors which have affected
the operation of the company and the significant change in the situation of the company from such
assumption, the assessed share value under this method will change as well as such share price should
not be used as a reference except for the objective above.
The financial advisor has not employed the dividend discounted method to assess the share
value because during the past 3 years, from January 1, 2000 to December 31, 2002, the company paid
no dividends to the shareholders due to the continued operating loss. The retained loss as at December
30, 2003 is 134.46 million Baht while the major income of the company from 2004 will come from
industrial stone mining business because the concession on tin mine of the company will expire this
year. Therefore the dividend payment of the company in the future is subject to the decision of the new
board of directors, cash flows, incomes, financial position of the company and other related factors as
deemed by the board of directors.
Assumptions for preparation of the financial projection may concluded as follows:
-Operating income
The operating income of the company is from the construction stone mining business
and the company has expected that sales of construction stones are about 17 and 20
tons per month during the projected period with selling price at 8.00 Baht to 8.40 per
ton.
-Operating cost
The operating cost consists of fees to subcontractors, electricity, excavation and
transportation expenses and vehicle expenses, the operating cost is expected at about
70% and 75%
-Other expenses
Other expenses consist of central office expenses which are about 9.2 million Baht and
9.5 million Baht (not including depreciation cost).
For the assumption used to compute the discount cashflows, the financial advisor found that the
cashflows were negative. Thus the share value assessment under this method is not applicable.
5.1.6The compared table of the offering price appropriation of all methods
The method of value assessment Assessed The different of offering
Value price
(Baht) Higher (Lower)
(percentage)
5.1.1Book value method 5.23 (47.69)
5.1.2Adjusted book value method 3.39 (66.06)
5.1.3Historical pricing method
- last 30 days 15.13 51.30
- last 60 days 14.61 46.10
- last 90 days 12.96 29.60
- last 180 days 8.77 (12.30)
- last 360 days 7.43 (25.70)
5.1.4.1Price to book multiple method- P/B 8.16 (18.39)
5.1.4.2Price to sales multiple method- P/S 2.14 (78.59)
5.1.4.3Price to earning multiple method - PER Not comparable
5.1.5Discounted cash flow method Not comparable
5.2Justification on acceptance or rejection of the tender offer
1)Appropriate Tender Offer
The financial advisor believes that the past share value method, the price-to-market
method and the discounted cashflow method are not appropriate because the past share value
method has not reflected the real value because the volume of sale and purchase of shares of
the company over the past year is illiquid, that is, less than 2.3% of the number of total issued
shares of the company.
The price-to-market method has not reflected the real value of the company because
among the comparative group of companies there is only one company based in Thailand while
the remaining has the business over Asia. Besides those companies have incomes from
various ore mining businesses. No company has its main income from the tin mining business
and industrial stone business like the company. Therefore the price-to-market method may not be
suitable.
For the discounted cashflow method even though this method is made with
consideration on the operating trend and business potential, as well as the business plan for the
next 3 to 5 years, the financial projection is made under the assumption confirmed by the
existing management of the company that the company could only generate its income from the
industrial stone mining business. The buying bidder is the major shareholder of the company
with shareholding of 74.01% and has appointed a director of the company since January 12,
2004. The projected financial figures provided to the financial advisor may be adjusted while
the buying bidder has indicated the potential of the business in the future.
The book value method and the adjusted book value method are made with
consideration on the latest values of the company, particularly, after the company has
completed the debt restructure negotiation with the creditors in the first quarter of 2003 and
completed the debt restructure work at the end of July 2003. Thus the book value method will
reflect the actual value of the company. If the additional asset assessment has been
undertaken, and the major assets employed in the operation of the industrial stone mining
business have been adjusted for a decline in value of assets method, the new adjusted book
value method will clearly reflect the value lower than the bid price and the adjusted book value.
From the reasons above, the financial advisor agreed that the share value of the
company should be suitably assessed by the book value method and the adjusted book value
method. Therefore the share value of the companies under both methods is between 3.39-5.23
baht per share. The offering price of 10 baht a share is higher than the assessed value so the
financial advisor believes that the bid price for the share of the company at is appropriate.
2)Business potential of the company in the future
Since the company is mainly engaged in the offshore mining business and industrial stone
mining business and the income from the offshore mining business is about to end become
both concessions for mining will expire in 2004, it is both anticipated than the industrial stone
mining business will become a major business of the company. If the income from the
industrial stone mining business is solely examined, the total income of the company in the
future will enormously decline so the company has to look for new markets and related products
to add value to such business and to make a feasibility study in new business venture.
The tender offers intended to changed the business operation policy which is a positive factor
for the company in the short run and the medium run (please see details related to such policy
and plan indicated in Clause 5.2).
3)Other factors to be considered
If there are a number of ordinary share holders agreeing to sell to the tender offerors
until the tender offerors will have a large portion of shareholding equal or more than 75% of the
total disposed shares, the shareholders who refuse to sell their share may be affected as
follows:
-Liquidity of securities If a number of the shareholders have sold shares to the buying
bidder and the small shareholders who have not expressed their intent to sell the
shares may be affected by illiquidity of securities sale as the shares may be unable to
be sold at the suitable time.
-Right to vote in a key issue As the small shareholders may have not enough number of
votes to oppose any material transaction of the company in the meeting of
shareholders.
5.3Benefits or impacts from plans and policies indicated by the tender offerors in the
tender offer, as well as the feasibility of such plan and policies.
The tender offeror group has indicated in the bid to acquire the securities that it has a
significant plan to make a change in the business plans or policies of the company, including a
change in business objective to expend to cover an investment in new business. That is to be
an agent on sale and purchase of refined fuels, which has been indicated in the prospective
projects as follows:
(1) Contact on sale and purchase of refined fuels overseas through major foreign
traders.
(2) Enter into contracts to lease warehouses and seaports in Phetchaburi to
storage the refined fuels from overseas.
(3) Enter into contracts to sell and purchase fuels for major fuel traders and local
gas stations.
(4) Apply for a permit to be a licensed oil trader with the Ministry of Commerce
according to Article 7 of the Fuel and oil trade Act, B.E. 2543.
Refined fuels will be imported from foreign agents and/or will be purchased from the
domestic oil refineries for wholesale distribution to the major oil traders. The new business
maybe under taken in the third quarter of 2004. The tender offeror group and the new
management team are competent in refined oil trading business and the professional executives
will be employed to help the teamwork.
In addition, the tender offeror group will make a change in the board of directors of the
company5 through organization restructure, employment of professional executives to desist the
existing teamwork and to facilitate the business expansion in the area of refined fuel trading
agency. However, the bidding group has no intention to sell or transfer shares of the company
in a significant volume, dispose assets of the company, make a financial restructure and change
a dividend policy within 12 months since the end of the buying period.
Thus, the investment in the new business venture to be undertaken by the bidding
group is made with confidence that the company will perform better since there are additional
incomes from the oil trading business but the organization restructure to be made within 12
months may significantly effect the company during such period.
5 The bidding group has changed the board of directors partially on January 13, 2004.
Conclusion on opinion of the financial advisor.
The independent financial advisor believes that the buying bid of the shareholders is currently
appropriate. However acceptance or rejection of the tender offer is mainly subject to the decision of the
shareholders after they have examined the reasons and comments of the independent financial advisor.
I certify that the opinion on the above cause has been prudently made in accordance with the
professional standard with respect mainly to the interest of the shareholders.
SRIPORN SUTTHIPHONG
(Mrs. Sriporn Sutthiphong)
Managing Director and Chairman of the Board of Directors
-Attachment A-
Comment of the board of directors of the company to shareholders
The company made a meeting of the board of directors on January 30, 2004, with an agenda to
consider the tender offer of the offeror group. There were 10 directors attending the meeting
as follows:
1.Mr. Kitti Cheevakittigul Director with vested interest and abstain the votes
2.Mr. Suthisak Lohsawat Directors who was appointed by the approval of
3.Mr. Yongyut Manathamphiboon the meeting of the board of directors meeting on
4.Mr. Sanguen Sabanatachai January 13, 2004 and abstain the votes.
5.Mr. Sivavong Changkasiri Independent director/ Chairman of audit committee
6.Mr. Somkiet Poothongchairit Audit committee
7.Mr. Chavarat Charnvirakul Director
8.Mr. Voraphan Chonthong Director
9.Mr. Vitoon Somboon Director
10.Mr. Cholapan Vongsing Director
4.1 Justification on acceptance and/or rejection of the tender offer.
The board of directors of the company has unanimously suggested the shareholders to accept
the tender offer with the following reasons.
The board of directors had a unanimous resolution that the offering price of 10 Baht was
appropriate. The independent financial advisor agreed that the share value of the company should
be suitably assessed by the book value method and the adjusted book value method. Therefore the
share value of the companies under both methods is between 3.39-5.23 Baht per share. The offering
prices higher than the assessed value so the financial advisor believes that the tender offer was
appropriate but the shareholders may choose to accept or reject the tender offer on their judgement
and may look into the opinion of the independent financial advisor to support their decision.
The board of directors (excluding the director with vested interest and abstain the votes) has
made a unanimous resolution that the tender offer was appropriate but the shareholders may choose to
accept or reject the buying bid dependent on their judgement and may look into the opinion of the
independent financial advisor to support their decision.
4.2Individual opinion of the board of directors and the number of shares held by each directors
(in case that the opinion of the board of directors of the company in Clause 4.1 is not unanimous).
- N/A
4.3Benefits or impacts from the policies and plans indicated in the buying bid of the bidding
group, including the feasibility of such policies and plans.
The tender offer or group has indicated in the buying bid that there is a plan to make a significant
change in the business policies or plans of the company, including a change in the business objective
through extension of investment in the new business venture, that is, refined oil trading agency. In
addition, the tender offer or group proposed to make a change in the board of directors of the company,
organization restructure, employment of professional executive to arrest the existing teamwork in
management and to facilitate the business expansion to the new area of refined oil trading agency.
However, the tender offer or group has no intention to sell or transfer shares of the company in a significant
amount, dispose assets of the company, make a financial restriction and change the dividend policy
within 12 months since the end of the buying period.
Although the new directors were appointed on January 13, 2004, the company had no the meeting
of new board of directors to consider the new business plan and policies as indicated in the tender
offer. The board of directors will report the progression to all shareholders onward.
The company certifies that the above statements are correct and true. There is no information
which may materially mislead the other persons and the information that should be informed has not
been kept confidential.
Suthisak Lohsawat
(Mr. Suthisak Lohsawat)
Director
Vitoon Somboon
(Mr. Vitoon Somboon)
Director
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